Bad news for employers providing medical care to staff - medical costs is expected to vastly outpace inflation in most major economies.

According to a new research by Mercer Marsh Benefits, in Asia, medical costs are expected to increase by 11.5% against an inflation rate of 2.1% in Asia.

The research, based on a survey of 171 insurers across 49 countries found that across Asia in 2016, the highest cost increases are expected in Vietnam (19.3%), Malaysia (17.3%) and Indonesia (11.8%).

It also pointed out that in the region, diseases of the circulatory system (59%), cancer (52%), respiratory conditions (46%), and gastro-intestinal diseases (46%) were the main cause of claims cost last year.

Rose Kwan of Mercer Marsh Benefits in Singapore explained that, “In Asia, the role of governments in specific markets has greatly impacted how consumers are experiencing healthcare.

"One core and fundamental strategy available to employers is to help employees live a healthier life, improve their productivity, reduce absences and increase engagement.

"Wellness programs, education of the impact of lifestyle choices and the redesign of medical insurance plans have all had an important role to play in better controlling long-term medical plan cost trends,” she added.

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Globally, the average per person increase in healthcare costs is almost three times the rate of inflation with 2015 seeing an average 9.9% increase in medical costs and forecast for this year being pegged at 9.8%. While average overall price inflation reduced from 3.9% to 3.5% over the same period.

The research pointed out that the cost increases were being driven by non-communicable diseases - those that cannot be caught from other people but are frequently caused by the lifestyle choices of individuals such as smoking, lack of exercise and a poor diet.

Jacques Goulet, Mercer’s president of retirement, health and benefits, commented: “Stakeholders need to embrace disruption in health care.  The window of opportunity is now for employer-led healthcare transformation – in the United States but also in other geographies where employers have not played a direct traditional role but where having a cost effective and high quality health care system is an enabler for business success.”

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The research also asked insurers about the greatest risks facing medical costs in the future and found that the top two risks were metabolic factors - such as high blood pressure, cholesterol, and dietary risk - like obesity, and physical inactivity.

While the third most cited risk varied by region with environmental risk being taking the spot in Asia.

Graham Pearce, partner at Mercer, said: “We believe that, quite frankly, a medical cost inflation rate close to three times that of overall inflation is just not sustainable. It is therefore of the utmost importance that employers become much more serious about ‘bending the trend’ with a long-term healthcare strategy. This approach, however, will require some initial investment, strong executive support and rigorous analysis of what is, and is not, working for specific workforce populations.”

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