Employee healthcare costs up 3.3% in Europe

Business felt the pinch as a result of medical inflation and attempts by the state to pass on healthcare costs to employers and individual citizens, said the provider of consulting, outsourcing and investment services. Companies are keen not to pass on the cost to employees, the survey finds, as many see the provision as key in maintaining and retaining talent and skills. The cost of providing healthcare and health-related benefits to employees in Europe rose by 3.3% in 2010, a sharper increase in many economies than was seen in salaries and general inflation. The rise in costs is due to medical inflation, increased utilisation of procedures and practices, an ageing population and the increasing complexity of medical procedures.hideAnd uncertainty due to the financial crisis means that governments are cutting health-care benefit protection levels in response to shrinking public spending budgets. According to Steve Clements, partner at Mercer, “Governments are shifting the cost of healthcare to employers and individuals in the form of tighter tax deductions, reduced scope of public healthcare services, privatisations, higher cost sharing and eligibility restrictions or opting-out schemes. From the other direction, employers are also under pressure from employees and trade unions to improve health benefits.” Employers operating under government health systems reported slightly higher increases, averaging 3.7% for all health-related benefits per-employee, compared to those operating under social insurance models, with an average of 2.9%. In countries that have generous public schemes companies tend to be funding benefits for wellness and prevention rather than disease-centred plans. As a result there is less exposure to risk and cost volatility thus medical cost increases are lower, the survey notes. Respondents from the UK and Ireland reported the highest increase, 4.9% for each, followed by Portugal, 4.1%, and the Netherlands with 3.7%. Germany and the Czech Republic reported the lowest cost increases of 1.7% and 1.8%, respectively. By comparison, in the US average health benefit cost per employee rose 6.9% in 2010. Broken down by country, the data highlights the differing drivers behind the healthcare cost increases across Europe. In Ireland, Poland, the UK and Spain, ‘medical inflation’–—the cost of treatments and medicine—was identified as the primary cause. In the Czech Republic and Portugal, it was ‘increased utilisation of health services’. Regulatory and legislative changes had the most impact in France and the Netherlands, while respondents from Germany were most likely to cite ‘increased complexity and expense of medical procedures’. “Despite the increases,” Mr Clements continued, “our survey found that most employers remain unwilling to restrict eligibility or the scope of coverage or to shift more costs to employees. To keep costs down they are generally focusing on measures that do not directly affect the employee, such as insurer negotiations and improved plan management and monitoring.” The majority of respondents, 72%, do not require employees to contribute to the cost of private medical plan coverage. The figure varies by country however. In France 80% of respondents require employees to contribute to the cost of employee-only coverage, compared to only 8% of respondents in the UK. Requiring contributions for dependant coverage is much more common. “Cost sharing might appear a logical manner in which to mitigate rising bills. That it isn’t widely used reflects not only diverse and established market practices but also employer reward strategies, union negotiations and industry-wide competitiveness,” said Mr Clements. For those that do require employees to contribute, the average contribution required is 46% of the total premium, or cost, for employee-only coverage and 68% of the premium for dependant coverage. One of the main reasons behind respondents’ reluctance to shift benefit cost to employees is the attraction and retention of talent. It is cited as the most important objective for offering health-related benefits, with 37% of all respondents rating it very important and an additional 36% rating it important. Managing employee health risks was rated a very important or important objective in the provision of health benefits by nearly two-thirds of respondents, 63%. More than half, 53%, cited improving productivity as an important or very important objective. Unsurprisingly, respondents from countries with stronger national health systems, such as Germany and the Netherlands, were more likely to place improved employee productivity above retention as a driver for health benefits. This is because company-provided benefits are perceived as less vital in countries with better healthcare. Respondents from the UK, Ireland and Spain, where public programmes already show some quality gaps, however, regarded health benefits as a valuable attraction tool. And 66% of respondents felt that future social welfare reforms will increase the pressure on employers to provide private health benefits. “In almost every country employers see opportunities in investing in benefit plans,” said Mr Clements. “This is especially evident in national systems that already exhibit such shortcomings as long queues, poor accessibility, lack of medical staff, higher fees and perceived quality issues. Investments in benefit plans are still tax-efficient for both the company and individuals and help attract and retain talented employees. The challenge is to achieve a return on investment through improved productivity while still keeping benefit costs under control.” The data was gathered as part of Mercer’s 2010 pan-European survey on employer health benefits. The survey was conducted in 14 European countries with responses from 556 employers. Health benefits include private medical plans and a range of other health-related benefits, including income support, critical illness cover, employee assistance programmes, dental and optical benefits, health screening, gym membership and ‘wellness’ programmes. Mercer received responses from employers in 14 countries in Europe but has only provided results separately for 10 countries. The four other countries—Austria, Russia, Belgium, and Switzerland—are represented in the overall results but submitted too few responses to permit valid separate reporting.

Employee healthcare costs up 3.3% in Europe

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