Ensuring the long term sustainability of employee benefits programmes

Providing integrated healthcare solutions and reviewing cost containment

Medical cover dominates a large portion of the employee benefits typically offered by many organisations across Malaysia today. While there have been surveys indicating that it is one of the most valued benefits, the cost of providing medical care to employees has been undergoing steep increases for some time now. This is a burden borne by employers, in order to better protect and support their staff and dependents.

An untenable position to maintain

Mercer Marsh Benefits’ recent Medical Trends Around the World 2017 Survey revealed that medical inflation is now close to five times the general inflation rate and therefore, over time, these rising costs may prove completely unsustainable leaving employers between a rock and a hard place, no matter what avenues they pursue. A proactive approach, however, will ensure that benefits programmes not only stay competitive but remain viable in the long run.

But first, what are some of the root causes driving these benefit cost increases? Is there data that employers can leverage to help them tackle these cost drivers? It would seem that there is a lot contributing to these cost increases, not least of which are changes in health care legislation.

Shifts in regulatory framework

The relevant piece of legislation here is the Private Healthcare Facilities and Services Act 1998 which underwent amendments in 2014. These changes have already resulted in wildly varying medical care cost increases, ranging from as low as 14 percent to 200 percent. And this is now further impacted by the implementation of Malaysia’s goods and services tax.

Advancing medical technologies

Medical advances in recent years have brought significant positive results –  higher success rates, lowered risks as well as faster recovery times. More options are available now than ever before, with the advent of minimally invasive surgeries (MIS) as well as robotic surgeries.

The downside to this, however, is that these advances and a wider array of medical choice come at a higher cost. For example, an open appendix surgery costs MYR6,000 whereas a laparoscopic surgery costs MYR10,000.

Changes resulting from today’s modern lifestyle

We are now seeing chronic diseases, such as diabetes and hypertension, affecting the young.  These used to be characteristic of the older generation only. These changes are the result of our lifestyle choices today – the food we eat, our workplace conditions, increased stress as well as a largely sedentary lifestyle. As a result, more and more of the young are suffering from obesity and hypertension.

An ageing population

A country is said to become an ageing nation when at least 15 percent of its population is comprised of senior citizens aged 60 and above. Malaysia is expected to attain this status by 2030; and it is not alone.  Population ageing is likely to influence patterns of health care spending in both developed and developing countries in decades to come.

This means that rising medical costs impacted by the care provided to a more elderly workforce will become even more of an issue to employers.

Managing people risks and costs

With these issues at play, what can employers do? They need to strike a balance between controlling costs and providing sufficient, yet strategic, healthcare. Health, by its nature, is a sensitive topic which means that in critical or catastrophic medical situations, emotions can spiral out of control and misunderstandings can arise based on how parties perceive the issues are being addressed. This is why employers should take a more proactive role in how they manage the healthcare solutions offered, how they communicate and address the sensitive issues as well as how timely they are in doing so.

Here are a few things employers can do to mitigate risks and lower costs.

Step 1 – Review existing benefits programmes

The aim of such reviews is to ensure that new factors are addressed. Benefits programmes should shift from being purely curative to preventative. Most employers provide general medical cover for both outpatient and inpatient care – in most cases, the medical benefits are extended to an employee’s spouse and dependents.

While employees may then have a sense of security knowing their medical care is being looked after, it can create an over-reliance on employers. The knock on effect is that healthy behaviour and a preventative lifestyle are not encouraged. Employers are faced with the question of how much benefit is really being afforded to employees with the range of benefits programmes offered today.

With the continued surge in medical costs, it would seem that it is no longer an option for organisations to keep maintaining lavish medical benefits; there is a dire need to repurpose these benefits keeping in mind cost sustainability and employee productivity. In one of our recent studies, we found that organisations that continue to do nothing about their benefits plan design will see a cost increase of up to 70 percent over four years – the cost of doing nothing can, therefore, have serious business implications.

Step 2 – Educate in order to create more awareness

Organisations need to move beyond basic employee communication towards education on preserving their well-being. The need to generate more awareness and internalisation is essential in order to help employees take responsibility for their own health.

Employers would do well to educate employees on various health risk factors, the importance of screening and early detection as well as the introduction of some consumerism in health plans so that there is a better appreciation of the value of employee benefits. Success is dependent on the method of education, the key performance indicators (KPIs) as well as the rewards system that is tied to the learning process. Ensure the message is communicated with some element of personalisation in a variety of creative ways in order to connect and engage employees at all levels.

Step 3 – Develop  targeted intervention wellness programmes

The development, introduction and ongoing provision of wellness programmes are a form of preventative care. However, more often than not, these wellness programmes, despite their well-intentioned plans will tend to attract those who are already living well rather than those who are chronically ill or at risk of a chronic condition. The challenge is to create an intervention programme that targets the employee population with key risk factors, implement said programme to create more awareness and ensure that it is a sustainable programme that will drive behavioural change.

With employee buy-in, organisations,  as well as individuals, can move from a curative approach to a preventative one. Employees under high-risk health conditions are then better informed, feel more empowered and make better decisions based on an array of choices, all of which lead to enhanced productivity.

As such, despite escalating costs, employers in Malaysia, can certainly take steps to ensure that the benefits programmes they provide are valued by employees and achieve their aim to both control costs yet provide sufficient health care.

Traditional claims and benefits management methods are no longer effective. Join us at the next Mercer Marsh Benefits Malaysia Seminar Series 2017 on 16 August at Hilton Hotel Kuala Lumpur for a half day seminar to discuss new and innovative solutions to engage employees, improve loyalty, reduce turnover and manage costs. The forum will include a discussion of innovative health care solutions that can impact business productivity and cost containment. For more details on this event, contact [email protected]

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Marsh is one of the Marsh & McLennan Companies, together with Guy Carpenter, Mercer and Oliver Wyman.  This article is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. The information contained herein is based on sources we believe reliable, but we make no representation or warranty as to its accuracy.  Marsh shall have no obligation to update this article and shall have no liability to you or any other party arising out of this article or any matter contained herein. 

This article has been adapted and was originally published in the Edge Malaysia.
Headline image, Woman-desk-macbook-pro-pen, courtesy Tranmautritam via pexels.com

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