Across the world, the population is ageing. Figures from the United Nations (UN) show that an all-time high 13% of the world’s population is currently aged 60 years or older and their number (962 million) is set to more than double by 2050. Tasked with funding the healthcare of this ageing population, health insurers have already begun to raise their premiums to offset the rising cost.
This trend looks set to continue, spelling trouble for employers, who must now make their already stretched budgets go even further to absorb the increasing cost of employee health insurance.
However, there are ways for companies to curb this expenditure without compromising the value of their healthcare benefits to employees. In order to do so, they must focus on strategies such as improving the health of their workforce, using co-payment schemes and making use of marketplaces. But first, let’s look at the burden the ageing population puts on the industry.
This trend looks set to continue, spelling trouble for employers, who must now make their already stretched budgets go even further to absorb the increasing cost of employee health insurance.
The health burden of an ageing population
Research published in the Annals of Oncology confirms that, like many other parts of the world, the Middle East is in the midst of a population shift. Recent years have seen fertility rates decline, while the average life expectancy has risen steadily over the last three decades from 60 to over 70 years old. Although the percentage of over-65s in the Middle East and North Africa (MENA) is currently modest (4.7%) compared to that global figure of 13%, a swell is expected over the next three decades, bringing a fivefold increase in the UAE. At the same time, it has been predicted that healthcare spending in the UAE will reach USD 19.6bn by the end of 2018 – suggesting that an ageing population is clearly taking its toll on the price of healthcare.
An ageing population presents a two-fold problem: not only does it mean the proportion of young workers funding the healthcare of the old is falling, it also means an increase in the prevalence of chronic diseases, such as osteoarthritis, dementia, type 2 diabetes, and cardiovascular disease (CVD), which all carry a higher risk with age. Indeed, the American Hospital Association predicts that by 2030, more than 60% of over 65s will have more than one chronic condition. As chronic diseases require long-term use of multiple resources, including medication, medical devices, surgery and the services of healthcare professionals, an increase in their prevalence is likely to put huge pressure on healthcare provision, with demand eventually outweighing supply.
A case in point is the UK, where 18% of the population is now aged 65 or over. Data gathered in 2016 by the health research charity the Nuffield Trust indicates that 40% of the UK’s healthcare spending is dedicated to over-65s alone, indicating the high level of healthcare spending regions like the Middle East can expect as their older population grows in number.
Health issues faced by the Middle East’s elderly
A study published in Health Services Research journal found that healthcare costs increase exponentially after the age of 50. It’s a finding that’s explained, at least in part, by the onset of diseases of old age. The World Health Organization (WHO) cites mobility impairment, hypertension, heart disease, diabetes, cancer, lung disease, and dementia as the most prevalent conditions among the elderly.
A study published in Health Services Research journal found that healthcare costs increase exponentially after the age of 50
The picture is fairly similar in the UAE. An analysis of the health status of the UAE, published in Global Health Action journal, has shown that CVD, along with diabetes and obesity, is rapidly increasing, affecting both the young and old. This observation is attributed to an increasingly sedentary lifestyle and poor diet. In fact, the UAE now has one of the highest death rates from CVD in the world and it’s a problem that is raising the healthcare demands of the elderly, because CVD manifests in many ways, including strokes, heart attacks, diabetes and loss of sight.
Cancer rates are also on the rise in the UAE, with the aforementioned study reporting that the incidence of all cancers is projected to double by 2020, as the population continues to age. UAE-specific lifestyle habits are also behind the increase in cancer rates. For example, lung cancer is the most common type of cancer among Emirati males but not females – a finding that corresponds with the fact that 23% of Emirati men smoke, compared to less than 1% of women.
How to reduce the financial burden of an ageing population
Health insurance is set to become an even bigger business expense than it currently is. Employers must, therefore, start to put in place measures to ensure they aren’t left with out-of-control insurance bills.
Here are some approaches to address this issue:
Maintain the health of employees: As healthy individuals with a low risk of future illness incur lower insurance premiums than those with multiple disease risk factors or existing health complaints, investing in an effective employee preventive health programme is vital for all companies that are keen to keep insurance costs low. Given that CVD, obesity, diabetes, and lung cancer are notable lifestyle diseases in the Middle East, employers should ensure that their preventive health programmes feature weight management, smoking cessation, physical activity and nutritional counselling.
Introduce co-payment schemes: Cost-sharing methods are popular in countries such as the US, where the effects of an ageing population on healthcare costs are already visible. An analysis by the WHO has shown that co-payment, in which employees contribute a little to the cost of premiums, is the most popular cost-sharing strategy used in the US. However, alternatives such as annual deductibles and co-insurance (in which employees pay a percentage of the cost of a healthcare service after paying the deductible) also exist and are worth exploring. The key to successfully introducing cost-sharing into a workplace lies in identifying the preferences of your workforce, and this is best done by obtaining their input before making any changes to the existing insurance system.
Align benefits to your needs: Many employers offer comprehensive cover packages that their employees do not use to the full. With this in mind, a good cost-management strategy is to review the different health benefits covered by your current insurance plan and check if employees need or want all of those benefits. For example, a male dominated workforce will have a less pressing need for a benefit like maternity, which may impact the premium for a comprehensive health package. But don’t just focus on niche benefits. Vision problems, for example, are more prevalent with age, which means that employers with young workforces may find their employees may be willing to forgo optometric cover if core health benefits, such as emergency health treatment, prescriptions and outpatient care, are fully covered.
Shop around: Sticking to the same insurance provider and simply renewing a plan each year may seem like a time-effective approach; however, it’s one that can cost your business. Avoid falling into this trap. Health insurance marketplaces that present a wide breadth of available offers are a good place to start, but remember that smaller, more affordable insurers may not be on these marketplaces. Therefore, utilise your business network – ask other HR managers what they pay for their employee insurance packages – as well as marketplaces to find the best deals.
Preparation is key
Like the rest of the world, the Middle Eastern population is living longer and this population trend is destined to result in rising health insurance costs. The good news is that countries like the US and the UK have already experienced the change that’s currently in its infancy in the Middle East and they have identified effective ways of offsetting the rising insurance costs businesses will face.
It’s now time for employers in the Middle East to take advantage of the lessons learnt from these countries. By doing so, companies across the region can prepare themselves for the change that’s fast approaching, secure in the knowledge that it’s a challenge that can be overcome, rather than a fate that must be endured.