By Matt Pinckard | 22 Aug 2024

Managing rising medical costs: Strategies for sustainable Group insurance

Medical inflation is one of the most significant challenges facing businesses that offer health insurance as part of their employment benefits.

Medical inflation in Singapore is rising and is projected to sit at 10.67% and 13% in 2024 by Willis Towers Watson and AON, respectively. These trends largely mirror what is happening globally and highlight how crucial it is for businesses to understand increases in medical costs, how they impact the health insurance they offer employees, and the cost containment strategies available to combat this.

Let’s explore how you can ensure your Group health insurance plan remains sustainable while simultaneously allowing you to offer benefit-rich products tailored to your employees’ needs.

What factors most significantly affect Group health insurance?

1. Dental benefits

Dental care can be a significant expense for Group health insurance plans, particularly as there is typically high utilisation of coverage for both routine and specialised treatments.

To manage dental costs effectively while allowing your team members to enjoy comprehensive coverage, you can:

Set annual limits on dental costs to help control overall expenses. You can ensure all your employees can access essential dental care while managing costs.
Focus on preventative care and encourage this by choosing a plan that covers routine check-ups and cleaning in full. Preventative care helps reduce the likelihood of more expensive treatments down the line, promotes oral health, and may also reduce the risk of developing serious conditions like stroke and heart disease.
Introduce cost-sharing mechanisms like co-pay or co-insurance for more extensive medical procedures. This can help you manage costs and encourage your employees to seek necessary treatments without overusing their benefits.

2. Physiotherapy

Due to frequent use, providing comprehensive coverage for alternative therapies like physiotherapy can be costly. Since physiotherapists might extend treatment without always achieving the desired resolution, this can further affect group costs.

If you wish to offer a physiotherapy benefit as part of your Group health insurance plan, consider implementing the following cost-control measures:

Mandate a GP referral after five physiotherapy sessions to ensure that a medical professional assesses whether continued physiotherapy is appropriate or if alternative treatments are needed.
Have a cost cap on physiotherapy coverage to prevent excessive use by a few individuals from impacting the entire group. This approach balances providing comprehensive coverage while managing costs.

3. Out-patient services

Out-patient services can be expensive due to frequent visits – particularly to a specialist – and where additional tests and consultations may be required.

To manage your Group health insurance costs while offering out-patient coverage:

Introduce co-pay for specialist consultations. This will encourage your employees to consider whether their visit is necessary and explore cost-effective options, such as seeing a GP first or choosing local hospitals that offer comparable expertise at lower costs.
Implement an out-patient excess, where your employees pay a certain amount out-of-pocket before the insurance coverage kicks in. This strategy can reduce the frequency of minor claims and discourage unnecessary visits, as your employees will become more conscious of their healthcare spending. An excess can help control costs while still providing comprehensive coverage for significant medical needs.

Proactive cost management vs. Community rate increases

Sometimes, businesses may expect insurers to absorb losses and manage rising costs through community rate increases. However, relying solely on this approach is not a sustainable solution.

Community rate increases distribute the cost burden across all insured Groups, often resulting in higher premiums for everyone. Aside from the unsustainable nature of this approach, insurers who previously preferred working this way are increasingly moving away from it as advancements in technology and artificial intelligence and their use in the health insurance space make it easier to provide tailored and fairer premiums for all.

Alongside this changing approach from insurers, you can better manage your Group health insurance costs by:

Engaging proactive cost management by implementing cost control measures within your plans to mitigate excessive claims, helping to prevent sizeable annual premium increases and ensuring long-term sustainability.
Working collaboratively and engaging with insurers to understand cost drivers and explore bespoke solutions that fit the unique needs of your business. Working in this way can help you develop more tailored coverage options and unlock better cost management strategies.
Evaluating plan efficiency regularly so you can proactively adjust your plan to ensure you balance providing value to your employees with managing your costs. Staying informed about usage patterns and emerging healthcare trends can help you make necessary adjustments to your plans rather than dealing with them when you get a significantly higher renewal quote than expected.

How to deal with renewal increases

Speaking of renewal quotes, it’s not uncommon for businesses to receive renewal quotes that far exceed their expectations.

While insurers need to cover their costs, sustainability is vital, so you should consider:

Introducing cost containment measures like those explored earlier.
Re-evaluating your coverage to assess whether you and your employees feel it’s necessary and appropriately priced for the coverage provided. If your Group health insurance comes at the cost of another benefit or even a lower salary, your team members may prefer an alternative approach.
Switching insurers, although this may only offer temporary savings and could lead to logistical and future cost increases anyway if you don’t address the underlying issues driving your Group health insurance costs.

Managing rising medical costs

By adopting the strategies and considerations we have explored here, your business can better manage its Group health insurance costs, ensuring long-term price sustainability and continued employee satisfaction.

Taking a proactive approach helps you avoid the pitfalls of solely relying on community rate increases, supports a more balanced and manageable approach to healthcare costs, and will ultimately help your business access plans and coverage better tailored to what you and your employees need.

Managing group insurance costs is like tending your garden. Just as you must regularly prune, water, and nourish plants to ensure they thrive, your business must continuously monitor and adjust its health insurance plans. By proactively addressing issues and making thoughtful adjustments, you can cultivate a healthy, sustainable insurance program that benefits everyone in the long run.

“The best way to predict the future is to create it.” — Peter Drucker