High blood pressure. Obesity. Lack of exercise. Many of the same risk factors that drive up health care costs in the United States are pushing up medical costs around the world, presenting challenges to global employers.
In his article “Managing Medical Plans Around the World” in the January issue of Benefits Magazine, author Wil J. Gaitan writes that deteriorating health habits is one of three factors that are having a major impact on global employers in terms of medical costs and employee absenteeism due to illness. Gaitan is a global consulting actuary and total rewards consultant for Aon Hewitt in Chicago, Illinois.
Poor health habits are proliferating worldwide with a growth of risk factors such as sedentary lifestyles, poor diets, higher unmanaged stress levels and increased consumption of alcohol, recreational drugs and tobacco. These risk factors lead to noncommunicable diseases (e.g., cancer, cardiovascular disease and respiratory conditions), which now account for most deaths and disabilities in the world, Gaitan notes.
The other major factors in rising health care costs around the world include:
- Transformation of the world economy. As power shifts to emerging markets, the rapid formation of a new middle class and growing competition for scarce talent in these countries are fueling a combination of unrealistic expectations for health care quality, increased demand for employer-sponsored medical plans and higher utilization levels.
- Aging of the population. Older workforces are more prone to illnesses and push up costs. In addition, demographic imbalances from an expanded retiree population are creating financial pressures on social health care programs, which can lead to cutbacks and costs shifting to private medical and disability programs.
Protective labor laws and new regulatory requirements on employer-sponsored plans in other countries add to the challenge of managing global health care costs, Gaitan states in his article.
[Related: Global Business Travel – Risks, Trends and Solutions]
To respond, multinational companies are exploring a range of financial and nonfinancial strategies. Financial strategies include the use of alternative funding methods such as local self-insurance, multinational pooling, corporate captives and bulk purchasing across countries. Nonfinancial strategies include wellness initiatives, cost-containment measures such as plan design changes, and restrictions on access and delivery.
These approaches are a good start to getting a handle on health care costs. However, Gaitan suggests that the path to an effective long-term solution likely will require global companies to design health care benefits and education that promote a healthy workforce through programs such as disease management, workplace safety and health education.
Kathy Bergstrom, CEBS
Editor, Publications at the International Foundation
