Global inflation may drive some employers to cut the healthcare coverage they offer to their employees, according to analysis from Pacific Prime.
As the Covid-19 pandemic slowly becomes a thing of the past, inflation is the main macroeconomic challenge facing the global health insurance sector, Pacific Prime said.
Against the backdrop of global economic upheavals and inflationary pressures, healthcare costs are expected to rise in most regions, Pacific Prime said in its report The State of Health Insurance 2023.
But rising costs may mean that some employers could decide to lower their level of healthcare coverage and/or pass on costs to their employees.
David Myers chief sales officer, health at Allianz Partners, said: “Prior to the pandemic, large corporates typically covered 100% of the health insurance needs for those going on long-term assignments, but we’ve seen a shift in this.
“Not only are people going on assignments for shorter durations, but companies are now re-looking at the level of health insurance that they provide and what the employee may consider topping up. Increasingly, employers are considering providing a basic level of cover, with anything extra at the discretion of the employee.”
Pacific Prime attributes this to growing labour and supply expenses, which are also causing hospital margins to continually decline, in large part due to the impacts of the Covid-19 pandemic.
Xavier Lestrade, CEO at Axa Global Healthcare, said: “As you’d expect, with the world recovering from a pandemic, civil unrest and inflation rearing its head in many major markets, we’re seeing an increasing focus on costs (premiums) and on cost control measures.”
Medical inflation rates also reflect the rise in healthcare costs, with the average rate of global medical inflation projected at 10% in 2023 – noticeably higher than 8.2% in 2021 and 8.8% in 2022, Pacific Prime noted.
Regional variations in the medical inflation rate also exist, with costs expected to rise at a higher rate in most regions.
Phil Austin CEO domestic health Europe and Asia Pacific; health of global business development at Cigna said: “As Covid-19 recedes, multiple underlying global health trends have reasserted themselves, including the pressing need for healthcare affordability as healthcare spend continues to outpace GDP growth worldwide.”
Meanwhile, the health insurance industry has faced a tumultuous past couple of years.
“After the catastrophic impact of the Covid-19 pandemic and the rocky road to recovery, the industry is now dealing with macroeconomic uncertainty and geopolitical volatility, chief of them being inflationary pressures arising from the war in Ukraine,” Pacific Prime said.
Other related challenges include rising interest rates, fluctuating currency valuations, and the ongoing effects on workforces and supply chains as a result of the pandemic, it added.
The growing cost of goods and services (especially the cost of healthcare) “may impact the amount of claims made and the profitability of underwriting,” Pacific Prime said.
“To combat this, insurers may be compelled to increase the cost of health insurance and/or implement cost control measures,” it said.
Neil Raymond CEO and founder at Pacific Prime, (pictured) said: “From the lingering effects of the COVID-19 pandemic to the war in Ukraine and tension between major powers, 2023 has been full of macroeconomic and geopolitical challenges that are naturally going to spill into the health insurance industry.
“We’ve seen high inflation affecting premiums and affordability, and impacting insurer strategies as well.”
