Medical cost increases to accelerate worldwide over next five years

Medical cost increases for employers throughout the world are expected to accelerate over the next five years, according to a poll of insurance companies conducted by Watson Wyatt Worldwide, a leading global consulting firm. The poll also found that, in a vast majority of countries, medical cost increases are outpacing the general rate of inflation.

Nearly three-fourths (71 percent) of respondents expect higher or significantly higher medical cost trends over the next five years. Additionally, more than eight of 10 (81 percent) report that medical costs are eclipsing the general rate of inflation in their country. The results are based on a Watson Wyatt survey of 85 insurance companies
that provide medical insurance to employers throughout Asia, Africa, Europe and the Americas.

Rising medical costs have rapidly become a global issue that reaches far beyond the United States and other developed economies, said Francis Coleman, a senior international health care benefits consultant with Watson Wyatt. Many of the factors causing U.S. employers to experience significant increases in their health care costs - such as increased utilization, expensive medical technology and an aging population - are having comparable effects throughout the world.

Insurance companies in Asia and Africa are expecting double-digit increases in employer medical costs in 2008, with the exception of companies in Hong Kong and Singapore, according to the poll. The same is true in Latin America, except for Brazil and Chile, where costs are expected to increase by around 7 percent. In Europe, most insurers -
except those in Italy - are projecting increases in the single digits, although respondents in all European countries said they expect higher trends over the next five years.

Medical Cost Trends Continue to Increase Globally

2006
2007
2008(projected)

Asia and Africa
China
15.2 %
21.2 %
19.6 %

Hong Kong
6.8 %
8.8 %
9.1 %

Philippines
11.6 %
11.4 %
11.5 %

Russia
13.3 %
13.7 %
15.7 %

Saudi Arabia
13.3 %
13.3 %
16.3 %

Singapore
5.5 %
6.5 %
7.5 %

South Africa
7.4 %
10.0 %
12.6 %

Europe
France
5.6 %
6.6 %
7.3 %

Italy
5.5 %
11.0 %
11.3 %

Netherlands
6.0 %
5.2 %
6.0 %

Switzerland
3.8 %
7.5 %
6.0 %

United Kingdom
6.0 %
8.0 %
8.0 %

Americas

Brazil
9.2 %
5.9 %
7.2 %

Canada
12.3 %
11.5 %
12.0 %

Chile
5.8 %
6.5 %
7.1 %

Mexico
12.0 %
12.8 %
12.6 %

United States
8.3 %
8.0 %
11.0 %

Venezuela
31.3 %
25.0 %
25.0 %

Health care is fast becoming the most desired employee benefit worldwide, even in countries that support state-sponsored programs, said Ted Nussbaum, North America director of group and health care consulting at Watson Wyatt. Given the similar factors driving health care costs around the world, multinationals have an opportunity to develop global solutions that engage workers and improve their health and productivity.