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Press release

Covid-19 will impact employee health benefits for years to come: Mercer Marsh Benefits Study

31/10/2020

02 November 2020

Disruption to the delivery of healthcare and lasting changes to work patterns resulting from the COVID-19 pandemic will have a major impact on both the cost and design of employer-provided health benefits, according to a new report by Mercer Marsh Benefits (MMB).  

The sixth annual, MMB Health Trends: 2020 Insurer Survey (formerly known as Medical Health Trends Around the World survey), reveals that 68% of insurers expect increased medical claims driven by COVID-19 diagnostics, care and treatment. 

Insurers also said they expect increases in medical costs to continue to vastly outstrip inflation in 2021. In 2019, insurers reported cost increases of 9.7%, which was just under 3 times the rate of inflation. In 2020, they expect a rise in medical costs of 9.5%, which is roughly 3.5 times the inflation rate. For 2021, 90% of insurers expect the trend to sustain or increase.

Commenting on the findings, Hervé Balzano, President, Health at Mercer and Mercer Marsh Benefits International Leader, said: “COVID-19 has had profound effects on all parts of society and the economy, including healthcare. With an expected rebound in elective treatments deferred during lockdown, a rise in negative health issues related to remote working and sedentary lifestyle, including musculoskeletal and mental health issues, and ongoing concerns about the long-term physical and mental health implications of COVID-19, we expect medical costs to continue to increase.”

Mr. Balzano continued: “In order to meet the new challenges posed by remote working and contain expanding costs, companies need to radically rethink the range of benefits they offer their employees and the way in which they deliver them.”

The COVID-19 crisis has highlighted the fragility of current employee benefits systems, many of which are paper based and cannot be accessed or managed remotely. With many employers now looking for benefit providers that can offer additional benefits such as mental health, preventive care, and an enhanced range of digital and online services, insurers are increasingly looking to broaden their suite of solutions.

The survey found an increase in the number of insurers offering virtual health consultations, or “telemedicine”, with 59% saying it was an active part of their current approach to plan management, up from 38% in 2019. Furthermore, 55% of insurers now cover preventive health initiatives, such as screenings, with an additional 20% indicating they are experimenting or have developed plans to initiate this within the next 24 months. Employer-sponsored plans will continue to play an important role in providing people with the health services they need. For example, just over half of insurers expect their employer-sponsored plans will cover COVID-19 vaccinations, especially in Latin America.  

The survey also found remaining gaps in mental health support, despite the increase in demand seen during the pandemic. For example, virtual mental health counselling is still not widespread, with only one-third of insurers offering it globally while 32% of insurers do not provide plans covering any mental health services. This is despite the fact that in all regions, insurers rate private, employer-sponsored health care systems as more effective than public ones in providing the needed prevention, diagnostics and treatment of mental health disorders.

The increase in medical costs in Asia continues to outpace inflation. In 2019, insurers reported cost increases of 10.2%, which was 5.4 times the rate of inflation in Asia. In 2020, they expect a rise in medical costs of 10.7%, which is 7.6 times the inflation rate. For 2021, 86% of insurers expect the trend to sustain or increase.

COVID-19 hit Asia earlier than other regions of the world, and the region has been able to “bounce back” faster than many other regions given widespread containment efforts. The majority of the impact from COVID-19 claims deferral was felt in the first part of 2020, and a significant portion of medical spend, including inpatient and outpatient expenses generally covered under medical plans (employees heavily rely on employer-sponsored medical in some of the region’s countries), has resumed. The double-digit 2020 increase also reflects the increased unit cost of care due to providers passing on the cost of personal protective equipment (PPE) needed to safely perform services in their bills as well as the higher cost of supply imports due to exchange rate fluctuations.

Amy Laverock, MMB’s Advice and Solutions Leader, added: “As medical costs rise and recession looms, it is important for more companies to focus on ensuring that the benefits they provide improve the health, well-being, productivity and engagement of their employees. Workforce health is a critical asset to firms, helping them to drive business performance and manage people risk effectively. Health plans should be looked at as an investment in people, not just a necessary cost.”

The report focuses on employer-sponsored health programs in 59 countries, excluding the United States, provided between early June and mid-July 2020. This year’s report contains the annual quantitative medical trends table, based largely on data provided by nearly 240 insurers, and added content beyond the financial aspects of insurance coverage. 

About Mercer Marsh Benefits

Mercer Marsh Benefits provides clients with a single source for managing the costs, people risks, and complexities of employee benefits. The network is a combination of Mercer and Marsh local offices around the world, plus country correspondents who have been selected based on specific criteria. Our benefits experts, located in 135 countries and servicing clients in more than 150 countries, are deeply knowledgeable about their local markets. Through our locally established businesses, we have a unique common platform, which allows us to serve clients with global consistency and locally unique solutions.

About Marsh

Marsh is the world’s leading insurance broker and risk advisor. With around 40,000 colleagues operating in more than 130 countries, Marsh serves commercial and individual clients with data-driven risk solutions and advisory services. Marsh is a business of Marsh McLennan (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people. With annual revenue over $18 billion, Marsh McLennan helps clients navigate an increasingly dynamic and complex environment through four market-leading businesses: Marsh, Guy Carpenter, Mercer and Oliver Wyman. For more information, visit mmc.com, follow us on LinkedIn and Twitter or subscribe to BRINK.

Media contact

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Angeline Ong

Head of Marketing and Communications, Marsh

+65 6922 8094

Disclaimer: Marsh India Insurance Brokers Pvt Ltd is a subsidiary of Marsh McLennan.

Marsh India Insurance Brokers Pvt. Ltd. having corporate and the registered office at 1201-02, Tower 2, One World Center, Plot-841, Jupiter Textile Compound Mills, Senapati Bapat Marg, Elphinstone Road (W), Mumbai 400 013 is registered as a composite broker with Insurance and Regulatory Development Authority of India (IRDAI). Its license no. is 120 and is valid from 03/03/2021 to 02/03/2024. CIN: U66010MH2002PTC138276.