Employers' medical plan costs have increased at a faster rate than their salary-related expenditure over the last five years, according to a report.
The key factors that have negatively impacted employers' healthcare costs are medical inflation, room rent and associated charges, cost variations across key geographical locations and health risks, according to report published by Marsh India, a subsidiary of Marsh, the global leader in insurance broking and risk management.
The report found that 95 per cent employers rated the increase in treatment costs as the biggest challenge they faced when managing healthcare costs. Increased health risks are rated by 86 percent employers as among the top three causes for concern.
The study said the cost to employers for providing employee benefits continues to rise. A typical premium increase has been in the range of 16 per cent to 22 per cent in 2012.
In order to manage the rising cost of health care, more than 70 per cent of employers have made changes to plan designs in the last two years. Popular changes include the implementation of room rent restrictions (86 per cent) and cost sharing with employees on claims (32 per cent).
Companies also anticipate making plan design changes over the next three years to manage these rising costs: Nearly 60 per cent of the companies say that they will re-evaluate the employee contribution and 55 per cent plan to introduce preventive care going forward.
"Organisations need to understand the controllable and uncontrollable cost drivers that affect their plan if they are to maximise cost savings and improve the sustainability of their benefits plans," Marsh India CEO Sanjay Kedia said.
It is clear that medical inflation remains a concern for many employers, and with the significant ongoing investment in medical technologies, it is likely that in the longer term medical inflation will continue to outpace consumer price and earnings inflation, the report said.
The study further revealed that the most prevalent health risks among employees are related to stress accounts for 65 per cent, tobacco/smoking 61 per cent, weight 60 per cent and diet around 58 per cent.
Many of these risks can be managed effectively through preventive action and lifestyle changes.
Employers are now responding to these concerns with increased emphasis on wellness initiatives to help their employees improve overall health, as well as addressing losses in productivity and increased medical costs.
"Rising health care costs and growing lifestyle risks are driving employers to revisit their employee health and well-being strategy. Organisations will increasingly need to manage underlying health risks to achieve their cost containment objectives," Kedia said.
Marsh India said it had interviewed 301 organisations with a total group size in excess of 1.5 million people for the survey. Apart from employers, the survey included seven leading general insurance companies, six TPAs and ten health and wellness solution providers.