What can we do in 2016 to reverse rising healthcare costs in the UAE?

Healthcare premiums around the world are rising and Dubai is no exception. According to data from the Insurance Authority – which was set up by the United Arab Emirates government in 2007 to regulate the insurance sector in the country – the average growth rate of health insurance premiums between 2011 and 2014 was about 20 per cent. The annual cost of insuring an employee now ranges from Dhs 650 to Dhs 15,000 per person.

It will have to be seen whether the figures will continue to rise at such an extreme pace in the years to come, but one thing is for sure – they will continue to rise at a pace that puts far too much burden on the system.

Regulations making health insurance mandatory for all residents (to kick in fully in 2016) is one factor. That is, more people need to be insured so claims risks are higher and insurers will absorb that additional expense in higher premiums. And because many healthcare insurers offer broadly the same levels of cover, there’s little room for the price flexibility or innovation that there is in other insurance sectors.

Some things, in other words, are part of the existing and evolving system, and that’s fine. In many instances that is to all our benefit in the long run. But others we can influence, and if we do not make a serious effort to do so, healthcare costs will become unsustainable in the decades ahead.

In this article I want to do a recap of the main issues employers – and their employees – need to be aware of in order to identify their role in contributing to the solution.

Misuse of services

Even the most well-intentioned and honest employee could – in the face of discomfort and distress – end up ‘taking advantage’ of their healthcare benefit. Take the common cold, for example. It’s pretty unpleasant, but it rarely requires medical intervention. Those that do seek medical care for such a basic ailment are helping to bump up the price of premiums for everyone – also known as a ‘moral hazard’, where one person takes risks because someone else bears the burden of those risks.

Some providers have implemented a co-pay system to help reduce the risk of this costly hazard. Although co-pay usually constitutes a very modest portion of the actual cost of the medical service, it helps prevent people from seeking care that’s not necessary – the theory being that without co-pay, people will use medical services much more than if they were paying for some or all of it.

Unhealthy habits

We’re living longer than ever before (due to advances in medicine), but we’re also living more unhealthily than ever before. Poor diets, smoking, alcohol, stress and sedentary lifestyles are without a doubt the biggest factors in the rise of chronic illnesses that are pushing up healthcare premiums.

The Dubai Health Authority has identified the five biggest health challenges for the country: diabetes, hypertension, cardiovascular disease, breast cancer and flu. Of these, 22 per cent of health insurance claims are related to diabetes and cardiovascular diseases – which are almost entirely lifestyle diseases.

With a better understanding of how lifestyle affects health (read prevention), and better programmes in place to aid in the early detection of illnesses, the general health of the workforce is improved, costs relating to absenteeism and presenteeism are reduced, and insurance premiums come down.

It can be helpful for organisations to commit some time to analysing their claims data. Not all ailments are preventable, of course, but it’s possible to identify “health hot spots” that would benefit from a long-term strategy of prevention.

For example, a hypothetical 2015 mid-year claims analysis based closely on data from one of our clients showed costs from ‘coughs and related’ amounted to 25 per cent of total claims, while those from lower back pain stood at 6 per cent. Awareness programmes encouraging better hygiene and time away from the office when sick (and contagious) is a simple way to deal with the former issue; while onsite chiropractic visits and workstation assessments can help deal with often preventable and often costly back pain claims.

Fraud

Consider this: written premiums throughout the UAE total around $9bn annually, yet losses from medical fraud clock in at around $1bn a year. This means more than 11 per cent of all claims in the region are fraudulent.

It’s difficult to paint a detailed picture of health insurance fraud and one of the reasons that it’s so rife (especially in UAE) is that most organisations don’t really know what it looks like.

Generally speaking, there are two types: soft and hard. Soft insurance fraud is usually opportunistic, such as ‘upcoding’, where practitioners bill for a higher-priced treatment than actually provided, or ‘unbundling’, where each step of a standard procedure is billed separately to get a higher payment from the insurer. Hard fraud requires a great deal of planning, so is less common, but is usually quite a lot more financially damaging and can even involve claims for procedures never performed or from clinics that do not actually exist.

Ensuring employees are on the look-out for wrongdoing and are aware of the long term implications to them individually is an important first step in tackling this growing and expensive issue.

Misinformation

According to Towers Watson, which surveyed 173 leading medical insurers in 58 countries, 25 per cent of insurers believe employees don’t fully understand their health policy benefits, which can also rack up insurance costs in the long run.

Say, for example, that an employee develops a persistent cough but doesn’t know that they’re entitled to general health checks, and several months down the line their symptoms become much more severe. Only then might they visit a medical professional, by which time their cough may have turned into something far more sinister and difficult – and costly – to treat.

Ensuring all policy holders are up to speed with their entitlements will help negate these unnecessary costs, which are only contributing to increased premiums in the long run.

Looking ahead in 2016

The issue of rising health premiums is no doubt one of the main issues concerning the government of the UAE and big steps are being taken. Back in November 2014, for example, the Dubai Health Authority moved to regulate the cost of healthcare in legislation. Hospitals and clinics who want to raise their prices now have to apply to the DHA, which will evaluate the request based on the rate of inflation, the cost of doing business in the emirate, the quality of services provided and the performance of the facility.

Of course, the organisations purchasing the care from these providers are generally removed from this process, so it may be helpful to look to the United States for examples of cost curbing at an HR-level. According to Towers Watson, adopting spousal surcharges, using defined contribution strategy instead of defined benefit, adopting new coverage restrictions and offering more customisation by adding voluntary benefits are all measures that have seen success in bringing costs down.

Certainly as far as health insurance pricing is concerned, there are two important parties: the providers and regulators on one side, and the purchasers and users on the other. As premiums inevitably continue to rise, everyone needs to pull their weight to stop costs from spiralling out of control.

Stephen MacLaren is head of regional sales employee benefits at Al Futtaim Willis