Tackling rising costs of medical insurance

It is a fact that the cost to insurers of covering health insurance claims in UAE increases by between 10-12 per cent per annum. This ‘inflation’ rate is described as a ‘medical trend’ — but what causes it and why is it always higher than general price inflation?

The medical trend is the result of a combination of factors:

■ Rising costs of medical treatment;

■ Rising operating and salary costs for health care providers;

■ Technological advances producing more expensive procedures;

■ Scientific advances creating more expensive drugs;

■ Increasing usage rates (utilisation) by insured members; and

■ Deteriorating population health due to chronic diseases resulting in higher claims.

So, how do organisations deal with this rising cost? Insurers increasingly scrutinise claims to check for medical necessity for the claim, whether the claim is eligible under the policy terms and the reasonableness of the treatment costs billed by the health care provider.

This often results in denials of the claim or a reduction in what the insurer will pay for. Employers (who by law in Abu Dhabi and Dubai must pay for health insurance for their employees and, in Abu Dhabi, up to three dependents) either have to pay increased insurance premiums at every renewal or try to reduce the premium by finding a cheaper insurer or reducing plan benefits.

The very fact that employees in Abu Dhabi and Dubai have the benefit of private medical insurance cover without themselves having to contribute to the insurance premium means that many see this as a “free” service. And apart from having to pay a possible contribution towards treatment — known as a “co-payment” or a “deductible” — they see no problem in visiting a doctor without a second thought.

However, this undisciplined usage of health insurance will eventually hurt the employee as insurers seek to minimise claims costs and employers seek to minimise insurance premiums by downgrading the benefits provided.

The only solution to this issue in the absence of any effective regulation of premium levels, provider pricing or the implementation of adherence by physicians to what are known as “clinical guidelines” is for companies and their employees to work together to reduce utilisation levels.

How could this work?

Firstly, employers must take the initiative to educate their workers as to how health insurance and the health care system work. Town hall meetings where the employer explains how rising claims costs affect their renewal premiums and the possible effect on employees’ plan benefits are an ideal way of communicating the realities. These meetings should also explain some basic matters which employees should understand.

In the UAE, most doctors are paid by way of a salary and a bonus based upon achieving revenue targets for the hospital or clinic they work for. This means that they have an incentive to recommend a multitude of (sometimes unnecessary) lab tests and pharmaceuticals because they know that your insurance company will be paying the bill and you will not argue.

In case you are not aware, there are internationally recognised “clinical guidelines” that physicians should follow in order to arrive at a diagnosis. In the UAE, physicians often ignore these pathways, instead preferring to recommend multiple lab tests and diagnostic procedures because that is how they earn money for themselves and their employer.

Employers should have experts explain that these unnecessary test can be potentially harmful (such as X-rays). They are also very costly, not to you of course (apart from any co-pay required) but definitely costly to the insurance company that covers your employer’s health insurance plan costs.

Secondly, employers should ask that employees think twice before running to the clinic or hospital every time they or a family member feel a little unwell just because they know that the cost will be covered by their employer’s health insurance plan. The more often the employee does this, the greater the claims cost to the insurer and the more likely that the employer will reduce plan benefits next year.

Thirdly, employers should encourage their employees to question the multiple tests and diagnostic procedures that the physician is recommending. You don’t need an MRI scan just because you have a headache…

Finally, employers should adopt a health insurance plan that covers telehealth consultation and provides apps that are simply more convenient for you, cheaper for your insurer and often can provide a diagnosis without the need for expensive lab and diagnostic tests. This can all be explained at employee meetings.

As an insured member within your employer’s health insurance programme, you are responsible for keeping the cost down and maintaining your benefit levels for the time when you really need them.

The very fact that employees in Abu Dhabi and Dubai have the benefit of private medical insurance cover without themselves having to contribute to the insurance premium means that many see this as a ‘free’ service.