Health insurance costs continue to increase globally

27 July 2017

Private health insurance costs have increased above the rate of inflation, with cancer and diseases of the circulatory system blamed as the main cost drivers. When it comes to major risk areas, however, proven links between the rise of metabolic disorders and related symptoms and decreasing quality of affordable food, coupled with workplace stress and environmental pollution suggest these hikes are punishing individuals for structural failures.

Outside systems of socialised medicine, “self-regulating” health has increasingly been cited by private insurance companies as being key to avoid getting stung by increasingly usurious premiums. Beyond state-provision, one model for health insurance is coverage provided by businesses – with the American health system relying on this heavily preceding the implementation of Obamacare. While businesses theoretically have an inherent interest in healthy employees however, this system also saw millions of Americans notably abandoned by the system if they could not find employment, or if their employer decided to cut back on their ‘benefits’ package, including the level of medical coverage they received, as a cost-cutting exercise to maximise profits.

A report into the insurance industry by Mercer has taken stock of the opinions of 220 insurers across 68 countries (notably excluding the US), to explore where enterprises might in fact benefit from taking a more active interest in the welfare of their staff. Researchers from the consulting firm highlighted that poor health, and risks related to covering their costs, continue to be prevalent globally, suggesting that structural conditions, such as diet, exercise, stress and pollution, are continuing to negatively affect human well-being outcomes.

Major cost conditions

Medical costs continue to rise rapidly well above inflation, topping a 10% increase in 2016, an increase which was particularly acute in developing countries. India for instance, saw costs increase by 15.3%, while Indonesia and Thailand saw increases of 13.1% and 12.5% respectively. Europe as a whole saw cost increases at a considerably lower than average 7.1%, with the continent hosting numerous states which control health industry prices through national insurance schemes somewhat insulating them from spiralling costs, although there were also considerable differences between West and Eastern Europe, the former seeing increases of around 2% - 6%. The UK, which continues to cite health premiums as a chief concern, saw an inflation adjusted cost increase of 5.3% for 2016, lower than the European average.

By region, Mercer’s research also identified the top three biggest treatment costs for 2016. Cancer was a considerable cost burden on Latin American insurers, situated in 84% of respondents’ top three, followed by Asia. Globally it came in the number one spot. Circulatory system related diseases followed, with particular prevalence in the Middle East / Africa, while respiratory conditions were a considerable cost burden in Asia and the Middle East / Africa, although hardly prevalent in Europe. Gastrointestinal disease was an outlier in Asia, with relatively little incidence across other regions.

Major risk factors

Respondents were also asked to identify the conditions that they believe have the biggest impact on medical costs. The top most cited risks, at more than 90% across all surveyed insurers, are related to metabolic and cardiovascular risk, which include, high blood pressure, high cholesterol, high blood glucose, overweight/obesity and physical inactivity. Respondents also cited poor diet as a key risk factor. A poor diet was broadly defined as one with a high carbohydrate intake, along with a low fibre intake featuring few vegetables, eating habits cited by an average 48% globally.

Emotional/mental risk was the third most cited issue, at 41% of respondents, relating to stress and sleeping disorders, as workplace pressures have intensified in the years following the international finance crisis, particularly as pay rates have continued to stagnate, piling monetary burdens on employees at home. Pollution was the forth most cited factor meanwhile, including indoor/outdoor air pollution, ozone, water sanitation along with climate change. The rapidly expanding economies of Asia, the Middle East and Africa noted the highest level of concern in this respect, as these regions have traditionally favoured economic growth fuelled by non-renewables.

Top five risk factors globally

Across the board by region, metabolic and cardiovascular risks are subsequently perceived as the biggest risk to care costs. Dietary risks rank second everywhere bar Europe, where emotional and mental risks take second place. While occupational risks takes the number four spot. Increased understanding of dangers posed by pollution have also propelled environmental risks to number five overall.

Summarising Mercer’s findings, Graham Pearce, the firm’s Global Consulting Group Leader, concluded, “With medical inflation again outpacing price inflation by a factor of nearly three, companies need to redouble their efforts to manage their spiralling healthcare plan costs. The quality of the claims reporting and loss prevention measures available varies significantly between the global insurance networks – both these factors are becoming key drivers in the choice of insurance providers at the local and global level.”


Medicine economic model creates negative health outcomes

26 March 2019

Profit-driven production of antibiotics has held back the development of vital medical breakthroughs, according to a new report. Analysis from a leading strategy consultancy suggests that a change in economic model and new incentives could prompt pharmaceutical giants to develop cures to major diseases, which could be affordable at scale.

The much maligned pharmaceutical industry has long been criticised for its failure to focus on deep seated issues in public health. For instance, there is increasing concern around microbial resistance, with some bacteria now resistant to all known antibiotics. Combating that requires new antibiotics – but drug companies see little profit in the field, and therefore have not seriously invested in it. Another instance of concern is a focus on treating symptoms rather than curing the diseases themselves, with such treatments requiring long-term payment to mitigate symptoms, rather than one-time cures being delivered.

Cases like the so-called “Pharma Bro” Martin Shkreli – who received widespread criticism when his company obtained the manufacturing license for the antiparasitic drug Daraprim and raised its price by a factor of 56 (from US$13.5 to $750 per pill – underline the failing of this system to meet the needs of society. New analysis from Boston Consulting Group (BCG) seeks to challenge the current economic model and its inherent failures in favour of a model that creates greater social good while also generating steady reliable returns for pharma companies. The analysis appears in the firm’s ‘Aligning Economic Incentives to Eradicate Diseases’ report.

Different pricing model makes cures more accessible

One example is Hepatitis C. The disease is massively damaging to human life, with considerable negative impacts on patients and society. Treatments have existed for decades, which manage the virus but did not cure it. These treatments had significant side effects however, which saw people not complete rounds – which then resulted in expensive emergency care and secondary health costs.

In 2013 a treatment was developed that effectively cured the virus in 8-12 weeks. The treatment has few side effects and works in most patients. However, five years later fewer than 10% of people globally with the virus have had the cure – largely because of prohibitive costs. The ambition to remove this disease and its large negative drag on the lives of millions by 2030 is becoming increasingly unlikely. The issue is cost.

The current economic model used by pharmaceutical companies mean that early adopters pay sky high prices as the company seeks to recoup costs, with the price eventually coming down to levels at which a larger segment can afford to access the drug – before its generic releases sees mass uptake. This model creates considerable initial barriers, and long-term social costs.

The report subsequently proposes a different pricing model that would see the price of a new drug kept at a constant level for its lifetime but have that level set considerably lower than the current model - which is focused on recouping costs immediately. Under the firm’s model, within 12 years of the Hepatitis C drug’s discovery, up to 96% of the population could be cured, at a cost 30% lower than the UN model and with a cure rate almost 50 percentage points higher than the base model.

The PLA scenario has better social outcomes than the traditional model

A change in model would, according to the firm’s analysis for HCP, triple the number of patients cured within 2 years, reduce the number of liver disease deaths by 60%, reduce total costs to payers by 30% (due to fewer additional costs on healthcare systems), while creating higher and more predictable revenue streams for pharma companies.

“There are many barriers to curing this population, but the dilemma created by current pricing models is one of the biggest,” said Dave Matthews, a BCG Principal and study co-author. The firm adds, “The dilemma results because a high price per patient makes treating everyone prohibitively expensive while an affordable price is too low for pharmaceutical companies to earn back their investments.”

Matthews concluded, “Switching to a population-based model such as the PLA not only makes the cure affordable, but also creates strong motivation to identify, diagnose, and treat as many patients as possible before the license expires.”

Related: Ten year deal activity in pharmaceuticals industry stands at $2.4 trillion.