How to effectively manage rising employee benefits costs in Asia

Group of young asian creative business brain storm meeting presentation,discussing roadmap to product launch, planning,strategy,new business development,working with new startup project in office.

Amid persistent inflation in an uncertain economic climate, organisations in Asia need effective solutions to continuously attract, develop and retain talent despite rising health and employee benefits costs for long-term success.

According to the latest People Risk report by Mercer Marsh Benefits (MMB), increasing health and employee benefits costs are top concerns for human resources (HR) and risk managers in Asia.

Medical cost inflation in Asia is projected to reach 11.4% in 2024, four times more than general inflation in the region,¹and it is impacting how companies provide valuable benefits to their workforce. Meanwhile, the ongoing cost of living crisis, economic downturn, and job uncertainties are placing pressure on both employers and employees, causing burnout at work due to financial stress or higher attrition as employees may consider leaving their jobs for better rewards and opportunities.

To strike the right balance between economic returns and the needs and well-being of their employees, organisations need to assess the effectiveness of their current plans and mitigate emerging risks. There are two approaches companies can consider to manage costs and sustain workforce resilience adequately:

1. Review existing health and benefits program

Companies can effectively identify, evaluate, and prioritise risks and opportunities by regularly reviewing the employee benefits program. Utilising the available data helps companies enhance and optimise the benefits program for long-term sustainability.

Case Study: Balancing cost and empathy through data analytics

An international school in Singapore faced a 15% increase in premium rate for its renewal due to the high amount of claims submitted. The school approached MMB for support to redesign its benefits plan, requesting to save SGD$200K on renewal.

MMB conducted a comprehensive review, including a deep dive into claims analysis to identify the usage and cost drivers, coupled with a survey to understand employees’ health and benefits concerns. MMB also proposed segmenting the current population to offer robust benefits plans to cater to the diverse needs of the school’s employees.

This plan management has brought about, amongst others, an increase in the overall outpatient annual limit and a greater area of coverage for employees who require the extension. A medical network analysis was also carried out, and plan design changes were implemented to incentivise cost-conscious behavior, including 100% cashless coverage for outpatient visits within the insurer network providers and co-payment for visits to non-panel providers.

This led to a reduced premium loading from 15% to 8%.

2. Cost containment through employee listening strategies

Besides redesigning employee benefits plans, organisations can also introduce flexibility, voluntary benefits opt-in options, and deductibles or co-payments, while still providing valuable employee support by understanding their needs.

Case Study: Flexible benefits to meet the diverse needs of the workforce

A private bank in Asia was experiencing talent loss and a lower employee engagement rate. This was attributed to its stagnant and rigid health and benefits plan despite a shift in demographic mix, including an influx of millennials and an increased number of caregivers among its employees.

Further challenges surfaced as multiple critical illnesses and inpatient claims over a three-year period resulted in a higher claims ratio.

Through surveys, MMB found a gap in views between the employer’s benefits provisions and employees’ diverse expectations:

The younger cohort expressed their desires for more flexibility and lifestyle-related benefits.
Married employees whose spouses are working do not require spousal coverage.
Caregivers prefer the ability to enrol their dependents for coverages like dental, which were only available to employees.
The older employees wanted more coverage on chronic care.
Benefits communication was also identified as a gap.

The detailed claims analysis carried out by the MMB team also discovered that the existing benefits design did not meet the employees' utilisation behaviour, resulting in expensive add-ons that employees did not need.

To cater to the diverse employee profiles, a flexible benefits approach, where employees are empowered to select their desired coverage, was introduced.

A wellness roadmap to increase awareness and drive engagement in preventive care was also developed to address the rise of critical illness and inpatient claims.

MMB’s solutions met the needs of the diverse workforce with a highly effective communication strategy, which saw over 90% employee log-in rates to the MMB Darwin benefits portal for information. The opt-in and opt-out model, co-sharing elements for cost sustainability, and the benefits plan overhaul have enabled the bank to save S$170,000 in costs at renewal.

When was the last time you reviewed your employee benefits plan?

Kickstart your journey in developing a resilient workforce with sustainable employee benefits plans. With deep experience in different industries’ needs in Asia, MMB can help you make informed decisions in your cost containment strategy through data analytics and plan review to build the right-sized benefits plan for your organisation and employees.

^{1 Mercer Marsh Benefits (2024), Health Trends}