What is Medical Inflation?
Medical insurance inflation refers to the increase in the cost of healthcare services covered by medical insurance over time. As the cost of healthcare services continues to rise, insurance companies must increase the premiums they charge to cover the costs of providing medical coverage. This increase in premiums can be attributed to several factors, such as the increasing cost of medical treatments, drugs, and medical technology, as well as the aging population and the prevalence of chronic diseases.
Medical insurance inflation is a significant concern for individuals and families who rely on medical insurance to cover their healthcare costs. The rising cost of medical insurance can make it difficult for individuals and families to afford coverage, and can also lead to reduced benefits, higher out-of-pocket costs, or even the loss of coverage altogether. In addition, medical insurance inflation can have a significant impact on employers which offer health insurance benefits to their employees as they must absorb the increased costs or reduce the quality and level of cover provided for employees.
On the rise globally
Medical insurance inflation can vary widely between countries and can be influenced by several factors, including the cost of healthcare services, the structure of the healthcare system, and the regulatory environment for insurance companies and providers, and even the culture and attitudes of the people being insured. However, some countries have experienced higher levels of medical insurance inflation than others in recent years.
According to a report by the International Federation of Health Plans, the countries with the highest medical insurance inflation rates in 2020 were the United States, Mexico, and Turkey, with increases of 10%, 9.9%, and 9.3%, respectively. Other countries that have experienced high medical insurance inflation rates in recent years include Brazil, Russia, China and the UAE. And it is worth noting these persistent annual increases occur year on year even in stable economic times characterised by relatively low underlying general inflation. The compounded affect over several years is huge!
It’s worth noting that healthcare costs and insurance premiums can be affected by a range of factors, including economic conditions, government policies, and the prevalence of certain health conditions. Therefore, medical insurance inflation rates can fluctuate over time and can be influenced by a complex array of factors in each country.
Whatever the driving factors most insurers expect higher cost increases over the next 3 years. Projections vary by region, with an average annual increase of 7% in Europe and 12% expected in the Middle East and Africa.
In the UAE
In recent years, the UAE has experienced a significant increase in the cost of healthcare services, with medical inflation in Dubai being particularly high.
According to a report by the Dubai Health Authority (DHA), the overall medical inflation rate in Dubai was around 9% in 2019. The report also identified specific areas of healthcare that experienced higher inflation rates, including pharmaceuticals, which had an inflation rate of around 14%, and outpatient services, which had an inflation rate of around 11%.
The rise in healthcare costs in the UAE can be attributed to various factors, such as an aging population, an increase in chronic diseases, and the growing demand for medical technology and specialized treatments. In addition, the UAE has a high standard of living and a significant expatriate population, which can contribute to higher healthcare costs and insurance premiums. Expatriates are typically provided with very rich and comprehensive insurance coverage that is better than they may be used to at home and given access to a vast array of fancy providers employing all the latest and most expensive technology and treatments, that often prioritise profitability and return on investments rather than being efficient and patient outcomes.
Treatment and care are very good generally but at times can be extravagant and excessive when compared to the more rational and humbler, yet still generally acceptable and professional, care that may be offered in other countries. Essentially many providers are overzealous in prescribing diagnostic tests, treatments, and medication, upselling and driving up revenues like any other business at every opportunity. Combined with incredibly low deductibles relative to what people earn such that there is no disincentive or control to stop these expats living it up in the UAE’s wonderful, almost luxurious in terms of service and facilities, healthcare providers. People still shun telehealth, with engagement very low compared to other parts of the world, instead preferring to visiting doctors for the mildest and even most non-sensical reasons because they can and are pampered. The resulting inflation year on year is therefore inevitable.
As a result of this medical inflation, the cost of medical insurance in Dubai and the wider UAE has increased in recent years, with some reports indicating premium increases of up to 20% or more. This has placed a significant burden on individuals and families who rely on medical insurance to cover their healthcare costs and has also affected businesses that provide health insurance benefits to their employees.
But what can we do in the UAE to control costs and make insurance policies sustainable without compromise? HanseMerkur has the solution with our latest product called Choices which provides access to all the best hospitals and clinics in the UAE but with typical savings of around 30% compared to our standard GlobalCare offering and other competing international plans.