The cost of employer-provided health insurance is expected to increase by more than 10% around the world in 2011, according to a new survey of health insurers conducted by Towers Watson, a global professional services company. Additionally, little relief is in sight, with the vast majority of respondents expecting higher medical costs over the next five years.

The Towers Watson Global Medical Trends survey, which includes responses from 170 medical insurers in 37 countries throughout Asia, Africa, Europe and the Americas, found that globally, the average medical cost trend is expected to be 10.5% in 2011. Respondents in Latin America and North America project the largest average medical trend for 2011 (13.7% and 11.6%, respectively). Only European respondents expect a single-digit average medical trend (9.1%) for 2011. Medical cost trend is expected to be 2.5 percentage points higher in emerging economies than in advanced economies. Additionally, virtually all respondents (95%) show a medical trend that is two or three times the rate of general inflation. Without inflation, the average global medical increase for 2009 was 6.9%.

The categorization of “advanced” and “emerging” economies is based on the International Monetary Fund’s definitions and list of 34 countries meeting the definition of “advanced”: Australia, Austria, Belgium, Canada, Cyprus, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hong Kong, Iceland, Ireland, Israel, Italy, Japan, Luxembourg, Malta, Netherlands, New Zealand, Norway, Portugal, San Marino, Singapore, Slovakia, Slovenia, South Korea, Spain, Sweden, Switzerland, Taiwan, the United Kingdom and the United States.

The survey also found that, while medical trend increases have slowed recently, nearly three out of four respondents (72%) expect costs to rise over the next five years. The most significant factors driving medical cost increases are new medical technology and the overuse of care, which are cited by 65% and 56% of respondents, respectively.

“The growing demand for private health care, particularly in developing nations, has placed enormous upward pressure on the cost of providing this valuable employee benefit,” said Francis Coleman, a senior international consultant at Towers Watson. “With double-digit medical cost increases now the norm, there appears to be a shift among employers and insurers toward a more holistic and consumer-directed approach to health care - one that helps employees to become more aware of risks and more responsible for maintaining a healthy lifestyle.”

Wellness Programs Embraced Globally

The survey noted that interest in wellness programs is growing in all regions, with most respondents adding some form of wellness feature to their health care offerings. Globally, nearly three out of four respondents (72%) offer employees lifestyle and health education programs, while 63% offer personal health assessments. Four in 10 respondents (40%) reported offering chronic condition or disease management programs.

“The clear interest all regions are showing in employee wellness is encouraging, and we expect that wellness features will play a greater role in managing global medical costs,” said Nicole Serfontein, a senior international consultant with Towers Watson. “In a global economy that will likely continue to experience medical inflation in the short and medium terms, these approaches supplement traditional methods by addressing some of the more common medical issues that drive up health care costs.”