UAE residents feel weight of higher medical insurance bills, as average hits Dh6,000 a year
A fairly comprehensive policy costing Dh4,500 in 2022 now comes to Dh6,000
Dubai: Average premiums on (non-basic) medical insurance in the UAE is closing in Dh6,000 for an annual cover, adding another layer of cost for residents to factor in. A standalone health insurance policy was averaging around Dh4,500 same time last year. Residents could even get coverage cheaper if they looked around.
Now, that’s changed as a combination of higher costs for insurers, inflation in the healthcare sector, and mounting claims show up in what residents are getting charged for their annual health policies, whether for renewals or new ones. Even lower claims the previous year does not help much in the current renewal cycle.
Medical insurance policies are getting costlier as hospital operators narrow down the number of insurers they work with. It has meant that residents need to pay higher if they want to keep going to their hospital of choice or consult with a particular doctor.
“Hospitals being selective about their insurer partners has convinced residents to seek out policies that offer better coverage,” said a top official with a leading healthcare company. “And if they wanted to try out new hospitals, some of the biggest insurers would not even have coverage for them, insisting on at least a 2-year operational performance from the hospital.”
Insurance rates firm up on multiple lines
In other words, residents want to look beyond ‘Basic’ health insurance policies. The Covid phase has brought about dramatic changes in how the population view the importance of medical cover, and how much they are willing to pay for it. (Which is a bit of an irony because Covid-related treatment costs was borne by the authorities.)
“There is increasing demand for enhanced/comprehensive coverage,” said Avinash Babur, CEO of InsuranceMarket.ae. “Customers with 'basic' or 'essential' health insurance plans are realizing the importance of more extensive coverage, leading to a surge in demand for better levels of cover. This is a significant factor contributing to the rising average on UAE health insurance premiums.”
Plus, insurance rates are heading higher across categories. Motor policies now come with a significant hike compared to a year ago.
Will there be more increases on medical?
According to insurance industry sources, on group cover renewals at the start of the year, rates have remained more or less stable. But this was largely achieved by dropping some of the add-on benefits, employees would have got on their health insurance policies in previous years. Of course, more group cover policies feature co-payments of up to 20 per cent on average.
Then, there is the domino effect of higher claims being created. “As customers with basic or essential plans choose to upgrade their coverage, this creates a pool with a higher risk profile,” said Babur. “Insurers are then compelled to adjust premiums accordingly to account for the increased likelihood of claims, which in turn raises the overall average health insurance premiums.”
Insurers are then compelled to adjust premiums accordingly to account for the increased likelihood of claims, which in turn raises the overall average health insurance premiums.
UAE’s universal healthcare cover
At some point this year, the UAE would make it mandatory for all residents to come under medical insurance cover. Currently, this applies to Dubai and Abu Dhabi.
Insurance sources say a wider pool of the insured does not necessarily lead to rates remaining stable, or even dropping. Any increase comes with higher claims, and healthcare industry costs too have seen sharp increases in the last two,- three years.
This in turn shows up as higher billing for consultations and other treatments. Which insurers have to pass on through higher premiums when renewals come up.
This is where the domino effect kicks in, and residents feel the pain of higher payments towards their insurance bills.
Regulators periodically permit Diagnosis-Related Group (DRG) rate increases for healthcare providers to ensure reimbursement rates are in line with the cost of providing care. As DRG rates increase, providers can charge higher fees for their services. This, in turn, puts additional inflationary pressure on health insurance premiums, as insurers need to adjust their pricing to accommodate the increased costs of medical services.
• As customers with basic or essential plans consistently choose to upgrade their coverage, this creates a pool of policyholders with a higher risk profile. Insurers are then compelled to adjust premiums accordingly to account for an increased likelihood of claims, which in turn raises the overall average health insurance premiums.
Will UAE and Gulf employers drop more benefits from their group medical insurance as inflationary costs start to bite deeper?
At the start of this year, some businesses did offset higher costs by trying to pay lower on their annual group insurance costs. It’s a strategy laden with risk as employers keep battling to retain key talent – and not have to lose them to competition willing to pay more and do better on incentives.
“Insurance buyers will already be aware of the need for careful cost management, as workplaces feel the effect of general inflation on businesses and employees,” said Julio Garcia-Villalon, Benefits Leader in Middle East and Africa at Mercer Marsh. “They will also need to ask careful questions of insurers to understand the full extent of aspects of coverage such as mental health support and digital innovation.”
Managing this can be quite a balancing act. Through recent years, group medical insurance covers have seen the individuals having to pay up to 20 per cent on a co-payment basis. And they also find that their latest insurance cover no longer allows them to seek consultation or treatment at their regular hospital or clinic.
Employers elsewhere in the region are also experimenting with how much they can save on group insurance. The Mercer Marsh survey found 44 per cent of organizations across MEA would consider reducing coverage to manage costs.
“The knock-on effects of COVID-19 on cost, coverage, claims and plan management are clear in these findings,” said Garcia-Villalon.
These are the main findings from the Mercer Marsh survey:
• Per-person medical cost increases are back to pre-pandemic levels.
The research found the global medical trend rate (the year-over-year cost increase for claims under a medical scheme on a per-person basis) for 2021 was 10.1 per cent. This marks a return to pre-pandemic levels (2019: 9.7 per cent), after a drop to 5.7 per cent during 2020.
Insurers reckon 2022 and 2023 rates will exceed 2019, hitting 12.7 per cent and 12.6 per cent. “Inflation and concerns about other economic shocks will inevitably play a part,” said Garcia-Villalon. “However, other factors such as later-stage diagnoses and increased volume of claims as a result of COVID-19 are significant contributors to medical trend.
“Employers should plan for a higher inflation and medical trend environment, but will need to balance economy and empathy..”
• COVID-19 continues to impact claims experience.
Globally, infection fears are now manifesting themselves through delayed diagnosis. More than half of insurers report seeing more later-stage illness diagnoses in claims due to deferred care.
“Insurers in MEA reported respiratory conditions as the top cause of claim costs in 2021 and one of the three most frequent causes of claims along with diseases of the circulatory system, and endocrine and metabolic diseases,” the official added. “Delayed diagnosis has meant that respiratory conditions and other chronic illnesses are being detected at a later stage, when it is more difficult and costly to treat.”
• Plan modernization
Nearly three quarters insurers now offer a telemedicine service, and should be a permanent part of their provision. In MEA, 31 per cent are including an app to find the right doctor or medical care when and where the user needs it.
• Mental health gaps
Although insurers have increased coverage, 19 per cent of insurers in MEA continue to exclude mental health care. Even among those that do offer cover, less than half are supplying communication on mental topics, like how to access crisis support lines.
• Plan management
Nearly one in ten insurers in MEA are adjusting coverage based on COVID-19 vaccination status, and 22 per cent are treating long-Covid as a pre-existing condition. That will require more rigorous plan management from employers.
“Expense sub-limits and annual/lifetime maximums can unintentionally shift costs onto employees, making care unaffordable,” the report says. “It is therefore important to review plan design annually, keeping the concept of employee affordability front of mind.”