What are the leading reasons for the increase of medical costs in Malaysia? The more obvious one lie in the evolution of medical technology, with breakthrough surgeries, prescription drugs and diagnostics.

Many of these interventions are miraculous and save lives and often produce a faster recovery process thus enabling the patient to return to the workplace. Other factors contributing to cost increases include an aging population, changing lifestyles and greater employee awareness about health and possible treatments, all of which lead to higher utilization of medical plans.

Additionally, as government hospitals are typically over crowded, more and more are seeking private healthcare which then also increases the cost. This will put even more pressure on employer sponsored plans.

Without a doubt, expenditures need to be managed judiciously, but most employers understand that investing in the health of their employees makes good business sense: it enhances productivity, helps them compete in the labour market and is part of their corporate social responsibility, more so when most Malaysians do not have personal health care insurance unlike their American counterparts.

At the same time, HR and finance professionals do want to maximize the return on their healthcare investment by ensuring that employees appreciate the value of their benefits and that money is spent on interventions to improve health outcomes instead of unnecessary treatment or costly administration.

The cost of “Presenteeism”
Unfortunately, we are seeing an increase in the incidence of many illnesses in many parts of Asia including Malaysia. This costs employers in a variety of ways. There are the direct costs associated with utilization of medical goods and services and medical leave. There is also the cost of “presenteeism”, or the lost productivity of employees who are not working at their maximum capacity due to health issues.

Research conducted on 375,000 employees in the US, as documented in a 2004 article in the Journal of Occupational and Environmental Medicine, suggests presenteeism can account for up to 60 percent of all total employee illness costs.

The employer’s role in preventing and managing illness is changing
Lifestyle has a large role to play in many of the chronic illnesses that plague employees. A recent study by the World Health Organization estimated that 80% of heart disease, stroke and type 2 diabetes, and 40% of cancer in Europe could be avoided if common lifestyle risk factors were eliminated.

In Malaysia, 98% of the 1.2million diabetics in Malaysia are diagnosed with Type 2 diabetes. By 2020, 25% of the Malaysian population will be plagued by this killer disease. Diabetes can lead to blindness, kidney failure or heart diseases. (Source: Malaysian Diabetes Association). The behaviours to reduce these risks include smoking cessation, exercising regularly, maintaining a healthy diet and taking preventative medications properly.

Employers can aid in educating employees and providing them with access to the latest thinking about prevention and lifestyle practices. Access to health risk assessment tools, health fairs and medical screenings is a good start. But for wellness programs to produce lasting change in employees’ lives, ongoing personal support, motivation and reinforcement is needed.

Some leading employers in Malaysia have Employee Assistance Programs designed to counsel on work life balance and promote smoking cessations programs as well as promote programs on obesity as well as diabetes management.

Indeed, wellness, prevention and chronic disease management involves a long term perspective, with cost savings typically achieved over a three to five year horizon. But Asian countries are waking up to this fact.

For example, the government of Singapore has recognized how important proper chronic disease management is and has invested in a number of initiatives targeted at individuals with certain lung, heart and other diseases. In Malaysia, the Ministry of Health along with awareness organizations such as the National Cancer Society of Malaysia have been promoting awareness on early detection of cervical cancers as well as spreading the benefits of smoking cessation. There is still a long way to go before more organizations pick up on the mantra that prevention and early detection is the best method to managing healthcare costs.

So what can companies do? Where do we start?

Think about your benefits plan strategically
Depending on your benefits philosophy, here are some solutions you may want to consider:

1. Understand what certain illnesses are costing your organization – outpatient and inpatient costs are a good start but don’t ignore indirect costs like those associated with poor customer service or the hiring of replacement workers. The best way to get good information about the health of your employees is through the use of comprehensive and confidential health risk assessments.

2. Make sure your plans include an element of consumerism, thus making employees financially responsible for an affordable portion of their healthcare costs. For example, a small coinsurance or co-payment element may make them smarter consumers of health care. Companies in Malaysia who have implemented co-payment schemes have seen utilization dip as employees are more aware of the cost of healthcare and avoid fringe usage of the medical plan.

3. Consider the use of flexible benefits to manage your long term costs. Although flexible benefit plans have primarily been used in Asia to assist with attraction and retention, they can also be used to share the costs of healthcare increases with employees (shift the funding basis from defined benefit to defined contribution).

4. Look at whether there is any “wastage” in your plans. Are your premium rates competitive? Does your plan pay for expenses that have little impact on health outcomes (e.g., luxury hospital rooms)? Is someone making sure that health-provider fees are reasonable and customary? Is your insurer paying claims correctly? Do you audit the insurance and managed care vendors to ensure they are compliant and have expected service levels?

5. Last but not least, invest in employee wellness and prevention and maybe even special support to help employees with chronic conditions better manage them. If your company has a high percentage of diabetes related illness, then target the food at the cafeteria, invest in bringing in a nutritionist to educate and inculcate a change of lifestyle and food consumption.

Focusing on one or two priority areas will help you manage both the health of your employees as well as your bottom line.