Managing employee health, and not just managing benefit costs,
is becoming a serious business issue
by Joan Collar
Oct 09 | Around
the world, employer healthcare costs continue to rise, and Malaysia
is certainly no exception, with medical inflation ranging from
12% to 15% whilst other Asian countries are also facing double-digit
inflation rates. While traditional forms of managing costs, such
as insurance premium sharing, premium shopping or the use of managed
care networks, have served employers well, new approaches are
also gaining strong interest—including reducing the cost
of illness in the near future by investing in employee preventive
care in the present. This offers a win-win situation: better employee
health and employer savings.
IMAGE COURTESY : MARSH MALAYSIA
Joan A. Collar is the Senior
Vice President & Business Leader for Marsh
Insurance Brokers’ Malaysian Health &
Benefits practice. Ms Collar oversees the consulting,
third party administration and broking and risk
management services for Malaysia.
She has more than 15 years of experience in
both consulting and benefits administration.
Formerly the country head and regional principal
and consulting director for a large MNC BPO
firm, she was part of the pioneering group that
spearheaded the growth of flexible benefits
and payroll and benefits outsourcing in Malaysia.
Joan has extensive experience in project management,
design & implementation of various benefit
programs including flexible benefits and cost
containment management in Asia particularly
in South East Asia.
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
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”
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
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
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
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
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
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.
what can companies do? Where do we start?
about your benefits plan strategically
on your benefits philosophy, here are some solutions you may want
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
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.
on one or two priority areas will help you manage both the health
of your employees as well as your bottom line.