The vacation season is over again! The coming period, plans are made and budgets are set for the coming year, this often involves high pressure.
Due to the many external developments that organizations face, it is not always easy to set forecasts for the new year. The pressure on organisations as a result of the tight labor market is further reinforced by rising absenteeism and disability (source: June note UWV).
Meanwhile, we are dealing with ongoing inflation, which has caused labor costs to rise significantly. This has also been affected by the increase in the minimum wage. Keeping costs manageable is therefore a priority for many employers. Research conducted by WTW shows that 40% of employers identified this as a top priority. This puts cost control in the top 3 priorities of HR Managers.
To keep inflation somewhat in check, interest rates have risen recently, impacting financial markets. A sector that is also unsettled due to the unstable situation caused by the war in Ukraine.
So plenty of developments to consider when making your plans for the new year.
As every year, the UWV announces the new calculation factors on September 1. While the June note still mentioned a substantial increase in the number of disability benefits (increase in 2023: 12,000 and 2024: 8,000), the calculation factors for the differentiated WGA and Sickness Insurance Act premiums do not reflect this. On the contrary, these are going to decrease significantly in 2024. The average premium percentage for the WGA will fall from 0.87% to 0.77% while the average premium percentage for the Sickness Insurance Act will fall from 0.66% to 0.45%.
The Work Resumption Fund (Whk) is the fund from which WGA and Sickness Benefits Act are paid. These benefits are financed by the employer, and if agreed, by the employee, through payroll taxes by means of a premium. For large employers, this premium, to be set annually, depends on the WGA and Sickness Benefits paid under the Act.
The decrease in the average premium does not necessarily mean that the premium for every publicly insured employer will decrease. This is because every differentiated premium calculation is based on the principle that a surcharge or discount is applied to the average premium. For large companies (wage bill > € 3,770,000), the surcharge or discount is determined entirely on the company’s own inflow into the WGA. For medium-sized companies, a weighted average between the industry risk and the company's individual risk applies. For small companies, an industry premium applies, so the amount of the surcharge or discount is determined by the industry inflow.
When calculating the individual employer risk or industry risk percentage, the T-2 principle applies. Year T is the year for which the premium is set. To determine the individual risk for the employer, the UWV relies on the entrants to the Sickness Insurance Act or the WGA of year T-2 (or two calendar years earlier). So when determining the premium differentiation for the year 2024, it looks at the benefits paid to WGA and Sick Persons in 2022.
Thus, large employers finance their own claims and contribute to financing the claims burden of small employers under the solidarity principle. Employers have the choice of being publicly insured, according to the principle described above, or becoming self-insured. Usually, the risk is then insured with a private insurer. In this way, the UWV competes with private insurers.
First of all, it is important to determine the main causes of the announced premium reduction. The temporary scheme simplified WIA inspection for people over 60 has caused a significant increase in the number of WIA benefits.
This temporary scheme was created to clear the backlog at UWV. The simplified assessment usually does not involve an insurance doctor. The employment expert determines the incapacity for work based on the reintegration report and the WIA application. The scheme applies from 1 October 2022 to 31 December 2023. It is likely that the scheme will be extended by one year.
The WIA benefits granted by this scheme are not borne by the employer and are not financed from the Work Resumption Fund (Whk) and therefore do not count for determining the differentiated premium. These benefits are financed from the Occupational Disability Fund (Aof). The Aof is the fund from which disability benefits are financed. This fund is financed from general resources, while the Work Resumption Fund is financed by employers (and employees).
Because these benefits are (temporarily) not counted as benefit costs, the burden does not appear to be so great and the premium for financing WGA benefits can be reduced. After all, the costs for financing the WIA benefits of the over-60s are financed from the general resources (the Aof). Thus, a windfall for employers.
As the main reason for the decrease in the average premium for the Sickness Insurance Act, the UWV cites the fact that a number of large temporary employment agencies have become self-insured for the Sickness Insurance Act. This has apparently had a major effect on the expected sickness benefits to be paid.
In the coming years, absenteeism and disability will continue to be a point of attention for organizations. In the past, the UWV could barely handle the WIA inflow, as evidenced by the measures taken. That this is now leading to a temporary decrease in the Whk premium is a windfall for employers (and employees). Rising interest rates also help because the June Memorandum already indicated that the benefit reserves created have increased substantially as a result.
Employers should take into account that the Whk premiums will rise again in the coming years. After all, the announced reduction is the effect of a temporary measure. In addition, the premiums for large employers are always calculated on the basis of their own historical claims burden.
The drop in sickness insurance premiums as a result of a number of large temporary employment agencies bearing their own risk is a sign of things to come. These staffing organizations apparently expect to achieve significantly better results by implementing the Sickness Insurance Act themselves.
The aforementioned developments obviously also affect insurers' results. On the one hand, measures such as increases in the minimum wage and the ever-increasing WIA inflow are putting pressure on the results. On the other hand, increased interest rates have a positive effect on insurers' provisions and results.
Another important effect of the increase in interest rates is that insurers can achieve better investment results in the capital markets. This makes many insurers show greater ‘risk appetite’. After all, a major source of income for insurers is investment results. This development increases competition and could drive downward trends in premiums.
WTW expects developments for the coming year to keep each other reasonably balanced. That means we do not expect extreme outliers and reasonably stable premiums. Of course, insurers evaluate each contract on its merits at the end of the contract period and this may result in a change in premiums.
It is therefore important to conduct market research at the end of the contract period to assess whether the current insurer's renewal proposal is good enough.
Our healthcare system is under pressure. Net healthcare spending is expected to grow by €16.8 billion in the period from 2021 to 2025, from €76.0 billion to €92.8 billion in 2025. As a result of an ageing population, costs will only increase. Something will have to be done to keep healthcare affordable. There are regular noises about changing the system and there are efforts on prevention and innovation.
These developments have a direct impact on the wellbeing of your employees; health care costs are increasing and accessibility to care is getting worse. For the coming year, this situation is not expected to change.
The healthcare premium is the amount you pay to the health insurer to be insured for costs from healthcare. The content of the basic health insurance is generally the same among all insurers. But the amount of the premium for basic insurance can differ. In recent years, the healthcare premium has steadily increased. Given the development of rising healthcare costs, the average premium is expected to rise further in 2024. Please refer to our annual survey of health insurers, which endorses this development.
Every year on Budget Day more is announced about the expected health care premium for 2024. It is expected to rise by at least €127 on an annual basis next year.
The deductible is the amount that you yourself pay for healthcare costs from the basic insurance before the health insurer proceeds to reimburse you. The deductible does not apply to children and costs for the general practitioner. The deductible remains the same until 2026 at an amount of € 385 as in previous years.
Health Care allowance is a contribution towards health insurance costs. The amount of care allowance depends on income. Because the health care premium is expected to increase, it is expected that the care allowance will also increase. On Budget Day more will be known about the amount of the (maximum) care allowance for 2024.
The content of the basic health insurance is generally the same for all insurers. More will be known on Budget Day about the changes to the 2024 basic package.
After the abolition of the collective discount on the basic insurance, there are no further general changes in 2024. Health insurers will continue to rely on employer collectives because they expect to be able to provide more targeted care and focus on prevention. This could lead to more control over health care costs. Collective discounts on supplementary health and dental insurance are still allowed.
Due to rising healthcare costs, access to care is not a given for everyone. As a result, collective health insurance is also taking on a more important role in the employee benefit package in the Netherlands and employers can influence access to care.
A WTW survey on mental health provides insights to look for opportunities to help groups of employees together with the insurer. This allows insurers to innovate in order to keep a grip on healthcare costs. Furthermore, this promotes the employability and wellbeing of your employees.
In the coming months we will keep you informed of important developments and, of course, we will inform you in detail about the premiums and conditions for the coming year. Broadly speaking, the agenda looks as follows
