2021 Global Medical Trends Survey report

• Key findings
• What's driving costs
• Top conditions globally
• Managing medical trend
• Impact of the pandemic

Executive summary

The 2021 Global Medical Trends Survey reveals that while the pandemic has had a significant impact on health care utilization and overall costs in 2020 due to a sharp decline in nonurgent surgeries and elective care, the resulting decrease in medical trend will be short-lived.

Globally projected health care benefit costs will take a sudden drop in 2020 before rebounding to 8.1% in 2021, up from 5.9% this year and 7.2% in 2019.

Average increases across different regions next year will range from 5.8% in Europe to 8.5% in Asia Pacific to 10% in the Middle East and Africa to 13.6% in Latin America. Health care benefit cost increases in the U.S. are expected to remain stable at 7.3% next year, according to other Willis Towers Watson research.

Looking beyond 2021, over two-thirds (67%) of respondents expect medical costs will continue to accelerate over the next three years. Roughly 90% of Middle East and Africa insurers expect higher medical trends over the next three years as do 77% of insurers in Europe. Only 40% of Asia Pacific insurers expect a higher medical trend.

The pandemic has helped to accelerate the adoption of telehealth with half of insurers globally currently offering telehealth across all plans. Although it’s still early days and many issues around telehealth need to be resolved, including its place in plan design, we believe that telehealth is here to stay. For this reason, a special section of this report is devoted to telehealth.

Key findings

• Overuse of care drives costs. The most significant factor contributing to rising medical costs related to provider and employee behavior is the overuse of care. While 65% of insurers are most concerned about providers driving up costs by overprescribing or recommending too many services, 55% also cite overuse of care due to insureds seeking inappropriate care.
• Member coinsurance continues to be the most popular cost-sharing approach. Insurers once again identify member coinsurance as “typical” or “most typical” in all regions with the exception of Europe where insurance plans are more heavily integrated with government health programs. Using contracted networks of providers for all treatments is the most popular cost management method with 73% of insurers identifying it as most effective. Sixty percent of respondents cite the placing of limits on certain services as the second most effective tool for managing costs.
• The cost burden of mental health conditions is expected to grow. Respondents rank cancer (80%), cardiovascular diseases (56%), and conditions affecting musculoskeletal and connective tissue (41%) as the top three conditions that currently affect medical costs. Gastrointestinal (40%) moved into the top three conditions causing the highest incidence of claims along with cancer (48%) and cardiovascular (36%); however, about four in 10 respondents predict mental health conditions will be among the three most common conditions affecting costs within the next 18 months (40%) and among the three most expensive in the next 18 months (39%).
• Gaps in coverage persist for alcoholism, drugs and HIV/AIDS. Between 50% and 53% of group policies regardless of size include exclusions for alcoholism and drug use, while between 41% and 47% exclude on the basis of HIV/AIDs. Group policies for less than 50 employees are more likely to exclude preexisting conditions.
• Claim data classification. Nearly half of insurers globally (48%) use the ICD-10 claim-coding system, while only 14% use a local coding system. This facilitates more consistent reporting of claim data and more accurate identification of core claim drivers.

The key cost drivers remain the same as prior years, albeit at slightly reduced levels. The overuse of care due to medical practitioners recommending too many services or overprescribing continues to be the key factor driving up medical costs. Sixty-five percent of insurers rank this factor as the leading driver of medical expenses. The second most significant cost driver is overuse of care by insured members, cited by 55% of insurers, representing an 11-percentage-point drop from last year. Unchanged from last year, 28% of insurers indicate that underuse of preventive services is a significant medical cost driver. Finally, 34% cited insured members’ poor health habits as a medical cost driver.

By cost

Cancer (80%), cardiovascular (56%) and musculoskeletal (41%) are the top three conditions by cost and remain unchanged from prior years as the leading conditions by cost of claims.

By incidence

The top three conditions currently causing the highest incidence of claims are cancer (48%), gastrointestinal (40%) and cardiovascular (36%). COVID-19 is also reported, not surprisingly, as one of the growing conditions based on incidence of claims in 2020.

Regional perspectives

Cancer continues to be the costliest condition across all regions. Cardiovascular is the second leading condition by cost in all regions except Europe where musculoskeletal ranks second.

Cost sharing

As in prior surveys, respondents identify member coinsurance as the most typical cost-sharing approach in all regions but Europe where socialized medicine distorts the averages. Annual limits on out-of-pocket expenses are less popular with only between 5% to 15% of insurers in most regions indicating that this is a very typical practice.

Other cost-sharing mechanisms include deductibles, which are very typical in Latin America (46%) and increasingly very typical in Europe (40%). Deductibles are also reported as a typical practice in Asia Pacific (49%), and Middle East and Africa (37%).

Tools for managing medical costs

Seventy-three percent of insurers globally report that using contracted networks of providers for all treatments is the most effective method of managing medical costs. Eighty-one percent of insurers in both Europe, and the Middle East and Africa indicate that this is their most popular cost management method, while only slightly more than half (55%) of insurers in Asia Pacific hold this view.

However, 71% of insurers in Asia Pacific find placing limits on certain services to be their most effective cost management tool. This is the second most popular method globally with 60% citing the placing of limits on certain services as an effective approach for managing medical costs.

Globally, we have seen insurers remove some pandemic exclusions as a result of COVID-19 and refine program wording limitations in some countries. Overall it is projected that only 30% of insurers will have pandemic exclusions going forward. At a regional level, we have seen the most significant change in Asia Pacific where only 8% of insurers are expected to exclude pandemics going forward compared with 27% pre-COVID-19.

Globally almost two-thirds of insurers indicate that they are open to offering other renewal options where the 2020 claims experience has been affected or reduced by COVID-19. The most popular option appears to be offering an experience rating formula, which would be likely for more sizable groups of more than 200 employees and could offer a return of premium if the claims experience continues to be lower than expected. Other potential options include offering two-year rate guarantees and so underwriting the plan over a longer period. This enables any medical treatments that were delayed due to COVID-19 to be realized in the experience period and offers a smoothed premium option for employers rather than big drops in premiums being followed by large increases in premiums.

About the survey

Willis Towers Watson conducts the Global Medical Trends Survey every year between July and September. Two hundred and eighty-seven leading insurers representing 76 countries participated in our 2021 survey. Global results presented here have been weighted using GDP per capita. The U.S. medical trend data are drawn from the Willis Towers Watson National Trend Survey research.

Participant profile

For more detailed findings, download complete report.