Sharp Rise in Medical Costs: Strategies for Companies to Curb Insurance Premiums
Jakarta, CNBC Indonesia - The surge in medical costs across Asia, including Indonesia, is not only squeezing insurance companies’ profitability but is now posing a new challenge for the business world.
The latest research from Mercer Marsh Benefits, titled “Health Trends 2026”, indicates that medical costs in Asia are projected to rise by up to 12.5% in 2026, which is 1.4 percentage points higher than the global average and nearly six times the general inflation rate. This situation is forcing employers to strike a balance between cost efficiency and employee needs.
On one hand, attractive health insurance benefits have become an incentive to attract top talent, but on the other, high premium costs will burden company finances.
Meanwhile, another challenge arises from the changing demographics of employees, which are no longer homogeneous. Employees’ health benefit needs vary depending on factors such as age, family situation, lifestyle, and health conditions. For example, younger generations are more concerned with mental health, senior workers need protection for chronic illnesses, and young families require family health coverage.
It is undeniable that health benefit provisions play a central role in supporting employee retention, resilience/loyalty, and trust. “Drastic cost-cutting can create new risks to the employee experience and erode the long-term value of the workforce,” said Steven Yu, Asia Leader at Mercer Marsh Benefits.
Now, he added, companies need to manage the trend of rising medical costs and healthcare cost management with smarter benefit designs, without overlooking what employees need from their benefits.
Drastic cuts to health benefits are a dangerous shortcut in facing soaring healthcare costs, as they can erode employee trust and resilience, and jeopardise long-term success.
Therefore, Mercer Marsh Benefits recommends that employers take a balanced approach that combines periodic changes to benefit plan designs, prevention, education, personalisation, smarter care navigation, and offers the most sustainable path to optimal workforce health with controlled benefit costs.
Preventive Care
Preventive care programmes are one of the most effective ways to manage long-term healthcare costs. Promoting a healthy lifestyle across all employees will help reduce the likelihood of more serious conditions and expensive treatments in the future. These programmes are not only for the healthy but include vaccinations, health check-ups, and chronic disease management to help employees manage or improve their health.
When risks are identified and addressed early, companies can reduce claims, leading to lower premium costs.
Health Awareness
Employers can support employees in taking greater responsibility for their health and related financial decisions through practical guidance and ongoing education. Employees can better understand their coverage and care options through various initiatives, including health workshops, targeted health campaigns, and enhanced benefit navigation tools via clear communication channels.
When employees are better informed, they are empowered to make decisions about when, where, and how to seek care. This can lead to more appropriate utilisation of benefits, improved health outcomes, and better overall control of healthcare spending.
Personalisation of Benefits
Companies are shifting towards more flexible benefits tailored to individual employee needs. Generic benefit selections often fail to meet employees’ needs at different life stages, family structures, and health risks.
Employers should review claims data, demographics, workforce, and utilisation patterns to identify where existing plans are no longer effective. Therefore, companies can personalise benefits with various options, including co-pay structures, opt-in/opt-out models, and coverage limit adjustments to improve affordability while keeping coverage relevant and competitive.
Healthcare Service Navigation
Encouraging employees to use efficient and quality healthcare facilities to avoid cost wastage. Insurance companies in Asia are evolving, with many shifting from managing health insurance as a product line to separate business units to meet business and employee needs.
This means insurance companies have specialised capabilities in network management and care direction. Thus, high-quality care can be provided at the right time and place when needed.
Healthcare Cost Management
The trend of rising premiums usually leads companies to prioritise premium negotiations. While this can provide short-term cost relief, its impact on healthcare service utilisation patterns, treatment paths, or overall care costs remains minimal.
Therefore, companies can consider several strategies, including preventive actions, addressing the root causes of claims, designing benefits according to employee needs, and improving access to high-quality healthcare services.