At the 2022 Sanlam Benchmark symposium, Gary Allen, Chief Executive: Sanlam Health Solutions, and Michele Jennings, Chief Executive: Sanlam Group Risk, shared some interesting thoughts on the way employee health can directly impact a company’s pension fund group risk costs.
They shared these insights against the background of mortality having escalated drastically during the COVID-19 peaks and as we continue to see increased mortality rates stabilising at about 15% to 20% higher than pre-COVID-19 levels.
Not all these deaths were reported as COVID-19-related deaths. In some instances, they were caused by non-communicable lifestyle diseases, deferred or avoided treatments during the pandemic, and unavailability of specialists, among many other causes.
As a result of the increased mortality, the only response health and life insurers had in the past was to protect their sustainability through premium increases or through benefit reductions. This approach included considering the historical experience and using this, together with environmental COVID-19 projections, as a predictor of future experience to set the required sustainable premium levels.
With 31% of stand-alone funds and 21% of umbrella fund Sanlam Benchmark respondents indicating that they had looked at ways to limit risk premium increases, Sanlam Group Life indicated that the cost of group risk insurance is reaching a point where it is becoming unaffordable for some employers and members. This is adding to the financial stresses and possibly contributing to even higher claims experience – so, clearly not a long-term solution.
Fortunately, new smartphone technology and frictionless health data aggregators are now enabling a convergence between health providers and life insurance. The technology supports a meaningful relationship with members regarding their health, wellness lifestyle, mental well-being and even adherence to chronic disease management, which can result in improved health benefits for members, and in turn, prevent or reduce claims for the health insurer as well as the life insurer.
| Projected growth per disease |
2020-2030 |
2020-2040 |
| Comorbidities (more than one co-existing non-communicable disease (NCD) in an individual) |
27% |
56% |
| Depression |
15% |
30% |
| Diabetes |
27% |
55% |
| Heart disease |
32% |
69% |
| Hypertension |
24% |
47% |
The NCD burden is a growing concern among the South African population, with the rate of growth almost doubling for most conditions between 2030 and 2040. NCDs are a good indicator of the need for healthcare services given their chronic nature and reliance on regular medication.
The rise in NCDs reflects a lack of awareness of the impact of lifestyle on diseases. Often, the impact of lifestyle-related diseases is detected too late to prevent the serious consequences suffered from advanced hypertension and diabetes, for instance.
Many of the triggers contributing to mental illness are lifestyle related, with financial stress being one of the biggest contributors. Financial stress leading to substance abuse as a coping mechanism, which in turn intensifies the mental illness, adds to financial stress, and so the cycle continues.
COVID-19 too has accelerated this trend. Afrocentric, a Sanlam Health associate within the Sanlam Group, delivers a large portion of antiretrovirals (ARVs) for the state. Of great concern is the significant reduction in repeat ARV prescription activations post the pandemic. The break in cadence and support from repeat doctor and clinic visits has possibly reduced patients’ focus on managing their health. As a result, a spike in HIV+ related health issues is likely to occur.
A change of lifestyle favourably impacts health outcomes and there is extensive interconnectivity between various diseases where one intervention can improve the outcome across multiple disease types.
Drawing on data from Afrocentric, we see how lifestyle choices drive diseases. In the medical scheme environment, poor lifestyle choices have driven 65% of healthcare expenditure. This excludes the impact of alcohol and drugs on trauma-driven hospitalisation. Ultimately, this is also reflected in group risk claims and increased group risk premiums.
The good news is that lifestyle changes can reduce and prevent many of these medical claim and group risk claim events. The World Health Organisation (WHO) estimates that as much as 90% of type 2 diabetes, 80% of coronary artery disease and 33% of cancer cases can be avoided through successful lifestyle interventions.
Evidence from Afrocentric and Medscheme shows that effective disease management, such as doctor visits or improving usage of chronic medication, ultimately leads to reduced hospital admissions and reduced length of stay in hospital. There is also clear evidence that managed diabetes programmes can improve the HbA1c score in about 62% of the beneficiaries.
Back and neck pain is a major cause of claims in insurance. Effective and early management can significantly improve a member’s experience, to the extent that hospitalisation can be avoided.
Medical schemes spend significant amounts of money on managed healthcare, the sole purpose of which is to reduce or avoid the huge expenses associated with many diseases. Since these same diseases drive claims in the risk environment, insurers could use lifestyle and managed healthcare disciplines to likewise reduce or avoid claims costs. We are not speaking of rewards-driven programmes where positive health outcomes are only possible for those who can afford a monthly rewards premium, but rather employer and insurer co-funded interventions funded by increased productivity and reduced claims experience, so that all members can receive significant and impactful managed care with no or limited costs to members.
With the knowledge that managed healthcare can lead to healthier lives, the scalability of these principles across an insurer’s entire client base will undoubtedly lead to improved outcomes.
The concept is not new. However, previous attempts have not managed to get the right traction. Through various attempts of trial and error, a couple of key factors to achieve holistic, integrated health and financial wellness have been identified:
- An advanced, affordable and proven technology platform is required to enable frictionless and real-time collection of member health and other data (all within the protocols required by POPIA), together with analytical and engagement tools that will enable well-being insights and management.
- Data is critical, but requires effort, so incentives help to motivate members and stakeholders to provide and respond to data requests on an ongoing basis. Incentivisation has also been proven to keep members engaged and motivated to live healthier lives, rewarding them for participating and engaging.
- Scalable managed healthcare protocols, delivered through engaging technology, are needed to drive improved health outcomes that are material enough to impact health and insurance experiences.
We foresee a future where the medical scheme industry’s managed care principals will be deployed to manage risk costs across the wider insurance industry. The improvement of technology and engagement tools will play a key role to achieve this.
Disclaimer
Information for the article obtained from:
2022 Sanlam Benchmark.