The cost of living crisis has hit us in an unprecedented way and the impact extends beyond just the UK – people and businesses are being affected worldwide. Just as we were recovering from the Coronavirus pandemic, Europe was affected by the crisis in Ukraine, which has amplified the negative financial impact on economies globally. Fuel, food, and energy prices are all rising, and we can expect long term impacts on the cost of services like healthcare as well.

Here, Nigel Oliver, Global Head of Commercial and Underwriting at AXA Global Healthcare and Laurent Pochat-Cottilloux, CEO of AXA Life & Health Reinsurance Solutions, discuss how the cost of living crisis is affecting the cost of healthcare around the world, the impact it’s having on health insurance customers and what might be in store in the future for the IPMI industry.

Generally speaking, how are cost-of-living increases impacting the cost of healthcare?

Laurent:

“During the pandemic, everything was on hold for a while, so now many medical providers are trying to recoup lost income from the past two years, when private healthcare providers either lost revenue or didn’t make a profit. As a result, we’ve seen some private hospitals, clinics and doctors increasing their fees, but this occurs quite regularly in the healthcare market as providers adjust to inflation and the economy.”

Nigel:

“Strain in the supply chain will be reflected in future healthcare costs too. We’re yet to see the impact of the rise in CPI (Consumer Price Index) rises as medical inflation is usually delayed. Most medical costs are contracted, and these are usually updated annually.

“There’s also increasing unrest at a workforce level within hospitals. We’re seeing an increasing number of strikes across a number of sectors as employees are seeking higher wages because they simply can’t afford to pay their bills. That, of course, will include everyone in hospitals themselves but also those further down the supply chain, such as lorry drivers who deliver personal protective equipment or those who transport blood.”

What are the most and least impacted countries?

Laurent:

“I’d say those most impacted are mainly countries that have greater reliance on energy through Russia and those that rely on grain imports from Ukraine. However, as wholesale markets are driven by the cost of production, even countries with good supply will be affected by the general increase in the price barrel of crude oil from low supply but high demand.

“On the other hand, countries less likely to be affected are probably those in the Middle East with strong reserves of oil. But, for most countries, there will be no way to avoid some of the consequences of rising costs in the supply chain.

“Despite all of this, there are always exceptions to the rule. Currently, there is a surplus of international private healthcare providers in China due to the departure of many expats following the closure of China’s borders. As a result, private providers are now competing with each other to regain market share and are therefore providing more competitive prices. So, the cost of private healthcare in China for the high-end market is actually on a downward trend!”

Has the rising cost of living caused a shift in consumer behaviour or attitudes towards private vs. public healthcare, particularly as public healthcare is still difficult to access post-COVID due to backlogs?

Laurent:

“A lot of private healthcare customers will now make choices according to the different services they get from their plan. For many of the world’s middle-class segment, private healthcare is considered as more of a necessity now. They’re more likely to purchase the least expensive policy they can possibly get away with, but one that will still protect them. Having seen how their public systems got quickly overwhelmed by the pandemic will continue to encourage people to use private health care.”

Nigel:

“It’s also worth looking at companies supplying international private medical insurance to their employees. Corporate customers are looking for healthcare cover to help attract and retain talent, as a desired and valued benefit.

“Of course, there will be pressure from above on insurance managers and HR to control their costs as efficiently as possible, because corporations will be looking to manage their finances better and reduce the impact of inflation on business. It’s likely that businesses will look to providers for affordable healthcare coverage, without compromising the level of care. This could be through more cost-effective services like virtual care. Generally speaking in the corporate world, it is incredibly difficult to take benefits away from people once they’ve been offered. And, if you’re fighting to attract the best talent, money isn’t the only thing that will attract them.”

Looking ahead to the next few years, what do you predict might happen to the cost of healthcare globally?

Laurent: 

“Overall, economic uncertainty is bound to cause a shift in the demand for health insurance, as rising costs are inevitable regardless of the industry. However, as international healthcare is considered more of a necessity now and is therefore a better valued benefit for employees and families, we expect people to opt for a more affordable option instead of cancelling their healthcare plan. It is impossible to predict what the financial future might hold, but for now, the market remains strong, and we’re committed as ever to delivering the best healthcare service to our customers.”