ABU DHABI // A significant number of companies plan to downgrade their healthcare benefits for workers amid budget cuts and concerns over the rising cost of health insurance.
Michael Bitzer, chief executive of the National Health Insurance Company (Daman), said many companies were looking to remove or trim what many felt were “luxury add-ons”, such as dental and optical insurance cover.
“We have seen a significant trend of downgrading,” said Dr Bitzer.
“We had boom years when clients said ‘give us the best, give us coverage of the Moon’.
“But now it is the opposite because they have budget constraints. They ask if we can give them lower rates, lower benefits.”
Dr Bitzer said the austerity trend was understandable.
“I think it makes sense to cover major diseases, but dental and optical, for example, are more consumables,” he said.
“They may have given it to their employees for the past couple of years but now they are in a budget-focus phase and they have to cut some luxury elements.”
GCC countries, including the UAE, depend heavily on government finance to meet healthcare needs.
For employers, the increasing cost of health insurance is a growing concern, because it adds to employment costs.
The overall cost of healthcare insurance premiums rose to Dh11.1 billion in 2014, up 12 per cent from Dh9.9bn in 2013, according to the Insurance Authority.
Pacific Prime, a healthcare insurance broker, said premiums grew 9.5 per cent last year and had risen by an average of 10 per cent a year for the past five years. In contrast, annual inflation had been about 2.5 per cent.
“Rates go up and employers are concerned, this is true,” Dr Bitzer said. “But all over the world healthcare costs are rising because of new technologies, new drugs. I think it is fair that people and employers shoulder more of the healthcare costs.”
Dubai resident C B, who works for a company in Jumeirah Lake Towers, felt the effect of her company’s reduced spending on healthcare benefits.
“Last year my optical cover was enough to at least help me get what I need for optical care – about Dh2,500,” said the South African. “But this year it is Dh500. I cannot do anything with that.”
C B said her company also cut dental benefits and she had to pay part of the cost for her family’s insurance coverage.
“My company received huge complaints from the staff about the change in policy,” she said.
“One good thing is they promised to amend it when the renewal is due in July, so we will see what happens then.”
Dr Sven Rohte, Daman’s chief commercial officer, said the Middle East was facing significant economic challenges amid the oil price slump as corporate revenues were falling and medical costs were rising.
“These rising costs will continue to push premiums higher,” he said. “Health insurance costs in the UAE now equate to a significant portion of the total payroll and are expected to rise over the coming years.
“The seemingly obvious solution is to reduce benefits and trim overall coverage, but this would not make employees any healthier or provide them with the health care that they may need now or in the future.”
As chronic conditions such as diabetes and heart disease account for the majority of healthcare claims, Dr Rohte said Daman and employers had to work together to encourage residents to become healthier and fitter.
“Employers need to take initiatives to support insurance members to become healthier, which will reduce costs in the medium to long-term,” he said.
“Insurers and HR departments have the same goals in mind – for employees to be in good health in order to be productive contributors at their workplace.”
newsdesk@thenational.ae
The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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The specs: 2018 Nissan 370Z Nismo
The specs: 2018 Nissan 370Z Nismo
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Director: Magizh Thirumeni
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Rating: 4/5
