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Rising medical inflation can often lead employers to reconsider the types of benefits they offer. Here’s how to manage costs while maintaining strong coverage for your workforce.
This article is brought to you by Howden.
Rising medical inflation is creating significant challenges for employers trying to manage healthcare costs effectively. In Singapore, factors such as an ageing population, the prevalence of chronic diseases, and technological advancements in healthcare are driving demand and cost. With more employees requiring long-term care, expenses have escalated as medical treatments become more frequent and complex.
As healthcare costs grow, insurance premiums follow suit, placing further pressure on benefits budgets. According to Diana Tay, Senior Director, Employee Benefits, Howden, this often forces employers into difficult choices, such as increasing benefits budgets to maintain existing coverage or risking coverage gaps. Some may even consider adjusting the types of benefits offered to balance costs with coverage, which can impact employee welfare and satisfaction.
Keeping this in mind, let’s take a closer look at the factors driving medical inflation and its impact on healthcare and insurance costs, the financial challenges companies face, and, importantly, strategies employers can look at to manage these rising costs.
Understanding the factors driving medical inflation in Singapore
Health Minister Ong Ye Kung shared some of the most critical national trends at the MOH Committee of Supply Debate 2024:
- Ageing population: A significant increase in the elderly population in Singapore, from 560,000 to 690,000 in just five years, has led to a surge in demand for geriatric care and chronic disease management.
- Advancements in medical technology: While innovative treatments offer improved outcomes, they often come with higher costs.
- Inflationary pressures: Rising costs of medical supplies, pharmaceuticals, and overall economic inflation contribute to increased healthcare expenses.
- Manpower costs: The healthcare sector faces increasing competition for medical professionals, driving up labour costs and overall healthcare expenditure.
- Generous insurance coverage: Overly generous insurance coverage can lead to overutilisation of healthcare services, resulting in higher claims and insurance premiums.
As a result, organisations now face higher healthcare costs, impacting the employee benefits package – coupled with statutory regulations, such as Singapore’s recent updates to the Work Injury Compensation Act (WICA) Limits, which effective 1 November 2025, will see raised compensation limits. These updated compensation limits, designed to ensure fair compensation for employees, will inevitably increase the cost burden on employers.
Further impact on employers could include:
Budget constraints: Companies may face increased pressure to stretch their budgets, often diverting resources from other critical business areas. This financial strain is like to be especially felt by SMEs, forcing difficult decisions about benefit levels and allocations.
Coverage gaps: To manage escalating costs, some organisations may have to reduce the scope of benefits, leading to potential gaps in healthcare coverage. These gaps may affect employee satisfaction, productivity, and morale in the long-term, as employees face higher out-of-pocket expenses.
Shifts in benefits planning: Employers are increasingly adopting new approaches to benefits planning, such as implementing higher deductibles or shared-cost structures.
Looking at how to tackle the overall impact, Diana notes: "It’s about finding ways to absorb these increases sustainably, often by focusing on preventive care and wellness programmes to keep claims low, or by negotiating more favourable terms with providers to manage these escalating expenses."
How employers can make informed decisions in their benefits planning
To mitigate the challenges above, employers must adopt a proactive approach. This involves assessing the performance of current plans and analysing employee utilisation rates, to spot underused or inefficient components. By understanding the actual value and usage patterns of their benefits offerings, employers can make informed decisions to streamline coverage, introduce more cost-effective options, or adjust contributions without compromising employee wellbeing.
Diana explains: "When you can see what’s driving your healthcare costs—whether it's chronic conditions, high utilisation of outpatient services, or certain demographics needing more care—it becomes much easier to tailor benefits to those needs. For instance, high claims for chronic conditions or frequent outpatient visits can signal a need for wellness programmes or preventive care initiatives."
Benchmarking data, both within the industry and regionally, is also vital, she adds, noting that this context around what benefits competitors are offering helps companies set realistic goals for their plan structure.
"Ultimately, clear insights into both costs and employee health needs allow for benefits that are both supportive and sustainable."
Diana Tay, Senior Director, Employee Benefits, Howden
In that vein, Diana shares some useful tips for revisiting coverage levels and exploring cost-sharing options that align with employee needs.
First, conducting regular audits and reviews is essential to ensure that coverage continues to meet both budget constraints and the evolving needs of the workforce. Rather than automatically renewing plans, employers should carefully analyse whether these plans still provide the right balance of coverage and affordability.
Adjusting deductibles, adding co-pays, or implementing a tiered benefits structure can also be effective. A tiered structure gives different employee groups options that better align with their unique needs, which can enhance both flexibility and employee satisfaction.
Next, wellness programmes and preventive care are smart investments, as they help employees stay healthier, which can cut down on claims over time.
Finally, Diana emphasises the importance of educating employees on their healthcare options. For example, promoting telemedicine for minor health issues can empower employees to make cost-effective choices, helping to keep overall healthcare costs manageable.
The support of the right benefits broker in managing costs
The good news is that there are brokers who are willing to take the load off the shoulders of employers & benefits decision makers.
In deciding who to partner, employers should look for one who is ‘proactive, not just reactive’, Diana advises. "The best partners come with ideas and data to help you manage costs, rather than just waiting for you to ask. Look for someone who’s got strong analytical capabilities—that way, you get real insights into your plan’s performance and can make adjustments based on actual trends."
Flexibility is also key, she continues, as brokers should be willing to tailor their offerings to employers’ needs, especially as costs change over time.
"Most importantly, you need a broker who has strong relationships with insurers; one who can get you the best deal possible for your benefits programme."
All in all, a collaborative relationship with a benefits provider can enhance an organisation's ability to manage costs and stay compliant with Singapore's regulatory requirements by fostering a partnership rather than a transactional dynamic.
Diana concludes: "This partnership also equips organisations with valuable support in navigating complex compliance issues and adapting to market shifts, an advantage amidst rising costs and a competitive benefits environment."
Find out how you can partner with Howden to take your employee benefits strategy to the next level.
Lead image / 123rf.com
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