The United States spends a larger share of GDP on healthcare than any other major industrialized nation. National expenditures for healthcare represent approximately one-seventh of U.S. GDP and continue as one of the fastest growing components of the federal budget, even during the recession.
How will the new economic environment affect this wide-ranging category? Analysis of GDP and medical costs during past recessionary times show the health industry is far less closely aligned with the business cycle than other industries. The impact of an economic downturn tends to show up with a lag of one year or more.
Nevertheless, healthcare insurance industry revenue is expected to show slower growth than seen in the late 1990s, increasing at an annual average real rate of about 3.5 percent in the five years to 2012. Key supporters of this trend are the aging of America and the growing employee population demographic of those over age 45. At this reduced growth rate, industry revenue will still increase to almost $500 billion by 2012. The growth will be underpinned by increased premiums, supported by increasing healthcare costs. However, due to growing sector competition and fiscal uncertainty, insurance provider margins have been cut significantly in recent years. The result has been an increased provider focus on cost-containment as a way to defend their market position. As an outgrowth of cost-containment drivers, most market players have reduced the number of products and services offered.
So as the overall economy stalls, unemployment rises, and corporate bottom line pressure increases, category buyers have fewer products and services to choose from. What are healthcare benefit buyers doing to manage costs and still provide efficient medical benefits to their employees?
The Denali Intelligence Healthcare Benefits Market Intelligence Report provides answers by examining the volatility in medical costs, shifting demand factors, and important market events in the past six months that have impacted the industry. In addition, it explores risks and regulatory factors, government expansion into the sector and best practices in sourcing this category, which are so critical to employee retention.