Evidence from past economic cycles indicates that dramatic increases in healthcare utilisation are often linked to economic downturns. Workers become fearful that their employers will cut expenses to manage operations – either through a pay decrease, reduced medical benefits or termination of employment.

In this climate of uncertainty, it is not surprising that people take advantage of their employer-sponsored benefits while they still can. When the workforce experiences such high levels of stress, they become more prone to chronic illnesses and health disorders, resulting in not only a reduction in the functioning labour force, but also a less productive one. There may also be an influx of claims lodged by employees for medical conditions commonly associated with the downturn, such as mental disorders and other stress-related ailments.

The insurance market may respond to these trends by increasing premium rates, in anticipation of spikes in benefits utilisation and loss of revenue from employers downsizing or dropping benefit schemes. Insurers may also look to recover some of their lost investment income through increases in premiums.

Evidence from past economic cycles indicates that dramatic increases in healthcare utilisation are often linked to economic downturns.

What you can do

As an employer, you can take preventative measures to prepare for this. The most obvious way to reduce utilisation is to restructure the benefits programme and introduce or increase co-payments and deductibles. During an economic crisis, employees are more likely to accept having to share the costs of their benefits with the company, rather than having their benefits removed completely.

Employers can also try to understand and manage the other factors driving up their benefit costs by conducting internal audits. Benefit items that are particularly prone to abuse, as well as certain schemes’ eligibility criteria may need to be re-examined. For example, there may be cases where individuals benefitting from the scheme may not have been eligible at all, such as ex-spouses and overage children.

Managing your employees’ health during an economic downturn is a strategic and financially relevant issue for the company because of the significant impact it has on your overall benefits costs and workforce productivity.