In January this year, the UAE Government’s new Basic Health Insurance package came into effect, requiring private sector companies to provide healthcare insurance for their employees as a prerequisite for securing or renewing a residency permit.
While this initiative has been broadly welcomed, it coincides with a period of rapidly rising medical and insurance costs. The Central Bank of the UAE estimates that insurers paid out Dh6.5 billion (USD 4.5 billion) in healthcare claims in the first nine months of 2024 - a 15% increase from 2023. In response, insurers have raised the cost of coverage by up to 20% and introduced deductibles of up to 30% for certain procedures to manage inflation.
Employers, particularly those seeking to attract top talent in the UAE, must also navigate these rising costs. Employees increasingly prioritise benefits packages, with one survey revealing that 56% of employees would leave their current job for better benefits elsewhere.
As healthcare consistently ranks as a top-priority benefit, employers must decide how to respond to these cost increases. They face a stark choice: maintain the level of coverage and absorb the rising costs or reduce the scope and effectiveness of coverage to stay within budget.
Managing Rising Premiums and Deductibles
Neither option is ideal, but with the right strategy and support, employers can transform their benefits package into a tool for attracting and retaining talent - rather than just a cost to manage.
Before making any decisions, organisations should assess:
When and how often employees use the plan.
What triggers employees to seek medical services.
What types of treatments are most commonly requested and recommended.
This analysis will help organisations understand how employee utilization impacts the plan’s financial performance. Additionally, surveying employees about their current health perceptions and wellness goals can help develop a targeted, cost-effective benefits strategy that aligns with employee needs.
Controlling Costs Through Wellbeing Initiatives
Costs can also be managed by integrating wellbeing support into the broader benefits package. Wellbeing encompasses a wide range of services, including:
Mental and physical health support
Financial planning assistance
Nutritional guidance
When strategically planned and properly utilised, wellbeing initiatives act as early intervention tools, helping prevent minor health concerns from escalating into serious conditions and ultimately reducing claims.
A Long-Term Approach to Healthcare
A key component of many wellbeing programs is telehealth, which is playing an increasingly important role in managing a variety of health conditions. As telehealth adoption grows, it provides a cost-effective, accessible alternative to traditional healthcare services.
The financial benefits of introducing a wellbeing program may not be immediately apparent in the first or even second year. However, forward-thinking organisations will find that over time, such programs contribute to lower medical coverage costs.
Perhaps the most effective way to reduce healthcare costs is through employee education. Since employees pay deductibles for certain treatments but do not contribute to their insurance premiums, there is a risk that healthcare may be perceived as a free service and leading to overuse.
Since higher claims result in increased renewal costs, educating employees on how to use their benefits efficiently is essential. Employees should also be encouraged to question or challenge treatments when appropriate.
Empowering Employees Through Collective Responsibility
An effective benefits program places greater responsibility on employees for managing their healthcare usage. With the UAE’s mandatory insurance policy now covering all foreign expat workers, organisations should foster a culture of collective responsibility to control costs and sustain high-quality coverage.
While companies bear the financial burden, employees are the primary beneficiaries. A well-managed benefits program ensures that healthcare remains both affordable and effective, creating a win-win situation for employers and employees alike.