New health insurance scheme to improve employees’ productivity, decrease turnover

health insurance

The recent announcement of the UAE's mandatory health insurance scheme marks a significant step towards enhancing employee well-being and bolstering employer competitiveness in the region. Set to commence on January 1, 2025, this initiative mandates all employers in the UAE to provide and finance health insurance coverage for their employees, including domestic workers, during the issuance or renewal of residency visas. While this move promises to alleviate financial burdens on employees and foster a sense of security, it also presents challenges in terms of increased operational costs for employers.

The introduction of this compulsory health insurance scheme is expected to yield multifaceted benefits for both employees and employers. Myra Bennett, principal consultant at Genie Recruitment, emphasizes the profound impact on employees, noting that many workers forego insurance due to its associated costs. By shouldering the financial responsibility, employers can alleviate this burden, thereby enhancing employee satisfaction, productivity, and retention. Bennett underscores the peace of mind afforded to employees, who can now rest assured knowing they have access to medical insurance in times of need.

In addition to improving employee well-being, the mandatory health insurance scheme positions employers to attract and retain top talent in a competitive marketplace. Bennett highlights the importance of offering comprehensive benefits beyond insurance, including schooling, work flexibility, and bonuses, to maintain a competitive edge. With health insurance becoming a standard offering, employers must explore supplementary perks to differentiate themselves and appeal to skilled professionals.

However, alongside the benefits, the implementation of this scheme presents financial implications for employers. Hatim Maskawala, managing director of Badri Consultancy, underscores the increased operational costs, positioning health insurance as the second-largest expense after employee salaries for many companies. This added financial burden comes at a time when inflationary pressures are already impacting profitability, necessitating a strategic approach to derive value from the investment. Maskawala emphasizes the need for employers to enhance their value proposition in the talent marketplace to offset rising expenses.

Moreover, the mandatory health insurance scheme is poised to expand the overall size of the insurance market in the UAE. While this may lead to heightened competition among insurers, Maskawala notes potential variations in profitability across different Emirates, citing differences in premium rates between Abu Dhabi and Dubai. Despite the anticipated increase in insurers vying for new business, the profitability landscape may vary depending on regional regulations and market dynamics.

Maskawala also highlights regional variations in health insurance practices, with mandatory schemes already in place in countries like Saudi Arabia and discussions underway in Oman. Across the MENA region, health insurance frameworks are shaped by government regulations, employer policies, and the availability of healthcare services. The trend towards mandatory health insurance reflects a broader commitment to enhancing healthcare access and quality for residents, underscoring the evolving landscape of healthcare provision in the region.

In conclusion, the UAE's mandatory health insurance scheme heralds a transformative shift towards prioritizing employee well-being and bolstering employer competitiveness. While it poses financial challenges for employers, the scheme promises to yield long-term benefits in terms of employee satisfaction, productivity, and talent acquisition. As organizations navigate the implementation process, strategic considerations and innovative approaches will be crucial in maximizing the value of this investment in the evolving landscape of employee benefits and healthcare provision.