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Aon: Employer medical costs expected to rise at nearly triple the rate of inflation
12/3/2018
 
Medical plan costs paid by employers around the world are set to rise nearly 8% in 2019, far outpacing average general inflation of nearly 3%, according to the 2019 Global Medical Trend Report released recently by Aon. The expected average increase before plan changes in medical and pharmacy cost for employer-sponsored medical plans in 2019 of 7.8% is slightly lower than the 8.4% in 2018 due to employer cost containment measures, tighter procurement of medical goods, new health improvement initiatives and lower rates of projected inflation worldwide.

“While the 2019 medical trend rates are at their lowest compared to prior years, these are still extremely high. We expect continued cost escalation due to global population aging, poor lifestyle habits in emerging countries, cost shifting from social health care programs and the increased prevalence and utilization of employer-sponsored health plans in many countries,” said Wil Gaitan, senior vice president and global consulting actuary at Aon.

Poor Health Habits Primary Driver of Cost Increases
Aon's report confirmed the increasing impact of non-communicable diseases on healthcare costs worldwide. Cancer and cardiovascular ailments, such as high blood pressure, diabetes and respiratory conditions, were the most prevalent health conditions driving healthcare claims around the world. Aon’s report also confirms the growing prevalence of risks from unhealthy personal habits around the world, such as high blood pressure, high cholesterol, physical inactivity, bad nutrition and obesity.

"Many of the global risk factors often lead to chronic conditions with long medical cost tails that make them expensive to treat and result in long term medical cost increases,” noted Tim Nimmer, chief healthcare actuary at Aon. “Employers can play a key role by motivating individuals and their families to take a more active role in managing their health, including participating in health and well-being activities and better managing chronic conditions.”

Employer Strategies for Alleviating Medical Costs
To mitigate costs, Aon’s report revealed that companies continue to use traditional strategies, such as adjusting plan designs, controlling unreasonable plan utilization and negotiating premium rates with carriers. The report also revealed that employers are being proactive and are increasingly creating programs to reduce chronic conditions, such as screenings, healthy eating and physical activity promotional programs.

Aon’s report reflects the medical trend expectations of employer-sponsored medical plans in 103 countries based on reported data from Aon professionals, clients and carriers represented in the portfolio of Aon medical plan business in each country.
For more information on the services available through TRA and Aon, please contact Adam Allen, chief operating officer at TRA, at adamallen@theriskauthority.com.