Medical plan costs paid by employers around the world are set to rise nearly 8 percent in 2019, far outpacing average general inflation of nearly 3 percent, according to the 2019 Global Medical Trend Report released today by Aon, the leading global professional services firm providing a broad range of risk, retirement and health solutions. The expected average increase before plan changes in medical and pharmacy cost for employer-sponsored medical plans in 2019 of 7.8 percent is slightly lower than the 8.4 percent 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.
Projected medical trend rates vary significantly by region. Countries in the Middle East/Africa and Latin America regions will experience the highest average medical premium rates of any region at 13.7 percent and 13.2 percent respectively. In contrast, Europe and North America are projected to see average medical premium rate increases in the single digits, with Europe seeing the lowest rate of increase at 5.1 percent.
Poor Health Habits Primary Driver of Cost Increases
Aon’s report confirmed the increasing impact of non-communicable diseases on health care costs worldwide. Cancer and cardiovascular ailments, such as high blood pressure, diabetes and respiratory conditions, were the most prevalent health conditions driving health care 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 health care 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.
These strategies vary based on region. For example, cost containment was the most prevalent strategy in North America, in the Middle East and Africa. Well-being initiatives, such as detection and education as well as preventive strategies like vaccinations were more prevalent in Europe, Asia Pacific and Latin America.
“We are also seeing the emergence of more sophisticated and broadly comparable claim data in several countries outside the USA. This data is foundational for employers who want to prioritize their interventions,” noted Francois Choquette, leader of Global Benefits at Aon. “A good place for employers to start addressing these challenges is the optimization of plan design, financial strategy and delivery mechanisms of their medical plans around the world. The structural solution for the long term involves the active promotion of a healthy workforce, beginning with a robust health care benefits for all company employees and their families.”
Methodology
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.