Employer medical costs around the world expected to rise at nearly triple the rate of inflation in 2019, according to Aon report
Medical inflation in Singapore is expected to remain at 10 percent outpacing general inflation of 1 percent.
SINGAPORE – Media OutReach – 14 November 2018 – 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 Rates Report released by Aon plc (NYSE: 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.
Tim Dwyer, CEO, Health Solutions, Asia Pacific, Aon.
Medical trend rate in Asia Pacific will decrease from 8.9 percent in 2018 to 8.6 percent in 2019. This rate is higher in Singapore at 10 percent and is expected to remain the same in 2019 — despite a lower projected general inflation of just 1 percent. On the other hand, medical inflation in Hong Kong is expected to rise from 6.2 percent in 2018 to 8.3 percent in 2019.
In China, medical trend rate will increase from 5.5 percent in 2018 to 6 percent in 2019. The Chinese government’s regulation to limit the number of intermediaries in the distribution of pharmaceutical and medical products to two is expected to temper medical inflation in future. Medical trend rate in India is at 9 percent and is expected to remain the same in 2019. Insurers there are now required to set premium rates based on portfolio claim experience and avoid artificially low fees for competitive advantage.
In Singapore, cancer and cardiovascular issues are the top medical conditions driving up medical plan costs — while increasing levels of stress and respiratory infections are core contributors to rising costs in Hong Kong. To minimise these costs, organisations continue to introduce design measures such as co-payment, dollar limits in plan, limiting certain benefits, and referring employees to cost-effective providers.
Tim Dwyer, CEO, Health Solutions, Asia Pacific, Aon said, “By focusing only on cost containment, companies are treating the symptoms instead of the underlying causes in relation to the health of their employees. Against the backdrop of an ageing workforce and increasing prevalence of sedentary lifestyles, the time is right for employers across Asia to develop sustainable wellbeing programmes. This will increase employee engagement, lead to a healthier and more productive workforce and, ultimately, improve business performance.”
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.
“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 ageing, poor lifestyle habits in emerging countries, cost shifting from social health care programmes and the increased prevalence and utilisation 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 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.
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.
Aon plc (NYSE:AON) Aon is a leading global professional services firm providing a broad range of risk, retirement and health solutions. Our 50,000 colleagues in 120 countries empower results for clients by using proprietary data and analytics to deliver insights that reduce volatility and improve performance. Aon has five specific global solution lines: Commercial Risk Solutions, Reinsurance Solutions, Retirement Solutions, Health Solutions and Data & Analytic Services.