Cost of employer medical benefits to outpace inflation

by James Burton18 Sep 2019

The costs of employer medical benefits across the world are expected to rise 8% in 2020, outpacing general inflation by 4.9%.

Costs in North America are forecasted to rise the same rate as last year at 6.4%, still more than inflation, according to the 2020 Global Medical Trend Rates Report released by Aon plc.

The anticipated average global annual increase for employer-sponsored medical plans is expected to be in line with 2019, with a 0.2% increase in 2020, due mainly to the rise of chronic diseases, expanded benefits, and a slight increase anticipated in general inflation.

“Rising medical costs and the prevalence of chronic conditions continue to be a focus of our clients around the world,” said John Zern, CEO of Global Health Solutions at Aon. “Providing our clients with market-leading solutions that enable consumer choice, promote transparency and enable wellbeing in order to drive better financial and colleague outcomes will continue to be a priority for us at Aon in 2020.”

Aon’s survey found projected medical trend rates continue to vary significantly by region. Costs are expected to increase the most in Latin America and Middle East/Africa regions, with average medical premium rates forecasted at 13.1% and 12.2%, respectively. In contrast, Europe is projected to see an average medical trend rate increase of 5.7 percent.

Health Care Benefit Cost Growth from 2019 to 2020

 

 

2019

2020

Global

 

7.8%

                     8.0%

North America

 

6.4%

                     6.4%

Latin America and Caribbean

 

13.2%

                     13.1%

Asia Pacific

 

8.6%

                     8.7%

Europe

 

5.1%

                     5.7%

Middle East/Africa

 

13.7%

                     12.2%

Aon's report also confirmed the increasing impact of non-communicable diseases on healthcare costs globally. The top-five conditions that will drive health care claims are cardiovascular disease, cancer, diabetes, high blood pressure and musculoskeletal.

The report also confirmed the growing prevalence of risk factors from unhealthy personal habits such as high blood pressure, physical inactivity, high cholesterol, poor nutrition and inadequate stress management. The disease and risk rankings differ significantly throughout the world.

"Many of the risk factors lead to chronic conditions with long-term medical costs that make them difficult to treat and result in long-term medical cost increases,” said Tim Nimmer, Aon’s global chief actuary for Health Solutions.

“As a large portion of our waking hours are spent on the job, the workplace is a logical place to create a healthier culture and change behaviours. Our goal is to guide employers as they become more critical in helping individuals and their families to take a more active role in managing their health, including participating in health and wellbeing activities and better managing chronic conditions.”