Australian employer medical plan costs are forecast to rise 4.9% in 2027, outpacing inflation by 1.7 percentage points, according to Aon’s 2027 Global Medical Trend Rates Report.
Aon said that the projected increase is slightly lower than the 5.2% forecast for 2026. Healthcare costs are still expected to outpace inflation, it said, creating ongoing challenges for employers managing workforce health and benefits costs.
Australia’s medical trend rate remains below the Asia Pacific average of 9.7% and the global average of 9%. Globally, average costs are forecast to rise 9% in 2027, down from 9.8% in 2026, while Asia Pacific is expected to fall from 11.3% to 9.7%. Aon’s regional release put Australian general inflation at 3.2% for 2027, down from 3.5%. That leaves the gap to inflation unchanged from 2026.
Stuart Whitbread, Aon’s director of health and benefits, Australia, said employers “still face difficult decisions around balancing costs with access to quality care.” He said organisations taking a long-term approach to workforce health would be better placed to manage costs while supporting employee wellbeing and productivity.
The report draws on insights from more than 100 Aon offices that broker, administer or advise on employer-sponsored medical plans, Aon said.
The report found chronic conditions remain a key driver of healthcare costs globally. Cardiovascular disease is the leading cost driver worldwide, while cancer is a significant contributor to medical plan costs in Australia, according to Aon.
Whitbread said cancer drives costs because of its prevalence, advances in treatment and growing demand for specialist care. Those developments improve patient outcomes but raise the cost of care for employers and insurers, he said. He added that the findings point to opportunities to invest in prevention and early intervention.
Aon’s report summary also flags hypertension and the growing impact of GLP-1 therapies as cost pressures.
Insurer claims figures show a similar pattern. Though not health insurance-linked, parallel claims in the life insurance sector illustrate the issue - cancer accounted for more than one in five claims at Zurich Australia in 2025, with close to $470 million paid. It was the second most common cause of claims at TAL in the year to March 2026. Mental health conditions remained TAL’s leading cause for a fifth consecutive year.
In parallel, private health costs are also moving up. The Department of Health approved an average premium increase of 4.41% from April 1, 2026, above last year’s 3.73%. That reflects medical and hospital costs that rose 5% over the past financial year. Private Healthcare Australia chief executive Dr Rachel David said more people are using cover for high-cost care such as joint replacements and cancer treatment.
Hospital cover reached a record 12,688,193 people, or 45.6% of the population, by December 31, 2025, according to Australian Prudential Regulation Authority data. Members Health Fund Alliance said its member funds’ average 2026 increase was 3.62%, against 5.12% for the three largest for-profit insurers.
Alan Oates, Aon’s head of global benefits for Asia Pacific, said the region’s moderation “should not be interpreted as uniform relief for employers.” Aon said the regional decline is driven largely by China and India. Trend rates are also expected to moderate in Australia, though five of the regional markets it lists still face double-digit increases.
Aon said Australian employers face growing pressure to balance cost management with employee expectations on access to quality healthcare. It said organisations that invest in workforce health and wellbeing can build greater confidence in their long-term benefits strategy.
Aon says the report is designed to help HR and benefits leaders plan medical plan and premium renewal budgets. For brokers advising employer clients, the forecasts offer a benchmark for 2027 renewal conversations.
