Aon: Global employer medical costs expected to rise nearly three times rate of inflation

In Canada, however, the situation is different

Aon: Global employer medical costs expected to rise nearly three times rate of inflation

Insurance News

By Lyle Adriano

Aon’s latest report suggests that global employers’ medical plan costs are set to increase by almost 8% in 2019 – outpacing the average general inflation rate of about 3%.

The 2019 Global Medical Trend Report by Aon projected a 7.8% increase in medical and pharmacy costs for employer-sponsored medical plans – before plan changes – for next year. Aon notes that this is just slightly lower than the 8.4% increase 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 healthcare programs and the increased prevalence and utilization of employer-sponsored health plans in many countries,” commented Aon senior vice-president and global consulting actuary Wil Gaitan.

Although Canada will also see its medical costs inflate next year, Aon noted that the country’s increase is trending lower compared to the rest of the world – indeed even to the rest of North America.

The report expects Canada’s medical costs to rise by 6.0% in 2019; Aon says this is a reversal from previous multi-year trends that saw Canada’ inflation approach average global levels (about 8%).

News of a lower medical inflation rate might be good news to Canadian employers, but Aon cautions that the country is still home to some of the highest prescription drug costs in the world. There have been recent efforts to establish a National Prescription Drug Plan, but its details and implementation remain up in the air. Until then, Aon recommends that plan sponsors stick with their current benefit and drug strategies and should only consider changing when more concrete information about the national program surfaces.

Canadians also have access to new and emerging levels of care, Aon pointed out. However, that accessibility does not come cheap.

“In Canada, cost inflation is largely driven by expensive prescription drug therapies, since many core healthcare services are provided through provincial programs,” explained Aon Canada senior vice-president and chief actuary, health and benefits Greg Durant. “These therapies, while expensive, are also often game-changers in that they keep can keep employees active and productive to a degree that would be impossible otherwise.” 

An earlier report by Aon found that Canadian employers are highly concerned about the rising costs of group benefits, but still prioritize the productivity and engagement of their people.

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