Surprise! Medical costs will rise again in 2019
Costs are going up globally, with the expected average increase before changes for employer-sponsored medical plans in 2019 of 7.8 percent.
Employers shouldn’t look for any respite from rising medical costs in the coming year, according to the 2019 Global Medical Trend Report from Aon.
But they won’t be alone in facing an expected increase of nearly 8 percent. In fact, the report says, they’ll have plenty of company—costs are going up globally, with the expected average increase before plan changes in medical and pharmacy cost for employer-sponsored medical plans in 2019 of 7.8 percent.
And even though that’s slightly lower than the 8.4 percent rise in 2018, thanks to employer cost containment measures, tighter procurement of medical goods, new health improvement initiatives and lower rates of projected inflation worldwide, it’s definitely not good news.
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“While the 2019 medical trend rates are at their lowest compared to prior years, these are still extremely high,” Wil Gaitan, senior vice president and global consulting actuary at Aon, says in a statement.
Gaitan adds, “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.”
Understandably, the rate of increase varies widely from one region to another. Countries in the Middle East/Africa and Latin America regions are well beyond the average expected increase, with the highest average medical premium rates of any region at 13.7 percent and 13.2 percent, respectively. On the other hand, 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.
Noncommunicable diseases and poor health habits will be taking their toll on health care costs across the globe, the report finds. Cancer, cardiovascular ailments such as high blood pressure, diabetes and respiratory conditions are the most prevalent in driving health care claims globally. The growing prevalence of risks from unhealthy personal habits, such as high blood pressure, high cholesterol, physical inactivity, bad nutrition and obesity, are also weighing on costs.
How are employers responding? They continue to use traditional strategies, the report finds, such as adjusting plan designs, controlling unreasonable plan utilization and negotiating premium rates with carriers. In addition, employers are being proactive, increasingly creating screening, healthy eating and physical activity promotional programs to reduce chronic conditions.
That too varies by region, with cost containment 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,” Francois Choquette, leader of Global Benefits at Aon, says in a statement.
Choquette adds, “This data is foundational for employers who want to prioritize their interventions. 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 … robust health care benefits for all company employees and their families.”
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