The average cost increases for employer-sponsored health-care plans are set to increase at a faster rate than inflation in 2018, according to a new report by Aon.
Global average cost increases are projected to be 8.4 per cent in 2018, nearly three times the projected rate of inflation of 3.1 percent. Results vary depending on region, with Africa and the Middle East expecting to see the highest average increases at 15.3 per cent and Latin America at 13.9 per cent. Europe, the report suggests, will see the lowest increase at 5.8 per cent.
And Canada is not too far behind with an expected six per cent rise in costs for extended health-care plans. After inflation of 2.1 per cent, the projected cost increase is 3.9 per cent. That’s compared to an overall cost increase of eight per cent in 2017 and a net rise of 6.1 per cent. The report notes this increase is currently trending lower relative to the rest of North America and the world, reversing a multi-year trend.
“Medical cost trend rates continue to increase due to many factors, including 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,” said Wil Gaitan, senior vice-president and global consulting actuary at Aon Hewitt, in a press release.
“Today’s multinational employers are experiencing the increased costs and complexities across their organizations with lower employee productivity levels due to the aforementioned factors.”
The report notes that as Canadian employers face high prescription drug costs the decline in cost inflation will serve as a reprieve. However, issues of mental health, an aging population and lack of physical activity all point to increasing medical plan use. In addition, certain medications such as biologic drugs, especially immunomodulators, are having an effect on plan costs already, according to the report.
“More moderate cost inflation is welcome news in the short term, but the underlying trends pushing medical costs up long term are only going to accelerate,” said Anthony Perlman, senior vice-president and national practice leader of health and benefits at Aon Hewitt Canada. “Employers and their insurers should be taking this opportunity to assess the impact of those trends, and to explore ways to take advantage of plan management options that can help them mitigate cost increases and ensure sustainable utilization.”
As such, the report noted that employers are moving away from traditional methods of alleviating this cost strain, such as negotiating with providers and tweaking plans, and are instead focusing on the root causes of cost increases by targeting programs to reduce chronic conditions and providing educational tools to help employees put their benefits to more efficient use.