Medical plan costs paid by employers are outpacing inflation, according to a new report by Aon.

In Canada, however, medical cost inflation is trending down, lower than both the global and North American averages. Aon expects Canadian medical costs to rise by six per cent next year. Factored against average general inflation of 2.1 per cent in 2019, that leaves employers with an expected net medical trend rate of 3.9 per cent.

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

Read: Global health-care plan costs to rise faster than inflation in 2018: report

Globally, the report projected plan costs will increase by 7.8 per cent in 2019, compared to average general inflation of almost three per cent. With that said, however, the increase of 7.8 per cent is lower than the 8.4 per cent seen in 2018. Aon attributes this to cost containment measures, tighter procurement of medical goods, health improvement initiatives and lower projected inflation globally.

“While the 2019 medical trend rates are at their lowest compared to prior years, these are still extremely high,” said Wil Gaitan, senior vice-president and global consulting actuary at Aon. “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.”

The Middle East, Africa (13.7 per cent) and Latin America (13.2 per cent) will see the highest projected medical trend rates, with Europe (5.1 per cent) at the lowest, according to the report.

Read: Health costs to rise 11.8% in 2018, survey predicts

“While continued moderate cost inflation is good news, it is typically achievable only through good governance and close scrutiny of plan design and cost drivers,” said Durant. “In our experience, employers looking to mitigate control cost increases and ensure sustainable utilization — all while balancing employees’ access to care — must examine the key characteristics of their employee population and determine the best solutions and plan management options going forward.”

Looking at cost drivers, the report found cancer, high blood pressure, diabetes and respiratory conditions are the most common health problems driving health-care claims globally.

“Many of the global risk factors often lead to chronic conditions with long medical cost tails that make them expensive to treat and result in long-term medical cost increases,” said Tim Nimmer, chief health-care actuary at Aon. “Employers can play a key role by motivating individuals and their families to take a more active role in managing their health, including participating in health and well-being activities and better managing chronic conditions.”

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The report also examined what strategies companies are using to control costs. It found traditional solutions, such as adjusting plan design, controlling unreasonable plan usage and negotiating premiums with carriers are still in use. However, employers are also being proactive, using new strategies like creating programs for health screenings, healthy eating and active living.

The most common solution in North America, the Middle East and Africa is containing costs, while health education, vaccinations and screenings are the most popular in Europe and Latin America.

“We are also seeing the emergence of more sophisticated and broadly comparable claim data in several countries outside the U.S. This data is foundational for employers who want to prioritize their interventions,” said Francois Choquette, leader of global benefits at Aon. “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 a robust health-care benefits for all company employees and their families.”

Read: Town of Richmond Hill awarded for strategic health approach

Copyright © 2019 Transcontinental Media G.P. Originally published on benefitscanada.com

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