The average cost increases for global employer-sponsored medical plans will be 9.1% in 2016, 5.5 percentage points higher than the global average projected, according to a new report by Aon Hewitt.
The report, which reflects the medical trend expectations of employer-sponsored medical plans in 90 countries, found that Latin America and the Middle East are expected to see double-digit average medical trends rates this year, while Europe and North America are expected to exceed average regional inflation levels by at least four percentage points.
In Canada specifically, the report suggested that the average cost increase is estimated to be as high as 8%, exceeding the projected general inflation rate of 2% by six percentage points.
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“We expect medical costs to continue to escalate around the world due to global population aging, overall declining health, poor lifestyle habits particularly in emerging countries, continued cost shifting from social programs and an increase in utilization of employer-sponsored health plans,” said Wil Gaitan, senior vice president and global consulting actuary at Aon Hewitt.
“Regardless of the underlying medical insurance system, employers around the world are continuing to experience added organizational cost and lost workforce productivity as a result of these factors.”
In Canada, the report suggested, both gross and inflation-adjusted cost increases are expected to significantly outpace the North American average.
According to the report, the most significant factor in the upward growth rate is the cost pressure that newly marketed specialty drugs to treat chronic Hepatitis C, heart failure and certain types of cancers are expected to have on drug benefit programs in 2016 and beyond.
Also, new high-cost biologic drugs to treat more common conditions (such as high cholesterol) are expected to impact costs in 2016.
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“Organizations will need to react to the new reality of medical cost inflation through sound plan management,” said Shawn O’Brien, vice-president, national business analytics leader, health and benefits at Aon Hewitt Canada.
“But they cannot lose sight of longer-term, structural changes in the medical cost landscape – for instance, the aging workforce and the impact of non-communicable conditions like obesity and high blood pressure. Plan sponsors must not only respond today, but also prepare for tomorrow.”
Aon Hewitt’s report found that cardiovascular issues, cancer and gastrointestinal issues were the most prevalent health conditions driving healthcare claims around the world. The global risk factors expected to drive future claims – and contribute to the adverse experience driving high medical cost increases – were primarily non-communicable diseases: high blood pressure, obesity and high cholesterol, followed by physical inactivity.
In Canada specifically, the largest contributors to adverse experiences will be obesity, physical inactivity and aging.