Medical Benefits Raise Employer Cost Fears

Image credit: iStockphoto/Umida Kamalova

As if the pandemic was not stressful enough, a new Aon plc survey warned employers that their employer medical costs are about to run away — and it is outpacing inflation.

The company’s 2022 Global Medical Trend Rates Report noted that employer medical benefits worldwide are forecasted to rise by 7.4% in 2022. This is higher than the expected 5% general inflation.

The Report noted that the average annual increase for employer-sponsored medical plans is expected to rise 0.2%, mainly due to medical utilization returning to pre-COVID-19 pandemic levels, increased chronic disease, expanded benefits, and higher unit costs for medical services.

“Looking ahead to next year, most countries are expecting medical utilization levels to be higher than they observed since the start of the pandemic,” said Ed Cwikla, Aon’s chief global actuary for Health Solutions. “Preventive and outpatient care are the medical services that are projected to increase in usage the most in 2022. Utilization of telehealth services is also expected to rise, continuing the strong increase observed during the pandemic.”

There are regional variations.  

The Report expects costs to increase the most in Middle East/Africa regions, with average medical trend rates forecasted at 11.1%, followed by Latin America and the Caribbean at 10.6%. Europe is projected to see the lowest average medical premium rate increase, at 5.6 %. The Asia Pacific came in the middle with 8.2%, a rise of 0.2% from 2021.

Aon's report shows that non-communicable diseases are impacting health care costs globally, which also play a role in the severity of COVID-19 outbreaks.

The top conditions that will drive health care claims are cardiovascular disease, cancer, high blood pressure, and diabetes. The report also confirms the growing prevalence of risk factors from unhealthy personal habits such as high blood pressure, physical inactivity, poor stress management, high cholesterol, and inadequate nutrition. The disease and risk rankings differ significantly throughout the world.

So what can employers do? The Report suggested looking deeper into wellbeing programs — such as preventive strategies like physical check-ups, screenings, healthy eating, and physical activity promotional programs — to reduce chronic conditions. Employers are also supplementing this preventative approach with traditional strategies, such as controlling unreasonable plan utilization, adjusting plan designs, narrowing networks, and adding flexible benefit plans to cap overall benefit costs.

“Poor stress management and physical inactivity continue to gain relevance as a top risk factor driving future adverse medical costs, with 20% more countries reporting poor stress management as a top risk factor,” said Rui Silva, Aon’s vice president of global benefits. “Targeted wellness interventions to address these risks are more relevant than ever; hence, we expect the increased demand for behavior and mental health services to continue.”

Image credit: iStockphoto/Umida Kamalova