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U.S. Employers Can Expect Health Costs Four Times Inflation

The 2016 medical trend rate in North America is estimated at 5.8%, while the annual general inflation rate is 1.5%, according to an Aon Hewitt report.

By PLANSPONSOR staff editors@plansponsor.com | January 15, 2016

Aon Hewitt estimates that the average cost increases for employer-sponsored medical plans globally will be 9.1% in 2016. This is 5.5 percentage points higher than the global average projected inflation rate of 3.6%.

According to Aon, projected trend rates are expected to vary significantly by region. Both Latin America and the Middle East are expected to see double-digit average medical trend rates in 2016, while Europe and North America will experience trend rates just below 6%. Still, average trend rates for all regions are expected to exceed average regional inflation levels by at least 4 percentage points.

“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,” says 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.”

Aon Hewitt’s report found that cardiovascular issues, cancer and gastrointestinal issues were the most prevalent health conditions driving health care 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.

Aon Hewitt’s report reflects the medical trend expectations of employer-sponsored medical plans in 90 countries based on reported data from Aon professionals, clients and carriers represented in the portfolio of Aon medical plan business in each country.

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