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Medical cost increases to slow

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Wednesday January 28, 2015 Written by  Aon PLC
The average cost increase for employer-sponsored medical plans will likely dip in 2015.

However, In a new report, the global talent, retirement and health solutions firm Aon Hewitt noted that cost increases will continue to exceed general inflation levels by a significant margin.

In 2015, global medical costs are excepted to increase by 10.15 per cent before plan design changes and vendor negotiations. That's six percentage points higher than the average inflation rate. In 2014, the global average medical trend was 10.34 per cent.

Here in North America, the medical trend rate is estimated at 6.5 per cent, compared to an annual general inflation rate of 1.75 per cent.

"There are three fundamental factors driving what is now a long-established pattern of high medical plan cost increases for multinational companies, including ever increasing utilization of private medical plans – especially in emerging markets – the aging of the world population and a higher incidence of chronic conditions for the working population," said Wil Gaitan, senior vice-president of global benefits at Aon Hewitt.

"The problem goes far beyond the financials of medical plans. Absenteeism due to these factors is resulting in mounting losses in output levels and drains in employee productivity."

Cardiovascular issues (76 per cent), cancer (60 per cent) and diabetes (48 per cent) are the most prevalent factors driving health care claims around the world.

In Canada, a higher prevalence of claims are related to mental health issues.

Global risk factors that are expected to drive future claims and contribute to medical inflation include high blood pressure (60 per cent), poor stress management (52 per cent) and high cholesterol (48 per cent).

Obesity was also cited as an important risk factor affecting the Canadian population.

"It is crucial for employers to ensure that effective health care benefits and health care education are available for all employees and their families, aimed at preventing illness and better managing chronic conditions, providing high quality health care treatment, and encouraging the global workforce to adopt healthy behaviours," said Gaitan. "Maintaining a health workforce will not only be the way to arrest steep medical cost increases, but also a business imperative for long-term success."

The report reflects the expectations for employer-sponsored medical plans in 84 countries.

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