Medical costs to increase by 8% in 2016

By Andrew Rickard | January 18 2016 09:44AM

In a new report, Aon Hewitt estimates that the average cost increase for employer-sponsored medical plans in Canada could reach 8% by 2016. This increase will be 6% higher than the projected general inflation rate of 2%, and will represent the largest increase in medical costs that the country has experienced since the mid-2000s.

Worldwide, the increase in costs is expected to be 9.1% in 2016, which is 5.5% higher than the 3.6% average inflation rate anticipated globally. Latin America and the Middle East are expected to see average medical costs increase by more than 10% in 2016, while the trend rates in Europe and North America are expected to be just under 6%. The average trend rates for all regions are expected to exceed the average rate of inflation by at least 4%.

Aon Hewitt’s analysis of Canadian extended health care benefit programs suggests that both gross and inflation-adjusted cost increases are expected to significantly outpace the North American average, reversing more recent medical inflation rates that have trended below 3%.

Newly-marketed specialty drugs such as those used to treat Hepatitis C, heart failure, and some kinds of cancer are putting pressure on plans; they are expected to be the main cause behind cost increases in 2016 and beyond.

“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,” comments 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.”

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