Employer-sponsored medical plan expenses could increase almost 8 percent worldwide this year, far exceeding the average general inflation of almost 3 percent, according to the “Global Medical Trends Rate Report 2019” released by professional services company Aon.
It is estimated that the average increase in medical and pharmaceutical expenses for health plans during 2019, offered by employers to their employees, will be 7.8 percent. This rate is slightly lower than 8.4 percent in 2018, mainly due to cost reduction measures, more restrictive acquisition of medical products, new health prevention initiatives and lower projected inflation rates worldwide.
In the case of Puerto Rico, an annual inflation rate of 1 percent is estimated for 2019. The severe reduction in both gross and net inflation is the result of a combination of challenges in the macroeconomic environment and the impact of Hurricane María.
Insurers are implementing discount networks, reviewing contracts with pharmacy administrators, among other strategies to reduce their operational costs.
This in preparation to serve a population facing a socio-economic crisis. In addition, a reduction in the insured population and changes in the patterns of use that could be drivers that affect the reduction of premiums are expected, the report stated.
“Companies invest in their employees in the short, medium and long term through the benefits they offer, including the medical plan,” said Maricarmen Burgos, leader of the practice of Benefits of Aon Puerto Rico.
“When an employee watches over their health and well-being, both the employer and the employee earn: the employee enjoys a better quality of life and the company minimizes the cost of said benefit,” she said.
Medical inflation rates projections vary significantly by region, the report shows. Countries in the Middle East/Africa and Latin America regions will have a higher annual rate of medical cost trends, compared to any other region, with 13.7 percent and 13.2 percent, respectively.
In contrast, in Europe and North America projections are observed with average single-digit increases, with Europe being the region with the lowest rate of increase with 5.1 percent.
“Despite the reductions, the numbers for Latin America and the Caribbean continue to be very high, and in 2019, the annual rate of inflation in that region is estimated at 4.7 percent. The three countries with the highest variation they are Venezuela, Argentina and Brazil, with 100,000 percent, 25 percent and 17 percent, respectively,” said Nicolás Jiménez, analytical leader of Aon for Latin America.
The Aon report confirmed the growing impact of noncommunicable diseases worldwide on the costs of medical care. Cancer and cardiovascular diseases, as well as high blood pressure, diabetes and respiratory problems, were the main health conditions that impacted health costs in Latin America.
The Aon report also indicates an increase in the risks associated with poor health habits – such as hypertension, high cholesterol, physical inactivity, poor diet and obesity.
To mitigate high costs, Aon’s report reveals that companies continue to use traditional strategies, such as adjustments in the design of health benefits, actions to control overuse of plans, and negotiation of the readjustments of premiums with health service insurers.
The report also shows that employers are being proactive in the creation and identification of programs to control chronic conditions in the early stages of the disease, such as screening tests and prevention programs that encourage and encourage the adoption of a healthy eating and the practice of daily physical activity.
These strategies vary according to the geographical region. For example, strategies for cost reduction are the most prevalent in North America, the Middle East, and Africa. On the contrary, welfare initiatives, such as the detection of risks and health education and promotion, as well as preventive strategies, such as vaccination, are the most used in Europe, Asia-Pacific and Latin America, the report stated.
“We have seen the possibility of accessing data and information that is more sophisticated and widely comparable among companies in some countries, different from what is done in the U.S. This information is fundamental for employers to define and prioritize their intervention strategies,’ said François Choquette, leader of Aon benefits worldwide.