Employer medical costs are expected to almost triple around the world next year, but for the second year in a row, medical cost inflation in Canada is trending lower than both the global and the North American averages, according to a new report from Aon.
Aon’s 2019 Global Medical Trend Report indicates medical plan costs paid by employers around the world are set to rise nearly eight per cent next year, far outpacing average general inflation of nearly three per cent.
Countries in the Middle East/Africa and Latin America regions are expected to experience the highest average medical premium rates of any region at 13.7 per cent and 13.2 per cent respectively. In contrast, Europe and North America are projected to see average medical premium rate increases in the single digits.
For the second year in a row, medical cost inflation in Canada is trending lower than both the global and the North American averages, a reversal from multi-year trends earlier in the decade.
Medical costs to rise next year
According to Aon’s analysis of extended health-care plans, medical costs in Canada are expected to rise by six per cent next year. Assuming an annual general inflation rate of 2.1% for 2019, the net medical trend rate is expected to be 3.9%. A medical inflation rate lower than the overall global trend is welcome news for employers providing employee benefits in Canada.
But Aon points out that Canadians are still exposed to some of the highest prescription drug costs in the world and while Canadians are fortunate to have access to new and emerging levels of care, that access comes with a price.
“In Canada, cost inflation is largely driven by expensive prescription drug therapies, since many core health care services are provided through provincial programs,” said Greg Durant, Senior Vice-President and Chief Actuary, Health and Benefits, Aon in Canada. “These therapies, while expensive, are also often game-changers in that they keep can keep employees active and productive to a degree that would be impossible otherwise.”