Employers, brace yourself for a big jump in medical benefit costs

02 October 2019 | Web Article Number: ME201916530

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EMPLOYER-provided medical benefit costs in South Africa are expected to rise 10 percent in 2020, outpacing the annual general inflation rate by 4.6 percent, according to the 2020 Global Medical Trend Rates Report released by Aon.

“The medical trend rate in South Africa for 2020 is expected to be slightly lower than the previous year, however the medical trend rate levels in both nominal and real terms continue to be extremely high, and we do not expect to see a different path anytime soon,” said Gavin Griffin, Aon’s Executive Head for Employee Benefits.

“The increase in VAT taxes has already been fully assimilated by the SA market and we will continue to see carriers working to contain costs by extending network arrangements to direct utilisation to more managed care interventions.”

He said the supply and demand side elements of utilisation had increased due to the ageing population of medical schemes as well as the increased incidence of chronic disease.

“Therefore, increased utilisation remains the major cost driver. A medical scheme with an ageing member base is expected to have a two to three percent increase in claims for every year that the average age increases. The need to grow or maintain solvency levels and the lingering ageing of the population will continue to pressure the market to keep medical trend rates at a high level.”

Globally, costs for employer-sponsored medical plans in 2020 are forecasted to increase eight percent, up from 7.8 percent growth this year. This is mainly due to expanded benefits and a slight increase anticipated in general inflation.

Projected medical trend rates vary significantly by region. Costs are expected to increase the most in Latin America and Middle East/Africa regions, with average medical premium rates forecasted at 13.1 percent and 12.2 percent, respectively. In contrast, Europe is projected to see an average medical premium rate increase of 5.7 percent.

Aon's report confirms the increasing impact of non-communicable diseases on health care costs globally. In South Africa, high blood pressure, diabetes, gynecological/maternity, cancer and ENT/lung/respiratory disorders were the most prevalent health conditions driving health care claims.

Aon’s report also confirms the growing prevalence of risks from unhealthy personal habits in South Africa, such as high blood pressure, high cholesterol, high blood glucose, lack of health screening and physical inactivity. Mental health prevalence is on the increase and is becoming a key focus for many employers.

"Many of the risk factors lead to chronic conditions with long term medical costs that make them difficult to treat and result in long-term medical cost increases,” said Tim Nimmer, Aon’s Global Chief Actuary for Health Solutions.

“As a large portion of our waking hours are spent on the job, the workplace is a logical place to create a healthier culture and change behaviours. Our goal is to guide employers as they become more critical in helping individuals and their families to take a more active role in managing their health, including participating in health and well-being activities and better managing chronic conditions,” Nimmer said.

To view the report, visit https://healthresources.aon.com/reports-2/2020-global-medical-trend-rates-report.

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