Employer medical benefit costs ‘to rise 10%’

By Supplied by Aon Time of article published Oct 2, 2019

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Employer-provided medical benefit costs in South Africa are forecast 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 terms and real terms continue to be extremely high, and we do not expect to see a different path any time soon,” says Gavin Griffin, Aon’s executive head for employee benefits.

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

“The supply-and-demand side elements of utilisation have 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 2 to 3 percent increase in claims for every year that the average age increases.

“The need to grow or maintain solvency levels and the 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 forecast to increase 8 percent, up from 7.8 percent this year. This is mainly due to expanded benefits and a slight increase in general inflation.

Projected medical trend rates vary significantly by region. Costs are expected to increase the most in Latin America and the Middle East/Africa region, with average medical premium rates forecast 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 healthcare costs globally. In South Africa, high blood pressure, diabetes, gynaecological/maternity, cancer and ENT/lung/respiratory disorders are the most prevalent health conditions driving healthcare claims.

The 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 screening and 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,” 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.

“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 activities and better managing chronic conditions.” 


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