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Employer medical benefit costs projected to nearly double the rate of inflation in 2020

Medical costs in the U.S. will rise more slowly compared to other regions, with Latin America, Africa and the Middle East seeing the most change.

Jeff Lagasse, Associate Editor

U.S. employer-provided medical benefit costs are forecast to rise 6.5% in 2020, outpacing general inflation by 3.8%, according to the 2020 Global Medical Trend Rates Report released today by global professional services firm Aon.

The increase for U.S. employer-sponsored medical plans expected next year is due to a combination of higher costs for specialty drugs, moderate price increases for care and flat or decreasing health utilization.

Medical costs in the U.S. will rise more slowly compared to other regions around the world. Globally, costs for employer-sponsored medical plans in 2020 are forecasted to increase 8%, up from 7.8% growth this year. This is mainly due to expanded benefits and a slight increase anticipated in general inflation.

WHAT'S THE IMPACT

Projected medical trend rates vary significantly by region. Costs are expected to increase the most in Latin American and Middle Eastern/African 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.

Benefit cost growth in the U.S. are expected to remain somewhat flat over that time, with only slight increases.

The report also confirms the increasing impact of non-communicable diseases on healthcare costs globally. In the U.S., musculoskeletal, cancer, cardiovascular, diabetes and high blood pressure were the most prevalent health conditions driving healthcare claims. The top five conditions that impact health claims in the U.S. are the same as those globally, but the disease rankings differ significantly.

Also revealed is the growing prevalence of risks from unhealthy personal habits in the U.S., such as physical inactivity, obesity, bad nutrition, ageing and excessive alcohol and substance abuse. The U.S. differs from the rest of the world with substance abuse ranked within its top five risk factors.

Many of those risk factors can lead to chronic conditions that are difficult to treat, and can contribute to long-term increases in medical costs.

THE LARGER TREND

A June report from PricewaterhouseCoopers also found medical costs are rising, and will likely show a modest increase of about 6% over the past two years.

After figuring in health plan changes such as increased employee cost sharing and network and benefit changes, PwC's Health Research Institute, which conducted the study, projects a net growth rate of 5 percent. Even with employers' actions, market forces likely will still overrun the efforts to quell them.

Prices, not utilization, are continuing to fuel healthcare spending. Utilization is still being dampened by high deductibles and other cost sharing, but at the expense of employee satisfaction with their health plan. In response, employers are inserting themselves more forcefully into the healthcare delivery equation.

Twitter: @JELagasse

Email the writer: jeff.lagasse@himssmedia.com