Aon health solutions co-director says benefit plan sponsors are at a pivot point in dealing with cost trends
The average medical trend rate for Canada for 2024 is forecast at five percent, down from 7.5 percent in 2023, says Aon’s ‘2024 Global Medical Trend Rates Report.’ The report identifies overall global themes as well as challenges faced by individual countries.
The trend rate figures represent the percentage increases in medical plan unit costs – insured and self-insured – that are anticipated to be required to address projected price inflation, technology advances in the medical field, plan utilization patterns, and cost shifting from social programs.
Lower net percentage in Canada
While Canadian medical trend is forecasted to be 2.6 percent higher than general inflation next year, it will be low compared with the rest of the world, at 10.1 percent, says the report. A gradual return to normal inflation levels, combined with the cost-control measures implemented by group benefit plan sponsors in recent years, provides a better forecast for healthcare trend in Canada for 2024 compared to 2023.
While inflation is directly related to the cost increases, treatments for certain medical conditions are also driving costs. The top three medical conditions driving medical plan costs in Canada are diabetes, mental health, and autoimmune diseases. The top medical conditions driving medical plan costs globally are cardiovascular, cancer/tumor growth, and high blood pressure/hypertension.
“We're probably at a bit of a pivot point in terms of how [plan sponsors have] been dealing with cost trends going forward versus some of the inflationary pressures they have seen in the past,” says Nabil Merali, Co-director, Health Solutions, Aon. “Coming out of COVID, the focus has really been on supporting employees with their mental health and driving DEI initiatives and I don't think these initiatives are going to go away. The last couple years has been about how sponsors can optimize programs while at the same time expand the coverages to plan members and reduce or maintain the cost.
More pressure on supporting cost increases
“Looking forward, while the focus is still going to be on supporting mental health and supporting the diverse needs of individuals and the organization, what we're starting to see now is a little bit more pressure on ensuring that the organization can support those cost increases.”
Merali says, “Organizations are working to optimize their plans by adjusting deductibles, adjusting copays, ensuring that they're adopting all the best practices, and working with the carrier to help control the cost curve.”
He adds benefit plan sponsors need to undergo a detailed review of their offering and work with their advisor and their carrier to ensure they're maximizing the current spend so they can drive initiatives and care. The report says it will be important for organizations to monitor the effects of the backlog in preventive and diagnostic treatments observed in recent years, which could result in a significant increase in health risks and the aggravation of minor issues not treated in a timely manner. These delays create a lag in the claims associated with treating those conditions for group benefit plans, an effect that will be somewhat minimized in 2024.
Employer benefit plan offerings have increased significantly over the years. “Historically, just covering some medical and dental provided value, but now we’ve added more support such as virtual care, paramedical support, and mental health support. Members now have access to optional benefits and voluntary benefits. The overall net value of what a member receives has significantly increased.
“We have multiple generations in the workforce and they view these benefit programs as part of their total compensation. These changes to benefit offerings over the past decade shows employers are listening to their employees and ensuring everybody receives some value out of the program.
The report says the inflationary conditions and economic volatility over the past few years created a series of shocks affecting economies around the world after the COVID-19 pandemic. These challenges continue to create an unstable environment for the healthcare market, despite continued signs of improvement.