News: Employers can expect medical benefit costs to rise in 2022: Aon survey

Compensation & Benefits

Employers can expect medical benefit costs to rise in 2022: Aon survey

Inflation, deferred treatments, and a stronger focus on well-being are likely to drive the trend.
Employers can expect medical benefit costs to rise in 2022: Aon survey

When COVID-19 hit last year, it overshadowed almost every other employer-sponsored medical benefit and claim. Firstly, economic slowdowns pushed many companies into cutting back their medical plans; secondly, healthcare systems pivoted most of their resources to dealing with the pandemic, meaning that a large number of medical treatments were deferred last year (and subsequently might only be claimed this year or even next year).

The costs are going to jump next year and possibly in subsequent years, though, according to the findings of a new Aon survey. Based on Aon's data, 2021 observed the "record lowest anticipated global Medical Trend Rate ever recorded", well below initial projections - but medical costs are going to rebound next year. What's more, costs are expected to rise "significantly above general inflation".

Across the APAC region, average gross medical costs are expected to grow by 8.2 percent in 2022. Some countries will see much lower increases - Australia, for example, will see medical costs rise by 3.1 percent and Hong Kong by 5.6 percent - but these figures are still noticeably above inflation levels.

China and Singapore, meanwhile, are looking at increases of 7 percent, with telemedicine claims in particular expected to rise. And in India, medical costs are expected to jump by a whopping 13 percent, which Aon analysts attribute to the particularly high risk of a third wave of COVID infections due to low vaccination rates.

Some of the universal factors leading to this cost increase existed even before COVID-19: population ageing, chronic medical conditions, poor lifestyle habits, and overall declining health. But the deferment of treatments, interventions, and even health checkups during the pandemic is likely to exacerbate all these, according to Aon analysts. Inflation and the cost of medical equipment and devices will add to the increase. And on top of that, there is a significant chance that more of the cost of COVID treatments will be passed on to employers as governments start to reduce funding.

Tim Dwyer, Head of Health Solutions, Asia Pacific, Aon, advised employers to look into adjusting the design of their medical benefits plans, and introducing behavioural interventions to reduce health risks. “The pandemic caused overall lower utilisation levels in 2020, which provided plan sponsors with some respite," he said.

"However, the dual effect of higher expected utilisation and inflationary pressures presents new cost challenges that need to be managed. The normalisation in utilisation patterns, emerging risks such as mental and musculoskeletal health and the potential for a greater COVID-19 cost burden to fall on the private sector will require employers to carefully analyse their medical plans as cost pressures increase over the next two renewal cycles.”

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Topics: Compensation & Benefits, Corporate Wellness Programs

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