Canadian employer medical benefit costs to grow 6.0% in 2020, Aon survey forecasts

Global health benefit costs set to rise 8 percent

TORONTO, Sept. 12, 2019 – Employer-provided medical benefit costs in Canada are forecasted to rise 6.0% in 2020, outpacing general inflation by 1.9%, according to the 2020 Global Medical Trend Rates Report released today by Aon plc (NYSE: AON).

The increase for Canada employer-sponsored medical plans expected next year is due to a combination of higher costs from the increased spend for drugs in general, reflecting the many health risk factors facing Canadians today. Several of these risk factors are manageable through a combination of drug therapies and other wellness initiatives and employers are increasingly looking at the bigger picture to determine the approach they want to take to mitigate costs.

“We expect the medical trend rate for 2020 to be similar to last year,” said Greg Durant, Aon’s Canadian chief actuary for Health Solutions. “However, with the federal election scheduled for October 2019, government subsidization of health care may be impacted as a national Pharmacare program is under consideration. While there is no certainty around the scope of this program, we expect that it will provide coverage for certain pharmaceutical products at the national level. If the incumbent government remains, we could very well see some changes in this regard, which could result in a positive impact on the 2021 medical trend rate for plan sponsors, as prescription drug costs are the largest single cost driver for medical plans in Canada.”

Globally, costs for employer-sponsored medical plans in 2020 are forecasted to increase 8.0%, up from 7.8% 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% and 12.2%, respectively. In contrast, Europe is projected to see an average medical premium rate increase of 5.7%.

Health care benefit cost growth from 2019 to 2020

Aon's report confirms the increasing impact of non-communicable diseases on health care costs globally. In Canada, musculoskeletal/back, cardiovascular, and mental health are the most prevalent health conditions driving health care claims.

Leading medical conditions in Canada and the World

Aon’s report also confirms the growing prevalence of risks from unhealthy personal habits in Canada, such as physical inactivity and poor nutrition.

Leading health risk factors in Canada and the World

"Many of these 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 behaviors. Our goal is to guide employers as they become more critical in helping individuals and their families take a more active role in managing their health, including participating in health and well-being activities and better managing chronic conditions.”

To view the report, visit Aon in Canada Health Thought Leadership page.

Methodology

The survey was conducted among 105 Aon offices, each one representative of a country, that broker, administer, or otherwise advise on employer-sponsored medical plans in each of the countries covered in this report. The survey responses reflect the medical trend expectations of the Aon professionals based on their interactions with clients and carriers represented in the portfolio of the firm’s medical plan business in each country.