Aon Hewitt Projects Global Medical Cost Increases will Dip Slightly in 2015

Average Global Rate is Six Percentage Points Higher than General Inflation

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Jan 21, 2015, 09:26 ET

LINCOLNSHIRE, Ill., Jan. 21, 2015 /PRNewswire/ -- A new report from Aon Hewitt, the global talent, retirement and health solutions business of Aon (NYSE: AON), estimates that the average cost increase for employer-sponsored medical plans globally will dip slightly in 2015 but continue to significantly exceed general inflation levels.

Aon Hewitt's report reflects the medical trend expectations of employer-sponsored medical plans in 84 countries based on reported data from Aon professionals, clients and carriers represented in the portfolio of Aon medical plan business in each country. The report shows that in 2015, medical costs are expected to increase by 10.15 percent before plan design changes and vendor negotiations—6 percentage points higher than the average inflation rate. In 2014, the global average medical trend was 10.34 percent. While the global average medical trend is expected to decline, three regions--Asia Pacific, Europe and Latin America--are projected to see an uptick in rates for 2015.

"There are three fundamental factors driving what is now a long-established pattern of high medical plan cost increases for multinational companies, including ever increasing utilization of private medical plans—especially in emerging markets—the aging of the world population and a higher incidence of chronic conditions for the working population," said Wil Gaitan, senior vice president of Global Benefits at Aon Hewitt. "The problem goes far beyond the financials of medical plans— absenteeism due to these factors is resulting in mounting losses in output levels and drains in employee productivity."

Average medical trend rates by region

	2014		2015
	Medical trend rate	Annual general inflation rate	Medical trend rate	Annual general inflation rate
Asia Pacific	10.12%	4.66%	10.87%	4.28%
Europe	5.94%	1.78%	6.01%	1.99%
Latin America and Caribbean	14.35%	5.81%	14.58%	6.25%
Middle East and Africa	12.28%	5.25%	12.03%	4.90%
North America	8.5%	1.76%	6.5%	1.75%
Global	10.34%	4.23%	10.15%	4.00%

Global Factors Driving Health Care Claims
Aon Hewitt's report shows that cardiovascular issues (76 percent), cancer (60 percent) and diabetes (48 percent) were the most prevalent factors driving health care claims around the world. There were, however, a few notable differences by geographic region. Canada, for example, reported a higher prevalence of claims related to mental health issues, while Middle East/Africa reported more cases of high blood pressure.

The global risk factors that are expected to drive future claims—and contribute to the adverse experience driving high medical inflation—included high blood pressure (60 percent), poor stress management (52 percent) and high cholesterol (48 percent). Asia Pacific and Europe also cited poor stress management as a global risk factor, while Canada and Latin America noted obesity.

"As learned from the US experience, standard cost-management approaches will be insufficient to addressing anticipated future spiraling medical costs," added Gaitan. "It is crucial for employers to ensure that effective health care benefits and health care education are available for all employees and their families, aimed at preventing illness and better managing chronic conditions, providing high quality health care treatment, and encouraging the global workforce to adopt healthy behaviors. Maintaining a healthy workforce will not only be the way to arrest steep medical cost increases, but also a business imperative for long-term success."

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About Aon Hewitt
Aon Hewitt empowers organizations and individuals to secure a better future through innovative talent, retirement and health solutions. We advise, design and execute a wide range of solutions that enable clients to cultivate talent to drive organizational and personal performance and growth, navigate retirement risk while providing new levels of financial security, and redefine health solutions for greater choice, affordability and wellness. Aon Hewitt is the global leader in human resource solutions, with over 30,000 professionals in 90 countries serving more than 20,000 clients worldwide. For more information on Aon Hewitt, please visit www.aonhewitt.com.

About Aon
Aon plc (NYSE:AON) is the leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 66,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical expertise. Aon has been named repeatedly as the world's best broker, best insurance intermediary, best reinsurance intermediary, best captives manager, and best employee benefits consulting firm by multiple industry sources. Visit aon.com for more information on Aon and aon.com/manchesterunited to learn about Aon's global partnership with Manchester United.