2019 Global Medical Trend Rates Report Global Benefits2 Global Medical Trends Key Highlights Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Key Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Global Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Regional Commentaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Call to Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Results Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Medical Plan Features . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Medical Plan Financing Approaches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Medical Plan Employee Cost Sharing . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Most Important Elements of Medical Plan Cost . . . . . . . . . . . . . . . . . . . . 12 Key Reported Conditions Driving Adverse Medical Claims Experience .13 Risk Factors Driving Supplementary Medical Plan Costs . . . . . . . . . . . . . 14 Mitigation Initiatives to Control Medical Plan Cost Escalation . . . . . . . . . 15 Average Medical Trend Rate Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Other Survey Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Levels of Claims Information Available From Carriers . . . . . . . . . . . . . . . 21 Prevalence of Medical Plan Features and Derivative Benefits . . . . . . . . . 22 Alternative/Innovative Delivery Mechanisms . . . . . . . . . . . . . . . . . . . . . . 23 Regional Summary of Practices on Employee Cost Sharing Premiums . . 24 Regional Summary of Country Practices on Employee Cost Sharing on Claim Outlays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Global Wellness and Health Promotion Initiatives . . . . . . . . . . . . . . . . . . 25 Glossary of Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Who to Contact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Table of ContentsAon | Global Benefits 1 Introduction Introduction Aon is pleased to present the results of its 2019 survey of average medical trend rates from countries around the world . The survey was conducted among Aon offices in 103 countries 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, clients, and carriers represented in the portfolio of Aon medical plan business in each country . The trend rates presented in this report do not include any allowances for potential employer countermeasures such as cost containment plan amendments or the potential impact of any attendant employer/broker negotiations with carriers. Aon has conducted this survey in order to help multinational companies: Budget premium costs for medical plan renewals Understand the factors driving medical cost increases Devise wellness and cost containment initiatives to respond to the challenges The trend rate figures shown in this report represent the percentage increases in medical plan (insured and self-insured) unit costs that are anticipated to be technically required to address projected price inflation, technology advances in the medical field, plan utilization patterns, and cost shifting from social programs to private insurance, including employer-sponsored plans, in each covered country . Care should be taken in interpreting the information presented here . The medical trend rates provided are not meant to represent an overview of each countrys health care costs as a whole . Neither are they necessarily indicative of the health care situation of each countrys population overall . This survey covers several separate themes: Estimated medical trend rates for 2019 Risk factors that are driving medical cost inflation Principal cost elements in medical claims Wellness and health promotion initiatives being undertaken by employers to deal with spiraling medical cost increase trends The most common employer practices in each covered country around medical plan prevalence, design, funding, and administration Qualitative responses to provide greater context to medical plans globallyThis report also provides information on the growing practice of requiring employee cost sharing in medical plan costs . The report summarizes the most typical practices in each covered country in this regardemployee sharing in medical premium costs, or in medical claim outlays . As a reference, we have also included the projected general inflation rates for 2019 published by the International Monetary Fund (IMF) that have been adopted as a proxy for the expected domestic retail inflation level in each country for 2019 . The trend rate figures, risk factors, and cost elements in this report relate to employer-sponsored plans and their participants with aggregate premiums managed by Aon of over USD 116 billion . The global and regional medical trend rate averages reflect the following technical procedures: A weighting process based on each countrys average private health care insurance expenditure per person with arbitrary adjustments for some countries in order to prevent over or under weighting A geometric averaging mechanism Due to the hyperinflation environment prevailing in Venezuela, we have left this country out of the regional and global medical trend rate averaging mechanism for 2019 . Aon intends to issue annual survey updates in the future . We expect that as the global demand for medical plan benefits extends to more countries, the number of participating countries in our published reports will increase over time . We hope you will find this report useful . We welcome any feedback you may wish to provide .2 Global Medical Trends Key Highlights Key Highlights The prevalence of employer-sponsored medical plans is increasing in all countries covered by the survey . Furthermore, the scope of the provisions offered by these medical plans continues to expand (e . g . , covered procedures, larger maximum lifetime benefits, higher allowances for maternity benefits, fewer exclusions from plan coverage, more lenient plan participation requirements . ) All regions of the world are expected to experience lower medical trend rates in 2019 relative to 2018 with the most significant decreases in average medical trend rates in North America and Europe . In fact, the 2019 global average nominal (gross of inflation) medical trend rate as well as the global average real (net of inflation) medical trend rate are at the lowest registered since 2013, the initial year of the Aon global medical trend rate survey . The drop in medical trend rates is due to lower rates of projected inflation worldwide as well as the result of employer cost containment measures and tighter medical goods and services procurement initiatives. Despite the drop, medical trend rates continue to grow over general inflation. Global Overview Regional medical trend rates are relatively lower in 2019 than in 2018 Medical trend rates at their lowest reported since 2013 survey Medical costs drivers: Global population aging, overall declining health, poor lifestyle habits, cost shifting from social programs, and increasing utilization of employer sponsored plans Medical trend rates continue to grow over general inflation, with average net medical trend rate being 4.9% in 2019 (5.3% in 2018) The global average medical trend rate for 2019 is 7.8% (8.4% in 2018) Prevalence of employee cost-sharing is growing relative to 2018 rates 4.9% 7. 8%Aon | Global Benefits 3 Key Highlights Exhibit 1: Double-digit margins between 2019 medical trend rates and domestic inflation levels were found in the following countries: 1 2019 projected inflation from IMF World Economic Outlook Database April 2018 22018 projected inflation from IMF World Economic Outlook Database April 2017 Brazil Venezuela Lithuania Lebanon Jordan Pakistan Egypt Costa Rica Panama Malaysia Ivory Coast Uganda Malawi The 2019 average global nominal and real medical trend rates are significantly lower than the corresponding 2018 average global medical trend rates: For 2019, the global average medical trend rate was 7.8% and the average general inflation rate was 2.9% 1 In 2018, the global average medical trend rate was 8.4% and the average general inflation rate was 3.1% 2 For 2019, the gap between the average global nominal medical trend rate and the global average general inflation rate is expected to decrease to 4.9% from the corresponding 5.3% figure in 2018.4 Global Medical Trends Key Highlights 4 Global Medical Trends Regional Commentaries North America (NA) USA While the individual health insurance marketplace continues to face an uncertain future; employers can expect slightly lower increase in costs for 2019 when compared to 2018 unit cost increases . Key drivers of medical costs in the United States, mainly medical services and pharmacy, are being more effectively managed . Employers are utilizing a growing number of strategies to help control the cost of pharmacy and medical services including cost transparency tools, referring employees to cost-effective providers, direct contracting with vendors, prescription drug alternatives, prescription drug formulary management, accountable care organizations (ACOs), and bundled payment models . Other factors are also at play: The entry of new players will likely introduce new innovations and efficiencies into the health insurance markets Less uncertainty in the regulatory environment of employer medical plans, including the suspension of the health insurer fee for 2019 for fully insured plans, will also contribute to the lower cost increases While the individual healthcare exchanges continue to struggle; employer exchanges continue to provide an effective cost management solution Canada Prescription drug costs are the largest single cost driver for medical plans in Canada . The federal government is taking steps to organize the purchase of pharmaceutical products at the national level which is now being performed at the provincial level with over 80 different provincial/territorial plans . The commentaries below present brief descriptions of developments that influenced the medical trend rates in selected countries that have large medical premiums per employee: Canada USA Regional Average Net Medical Trend Rate 6.4% 4.0% Regional Average Gross Medical Trend Rate Aon | Global Benefits 5 Key Highlights Asia-Pacific (APAC) China The Chinese government has taken a series of measures to control medical costs: 1 . Removed the 15% drug mark-ups in all public hospitals 2 . Issued regulations to limit the number of intermediaries in the distribution of pharmaceutical and medical products to two; the core of the regulation is that a manufacturer (importer) sells to a distributor, and the distributor sells directly to the hospital; a second distributor or local dealer is no longer permitted; this policy will help lower medical product costs 3 . Started a pilot program on innovative but expensive medicines that were outside the National Formulary 4 . Promoted the research and availability of generic drugs and the improvement of their quality These developments are expected to have a tempering effect on medical trend rates . Hong Kong General population aging, increasing levels of stress, and respiratory infections are core contributors to rising use of company plans in recent years . These factors have led to higher gross and net medical trend rates in 2019 relative to 2018 despite lower general inflation projections for 2019 . India The gross medical trend rate will be the same as last years despite a modest decrease in expected general inflation which was offset by recent requirements for insurers to set premium rates based on portfolio claim experience and avoid artificially low medical premiums for competitive advantage . Additionally, employers in general will be concentrating on initiatives aimed at medical plan cost shifting to employees . Singapore The gross medical trend rate for 2019 remains high despite lower projected general inflation in 2019 . This situation will need to be closely monitored as there is increasing traction from employers and insurers taking a pro-active approach with health intervention initiatives . However, there is a great deal of uncertainty as to whether the ROI from these measures will materialize in the short term . South Korea Decreases in medical trend rates for 2019 are mainly driven by regulation changes on 3 non-statutory medical coverages: (1) Chiropractic procedures, (2) Injections, and (3) MRI exams . Additionally, the typical coinsurance rates have increased from 20% to 30% . India China South Korea Singapore Hong Kong Regional Average Net Medical Trend Rate 8.6% 5.8% Regional Average Gross Medical Trend Rate6 Global Medical Trends Key Highlights Europe France Medical trend rates for 2019 anticipate higher physician fees due to nationwide negotiations with doctors and dentists . Additionally, we estimate that the upward direction of medical trend rates will continue over the 2020-2021 period, given the “100% Medical” reform which will impose full coverage of dental, optical and audio prosthetics related costs by medical insurance plans . This reform will have a stronger impact on lower-level schemes which will have to be upgraded accordingly . Ireland We anticipate that premium rates will remain flat in 2019 medical plan renewals due to lower general inflation, a soft carrier market in a community-rated premium-pricing environment (same price for all for a specific plan at a specific point in time) and improvements in efficiency in the public healthcare sector services . United Kingdom With continued deterioration in the social healthcare system (NHS) along with high incidence of large claims (especially in the area of oncology) medical trend rates remain at a relatively high level relative to other industrialized countries with insurer focus on claims and cost management minimizing the impact of these . Ireland UK France 5.1% 3.0% Regional Average Gross Medical Trend Rate Regional Average Net Medical Trend Rate Aon | Global Benefits 7 Key HighlightsAon | Global Benefits 7 Aon | Global Benefits 7 Latin America and Caribbean (L