2024 Global Medical Trend Rates Outlook

The global average medical trend rate for 2024 to be 10.1%, up from 9.2% in 2023 and the highest rate since 2015. The upsurge in medical trend is driven by a generalized increase expected in all regions, with every global region showing an increase in trend over 2023.

According to AON Report, 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.

The findings reflect the medical trend expectations of Aon professionals based on their interactions with clients and carriers represented in the portfolio of the firm’s medical plan business in each location.

Global healthcare benefit costs projected to Jump 10%. Widespread inflation and increasing healthcare utilization are combining to drive projected increases in global healthcare benefit costs to their highest level in nearly 15 years, according to a survey of global medical insurers conducted by analitics.

The series of shocks affecting economies around the world after the COVID-19 pandemic continue to create an unstable environment for the healthcare market, despite continued signs of improvement. Volatile conditions will persist (see How to Reduce Healthcare Costs?).

Despite uncertainty on how long global inflationary pressures will last, it is clear from the locations surveyed that the medical trend rate will see a sharp rise in 2024 among employer-sponsored medical plans.

Rui Silva, vice president and medical trend leader in Health Solutions for Multinationals at Aon

Although the leading conditions driving the trend rate – cancer and cardiovascular – are associated with risk factors like poor nutrition, air pollution, and excessive drug and alcohol use, it is physical inactivity and poor stress management that continue to lead the list of risk factors (see 86% of Cloud Attacks in the Healthcare Sector Result in Financial Losses). Hypertension is both a leading condition in and of itself, and a leading risk factor for other conditions.

The top medical conditions driving medical plan costs are consistent with 2023

1. Cancer/Tumor Growth: The most common cancers are breast, lung, colon and rectum, and prostate, which are a top condition in nearly all regions.
2. Cardiovascular: Cardiovascular diseases include disorders of the heart and blood vessels, encompassing several different conditions. These diseases negatively impacted claims in APAC, Europe and the Latin America and Caribbean regions.
3. High Blood Pressure/Hypertension: Considered a leading risk factor for other conditions, high blood pressure and hypertension is consistently reported as the top condition in the Middle East and Africa, as well as numerous countries across Latin America and the Caribbean.

Although the leading conditions driving the trend rate are associated with risk factors like poor nutrition, air pollution and excessive drug and alcohol use, it is physical inactivity and poor stress management that continue to lead the list of risk factors.

Companies have turned to new cost mitigation strategies for health and wellbeing as year-over-year medical plan costs continue to rise. In 2024, 60 percent of companies are expected to use flexible benefit plans as a mitigation tactic. Wellbeing initiatives are also a leading mitigation strategy at the local level.

In addition to giving employers a greater deal of cost control, flexible benefit plans enable change in employee’s behavior and work as an HR tool to deliver differentiated benefit packages. This allows organizations to attract and retain talent, while also offering adaptative benefits to meet individual needs and address diversity, equity and inclusion

Alex Wootton, executive vice president and global leader of Health Solutions for Multinationals

As employer-sponsored medical plans become a larger part of total rewards spend and pressure mounts to accurately forecast and manage costs, this report will serve as a valuable resource for organizations to plan global budgets and benefits strategies, shaping better decisions to build more resilient workforces for 2024 and beyond.

What are leading employers doing to mitigate rising costs?

Health and wellbeing costs have become an important concern for companies as year-over-year medical plan costs continue to rise. These rising rates often bring unexpected or unbudgeted cost increases and make affordability for employers and employees more difficult.

At the country level, companies looking to mitigate these increased costs are using a familiar set of strategies. Wellbeing initiatives are again the leading mitigation strategy.

These initiatives help to control costs in a couple of ways: by encouraging utilization of preventative care, they can avoid more expensive care down the road; and by keeping employees engaged in their wellbeing, they can reduce the stress that can exacerbate other health conditions.

Cost containment measures – initiatives aimed at reducing or controlling overuse, suchas raising deductibles and copays and the use of referrals – are expected to play an important role during 2024.

More significant plan design changes, such as the use of flexible benefit plans to cap overall benefit costs, and access and delivery restrictions, are all measures designed to incentivize plan members to seek care in a cost-effective manner and are also expected to play a role in 2024.

Flexible benefit plans are worth mentioning as an increasingly used mitigation initiativeat a global level, with around 60% of countries identifying this as a top initiative to consider in 2024.

Countries like Spain, South Africa, and the United States already have this as one of their most important initiatives. Apart from allowing employers a greater deal of cost control, flexible benefit plans often serve as an enabler of change in employees’ behavior.

They also work as an HR tool to deliver differentiated benefit packages that can attract and retain talent, while also offering adaptative benefits to meet individual needs and address company policies around Diversity, Equity, Inclusion and Belonging (DEIB).

Implementing a long-term health and wellbeing strategy

Implementing a long-term health and wellbeing strategy becomes increasingly crucial to cost containment. It is important that this strategy align with other strategic corporate initiatives like DEIB and Environmental, Social and Governance (ESG) policies. Every company is different, but almost all leading employers look at the following as they devise a health and wellbeing strategy:

• Long-term healthcare financing – A long-term perspective on healthcare financingallows employers to gain insight and influence over their healthcare spend by leveraging broker and vendor consolidation and identifying alternatives to traditional financing. One such alternative is to use a captive insurance vehicle. Captives provide far greater control over pricing and facilitate the linkage between wellbeing, DEIB initiatives and healthcare spend.

• Healthcare analytics – For any strategy to work, it must be built on robust data andan understanding of the underlying health cost drivers. Many leading employers are looking towards using a “Global Health Dashboard” to access regular reports on claims and diagnostic data for their major healthcare plans, which can then be used to set and measure tailored initiatives, budget costs appropriately, and react to unexpected claims.

• Broad wellbeing strategy – Leading employers build resilient workforces bycombining healthcare data with other key wellness data sources (time off, wellbeing app data, EAP statistics, etc.) to identify a broad set of wellbeing focus areas and then implement programs and strategies to tackle these key challenges.

2023 Average Medical Trend Rates

General Inflation Rate is the 2024 projected domestic general inflation published by the International Monetary Fund (IMF) World Economic Outlook Database April 2023.

The 2024 medical trend rate for the United States was obtained from Aon’s Health Value Initiative database, as applicable to PPO plans, adjusted to reflect expected increases prior to any plan, program or carrier changes for cost containment.

2024 Average Global Medical Trend Rates

The IMF outlooks are considered the best available proxy for domestic inflation and were used across all countries except for Bermuda, where the best available proxy was the most recent domestic retail inflation data as reported by the Bermuda central bank.

“Net” indicates medical trend rates net of domestic general inflation rates. This report was developed in Q3 2023, and all commentary is based on the figures and predictions available at this time.

For Lebanon, Pakistan, Sierra Leone, Venezuela and Zimbabwe, we are not reporting 2024 medical trend rates due to a prevailing hyperinflation environment. AON have also excluded those countries, alongside Argentina and Ukraine, from regional and global averages. Algeria, Morocco, and Russia were included in the tables below, but with no medical trend rate being reported.

2024 Average Medical Trend Rates by Region and Country

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AUTHORS: Rui Silva – vice president and medical trend leader in Health Solutions for Multinationals at Aon, Alex Wootton – executive vice president and global leader of Health Solutions for Multinationals at Aon