Across the globe, medical costs are rising. The global average medical trend rate for 2024 is expected to be 10.1 percent, according to Aon’s 2024 Global Medical Trend Rates Report. That’s up from 9.2 percent in 2023, with every region showing an increase.
High-cost claimants are contributing to this rise in medical plan costs, putting employers under enormous financial pressure. This increase is driven by exorbitantly high-cost drugs, more complex therapies and a larger population with multiple chronic conditions.
“The number of million-dollar healthcare claimants in the United States has risen 45 percent in recent years and I expect it will continue to go up,” says Charles Smith, Aon’s chief medical officer in North America. “This is creating a strain across the healthcare system.”
There are several strategies employers can use to mitigate rising costs. Some companies are using analytics to pre-emptively identify high-risk claimants and adverse population health trends. Leading employers are also implementing wellbeing initiatives, cost containment measures and plan design changes to help defray costs. Tools, such as Aon’s Health Risk Analyzer, can help employers to take a proactive approach to managing their high-risk population by optimizing care coordination and designing effective benefit programs. Flexible benefit plans are also an increasingly popular mitigation initiative. Around 60 percent of countries identified this as a top initiative to consider in 2024.1
Medical trend rates in United States
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The American Cancer Society reported a 5 percent increase in cancer each year, with a 12 percent increase in young people. This has resulted in a lower screening age for many cancers.
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Because of the pipeline of new therapies in development, Aon forecasts an 11 to 21 percent increase in the cost of cancer care every year.
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Many large employers have dropped reinsurance that would usually protect them from high-cost claims, making them vulnerable to significant risk from costly claims and new gene and cell therapies.
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Stop loss reinsurance is becoming more challenging for smaller and medium-sized employers, as many carriers are either refusing to offer quotes or excluding high risk individuals from the policy.
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Drug treatments are often prioritized depending on which are the most effective and least toxic, which are generally the newer and more expensive options.
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Catastrophic claims are increasing to new levels, exceeding $4 million to $6 million for rare cancers and hemophilia.
The risk of doing nothing
It is important to understand that inaction may come with consequences. While innovations in cancer treatments and gene and cell therapies give patients the potential for life-changing results, the high costs can be unsustainable for employers, employees, insurers and governments. Average healthcare costs are outpacing wage increases in most regions, creating affordability issues around the world.
There are a number of things employers can do to help drive down some of these costs and improve employee health. For starters, the positive impacts of preventative and lifestyle changes can be very effective. Implementing a wellbeing strategy, cost containment measures and plan design changes are excellent mitigation strategies.
Mitigation strategies for rising healthcare costs
The issue of high-cost claimants is multi-dimensional, with clear challenges that can’t be ignored:
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Medical data can be complicated and difficult to analyze, making it challenging to find useful insights.
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There are also strict regulations around how medical data can be used and shared, which can reduce the availability of data for analysis.
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Future cost estimates and risk evaluations are uncertain and complex.
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Stop loss carriers are raising premiums and creating exclusions and limits, requiring insured options for high-cost treatment.
However, there are numerous mitigation strategies that employers can implement now to stay ahead of these challenges.
Prevention and early detection are essential
Many conditions will worsen the longer detection is delayed. For example, patients in high-income countries whose cancer is usually detected early have treatment that is two to four times less expensive than treatment for patients whose cancer is detected later, according to the World Health Organization.
Encourage on-site screenings and interventions
Employers have a role to play in motivating employees to have regular medical exams. These should be paid for by insurance through their main doctor or free screening events hosted onsite by the company. For example, offering cancer and blood pressure screenings in the workplace is an effective way to determine who needs more help — with high blood pressure one of the main conditions for claims and a risk factor for other conditions. Employers can also encourage and help facilitate at-home screening kits and provide education around the process.
Use data to inform strategies
Collect and analyze data to plan a good benefit program. Use health data from sources like screening, wellness programs and absence data to identify and address health risks among your employees. For example, Aon’s Health Risk Analyzer uses machine learning to help companies improve their care management and budget planning by more accurate forecasting, finding risk early and monitoring it regularly, and providing integrated wellbeing care. This helps companies prepare for risk, save money for healthcare costs and handle claims effectively.
Explore alternative funding options
There are several additional risk controls that companies can use to mitigate the rising costs of healthcare, including stop loss, captives, hybrid financing approaches and redirecting investment into areas that pose high risk to employees. These measures can help companies manage their healthcare costs and mitigate the risks associated with rising medical trend rates.
