Aon Forecasts 11.1 Percent Increase in Employee Medical Plan Costs for Businesses in Asia Pacific

SINGAPORE –
Media OutReach Newswire – 22 January 2025 –
Aon plc (NYSE: AON), a leading global professional services firm, has released its
2025 Global Medical Trend Rates Report. The report forecasts a projected 11.1 percent rise in the Asia Pacific region (APAC), which is higher than the global projected increase for 2024 of 9.7 percent, which represented the highest increase forecasted in 10 years.

Trend rate figures represent the percentage increase in medical plan costs per employee – both insured and self-insured. Knowing estimated costs in advance can help organisations budget and adjust their benefits philosophy in response, ensuring programs are sustainable.

This year’s report projects APAC will experience the second highest year-over-year trend rate increase after the Middle East and Africa, which has the highest trend rate of any region at 15.5 percent.

“The biggest rise in medical utilisation and inflation are now behind us in APAC, but recovery in insurer profitability is expected to keep medical trend rates in the double digits for 2025 and 2026,” said Alan Oates, head of global benefits for Asia Pacific at Aon.

“The high medical trend rate can also be attributed to a higher incidence of cancer and chronic conditions than before the COVID-19 pandemic. Managing the impact of medical inflation therefore should be a top priority for all southeast Asia markets and especially important in New Zealand, Papua New Guinea, Thailand and Vietnam, which are seeing 50 to over 100 percent increases compared to last year,” Oates explained.

The survey further revealed that prescription and specialty medications, including weight loss medication, innovations in medical technology, and geopolitical factors, are significantly impacting medical trend rates in APAC and around the world. In addition, support for emotional health as the fastest-growing claim in Aon’s APAC client portfolio, wellbeing initiatives designed to mitigate stress, along with other plan enhancements, are also contributing to the double-digit medical trend.

“Although most insurers are still raising premiums, we are seeing a slight drop in some markets where risk appetites are returning among insurance providers that were quick to take corrective measures in previous renewal periods. As these insurance providers can now offer competitive pricing terms, we are encouraging clients to test the market as there is increasing value in doing so,” said Marina Sukhikh, professional services industry practice leader, global benefits for Asia Pacific at Aon.

How are Companies Addressing Rising Costs?

Wellbeing programs, plan design changes, alternative financing, data and analytics and flexible benefits are among the top strategies employers are expected to undertake in 2025 to affordably promote a healthy workforce.

Sukhikh said, “Aon has observed growing co-investment in wellbeing initiatives by employers and insurers. Greater investment is being matched with greater scrutiny into investment return, and wellbeing programs are increasingly being integrated and aligned with prevention strategies. For example, more initiatives are targeting physical inactivity, poor stress management, hypertension, high cholesterol and other risk factors driving chronic conditions that lead to adverse future claims.”

“We are encouraging clients to seek a more integrated value-based outcome from insurers where they are cooperating in the sharing of data, investment in wellbeing and offering creative solutions for design and financing. Sophisticated analytics tools, such as Aon’s Health Risk Analyzer, are helping companies leverage a growing volume of multi-source data, not just to identify and mitigate today’s risks but to accurately predict and prepare for the risks of tomorrow. Technology is helping us identify under-served populations and anticipate opportunities faster than ever,” added Sukhikh.

According to Aon’s
2024 Global Benefits Trends Study, employers in around 60 percent of countries are expected to use flexible benefit plans to address diverse workforce needs while controlling overall benefit costs. Meanwhile, one in three are actively considering alternative benefits financing arrangements, such as multinational pooling, global underwriting and captives.

“More than at any point in the last 10 years we have observed employers taking steps to reduce plan design due to affordability. Flexibility and choice have been a valuable tool in design change because employees generally place a greater value on shorter-term flexibility and choice than they do on longer-term core benefits. Alternative funding will not materially reduce cost, which is generally determined by claims and scale, but it can smooth cost volatility over a longer period than is possible with direct insurance and that is helpful in this volatile market,” Oates added.

Read Aon’s
2025 Global Medical Trend Rates Report.

About the report:

The report is based on insights from 112 Aon offices that broker, administer, or advise on employer-sponsored medical plans in each of the countries covered in the report. 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.

As employer-sponsored medical plans become a larger part of total rewards spend and pressure mounts to accurately forecast and manage costs, this report is a valuable resource for organisations to plan global budgets and benefits strategies for 2025 and beyond.

Read Aon’s
2025 Global Medical Trend Rates Report.

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