Aon Hewitt

Global Benefits

2013/2014
Global Medical
Trend Rate
Survey Report
December 2013
 2013/2014 Global Medical Trend Rate
Survey Report

Contents
3 Introduction

5 Key Highlights
Call to Action

8 Survey Results
Average Medical Trend Rate Table
Key Reported Causes of Adverse Medical Claim Experience
Risk Factors Driving Supplementary Medical Plan Costs
Global Wellness and Health Promotion Initiatives

20 Appendix
Trend Rate Overview
2 Aon Hewitt
Introduction Aon Hewitt is pleased to present the results of its survey of 2013 and
2014 medical trend rates around the world. The survey was conducted
among Aon Hewitt offices that broker, administer or otherwise advise on
medical plans that are established and managed by employers in each
of the 69 countries covered in this report. The survey responses reflect
the medical trend expectations from Aon professionals, clients and
carriers represented in the portfolio of Aon medical plan business in
each country. The trend rates presented herein do not include any
allowances for potential employer countermeasures such as cost-
containment plan amendments or the impact of any attendant carrier
negotiations.

Aon Hewitt has conducted this survey in order to assist multinational

companies in:

 Budgeting premium costs for medical plan renewals for the two
projection years
 Understanding the factors that are driving medical cost increases
 Devising wellness and cost-containment initiatives to respond to the
challenges

The trend rate figures shown is this report represent the percentage
increase in medical plan (insured and self-insured) unit costs that are
anticipated to be technically required in order to address projected price
inflation, technology advances in the medical field, plan utilization and
cost shifting from social programs. This survey covers three separate
themes:

 Estimated medical trend rates for 2013 and 2014

 Risk factors that are expected to drive medical cost inflation in the
future
 Wellness and health promotion initiatives being undertaken by
employers in order to deal with spiraling medical cost trends

As a reference, we have also included the general inflation rates for

2013 and 2014 published by the International Monetary Fund which
have been adopted as a proxy for domestic retail inflation levels in each
country for the two projection years included in the survey.

The trend rate figures and risk factors in this report relate to employer-
sponsored plans and their participants. The information presented is not
necessarily representative of each country’s health care costs as a
whole, nor of the health care situation of each country’s population
overall.

2013/2014 Global Medical Trend Rate Survey Report 3

 Aon Hewitt 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 published in our
reports will rise.

We hope you will find this report useful. We welcome any feedback you
may wish to provide.

4 Aon Hewitt
Key Highlights The prevalence of employer sponsored medical plans is increasing in all
countries covered by the survey. Furthermore, the scope of the
supplementary plan coverage is expanding vertically (e.g., larger
maximum lifetime benefits, larger allowances for maternity benefits) as
well as horizontally (e.g., fewer exclusions, more procedures covered by
the plan).

The medical trend rates continue to exceed local general inflation levels.

 In 2013 the global average medical trend rate of 10.14% was 5.8
1
percentage points higher than the average inflation rate of 4.34%
 For 2014, an even wider difference of 6.11 percentage points
between the average medical trend rate of 10.34% and the average
2
general inflation rate of 4.23% is expected
 Aon Hewitt expects further medical cost escalation due to global
population ageing, overall declining health, poor lifestyle habits
pervading across emerging countries, continuing cost-shifting from
Social programs and increasing utilization of employer sponsored
plans

Double digit margins between medical trend rates and domestic inflation
levels were found in:

Asia Pacific Europe Latin America Middle East/Africa

Singapore Ireland Argentina Oman
Vietnam Norway Venezuela UAE
Ukraine Honduras

1
IMF World Economic Outlook Database April 2013.
2
Ibid.

2013/2014 Global Medical Trend Rate Survey Report 5

 The three main reported conditions that are giving rise to adverse claim
experience around the world are:

% Responding

Cardiovascular 77
Cancer 55
Respiratory 44

Differentials by geographic region in the main medical conditions that

were reported to generate adverse claim experience are:

Africa Asia Pacific Canada Europe Latin America Middle East

Cardiovascular Respiratory Cardiovascular Cancer Cancer Cardiovascular
Infectious Gastro-Intestinal Mental Health Mental Health Respiratory Respiratory
Disease
Obstetrics Cancer Diabetes Diabetes Diabetes Diabetes

Non-Communicable Diseases (NCDs) represent the main conditions

behind the adverse experience which is driving high medical inflation.
NCDs are directly linked to modern lifestyles, and incidence can be
significantly improved through modification of individual behaviors. This
represents both a challenge and an opportunity for employers to
influence these behaviors.

The key reported global risk factors that are expected to drive future
claims are:

% Responding

High Blood Pressure 72

High Cholesterol 49
Stress 49

6 Aon Hewitt
 Differentials by geographic region in the risk factors that are expected to
generate future claims are:

Africa Asia Pacific Canada Europe Latin America Middle East

High Blood Stress Stress Stress High Blood High Blood
Pressure Pressure Glucose
Infectious High Blood Sedentary Lifestyle High Blood Obesity High Blood
Diseases Pressure Pressure Pressure
High Blood High Costly Novel Smoking High Blood Obesity
Glucose Cholesterol Therapies Emerging Glucose
(treat previously
untreated conditions)

The most common wellness and health promotion initiatives being

undertaken by progressive employers globally are:

% Responding

Detection 85
Education 79
Advanced Assessment and Wellness 71
Interventions

Call to Action The findings addressed in this report suggest that employers will need to
accelerate their efforts at helping employees to understand their own
health risk and to begin to take steps to improve health. Rising costs and
increased prevalence of chronic conditions are a global phenomenon;
regardless of the underlying medical insurance system, employers will
experience added organizational cost and lost workforce productivity if
these trends continue.

2013/2014 Global Medical Trend Rate Survey Report 7

 Survey Results
Average Medical
Trend Rate Tables
2013 2014
Annual Annual Medical Annual Annual Medical
General Trend Rates General Trend Rates
Inflation Inflation
3 4
Region Rate (%) Gross (%) Net (%) Rate (%) Gross (%) Net (%)
Global 4.34 10.14 5.80 4.23 10.34 6.11
North America 1.66 7.10 5.44 1.76 8.50 6.74
Europe 2.05 6.23 4.18 2.04 5.94 3.90
Asia 3.87 10.20 6.33 4.21 10.12 5.91
Latin America & Caribbean 5.95 12.85 6.91 5.85 14.35 8.50
Middle East & Africa 6.85 13.14 6.29 5.93 12.28 6.35

2013 2014
Annual Annual Medical Annual Annual Medical
General Trend Rates General Trend Rates
Inflation Inflation
5 6
Region and Country Rate (%) Gross (%) Net (%) Rate (%) Gross (%) Net (%)
North America (Avg) 1.66 7.10 5.44 1.76 8.50 6.74
Canada 1.49 5.00 3.51 1.81 8.00 6.19
United States 1.83 9.20 7.37 1.71 9.00 7.29
Europe (Avg) 2.05 6.23 4.18 2.04 5.94 3.90
Austria 2.20 2.50 0.30 1.90 2.50 0.60
Belgium 1.73 4.00 2.27 1.36 4.00 2.64
Bulgaria 2.05 3.00 0.95 1.91 3.00 1.09
Denmark 2.00 2.13 0.13 2.00 2.20 0.20
Finland 2.90 10.00 7.10 2.51 10.00 7.49
France 1.57 5.00 3.43 1.46 8.00 6.54
Germany 1.61 4.00 2.39 1.70 4.00 2.30
Greece -0.80 2.00 2.80 -0.44 0.00 0.44
Hungary 3.20 3.70 0.50 3.50 3.80 0.30
Ireland 1.32 20.00 18.68 1.27 10.00 8.73

3
IMF World Economic Outlook Database April 2013
4
Ibid.
5
Ibid.
6
Ibid.

8 Aon Hewitt
 2013 2014
Annual Annual Medical Annual Annual Medical
General Trend Rates General Trend Rates
Inflation Inflation
5 6
Region and Country Rate (%) Gross (%) Net (%) Rate (%) Gross (%) Net (%)
Italy 1.99 3.00 1.01 1.43 3.00 1.57
Norway 1.50 12.00 10.50 1.50 15.00 13.50
Poland 1.85 5.00 3.15 2.00 5.00 3.00
Portugal 0.70 4.00 3.30 1.03 4.50 3.47
Romania 4.62 7.00 2.38 2.87 5.00 2.13
Russia 6.86 9.40 2.54 6.18 9.00 2.82
Spain 1.94 5.00 3.06 1.50 5.00 3.50
Switzerland -0.20 1.20 1.40 0.20 3.00 2.80
The Netherlands 2.82 3.50 0.68 1.74 3.40 1.66
Ukraine 0.48 15.00 14.52 4.68 15.00 10.32
United Kingdom 2.65 9.33 6.68 2.50 9.25 6.75
Asia (Avg) 3.87 10.20 6.33 4.21 10.12 5.91
Australia 2.46 8.00 5.54 2.54 7.80 5.27
China 3.01 7.30 4.29 3.00 7.00 4.00
Hong Kong 3.50 9.00 5.50 3.50 9.00 5.50
India 10.82 12.00 1.18 10.71 12.00 1.29
Indonesia 5.57 15.00 9.43 5.57 15.00 9.43
Japan 0.06 3.90 3.84 2.97 3.90 0.93
Kazakhstan 7.22 5.00 -2.22 6.40 5.00 -1.40
Malaysia 2.20 11.00 8.80 2.40 11.00 8.60
New Zealand 1.39 7.00 5.61 2.23 7.00 4.77
Philippines 3.06 10.00 6.94 3.22 9.00 5.78
Singapore 4.01 20.00 15.99 3.44 20.00 16.56
South Korea 2.36 5.50 3.14 2.90 6.00 3.10
Taiwan 2.00 10.00 8.00 2.00 10.00 8.00
Thailand 3.00 9.30 6.30 3.43 9.10 5.67
Vietnam 7.32 20.00 12.68 8.80 20.00 11.20
Latin America & Caribbean (Avg) 5.95 12.85 6.91 5.85 14.35 8.50
Argentina 9.84 26.00 16.16 10.05 30.00 19.95
Bahamas 2.00 10.00 8.00 2.00 10.00 8.00
Bolivia 4.63 10.00 5.38 4.28 10.00 5.72
Brazil 6.13 14.41 8.28 4.73 16.12 11.39

2013/2014 Global Medical Trend Rate Survey Report 9

 2013 2014
Annual Annual Medical Annual Annual Medical
General Trend Rates General Trend Rates
Inflation Inflation
5 6
Region and Country Rate (%) Gross (%) Net (%) Rate (%) Gross (%) Net (%)
Chile 2.14 3.00 0.86 3.00 5.00 2.00
Colombia 2.22 10.25 8.03 3.01 12.00 9.00
Costa Rica 4.67 12.00 7.33 5.00 13.00 8.00
Dominican Republic 4.45 8.00 3.55 4.75 10.00 5.25
Ecuador 4.66 12.00 7.34 4.11 15.00 10.89
El Salvador 1.90 8.00 6.10 2.40 9.00 6.60
Guatemala 4.30 12.00 7.70 4.35 12.00 7.65
Honduras 5.70 20.00 14.31 5.80 25.00 19.20
Jamaica 8.49 11.00 2.51 6.70 20.00 13.30
Mexico 3.69 9.00 5.31 3.25 9.00 5.76
Nicaragua 7.02 12.00 4.98 8.31 13.00 4.69
Panama 5.20 10.00 4.80 4.80 12.00 7.20
Puerto Rico 3.00 6.50 3.50 3.00 6.50 3.50
Trinidad and Tobago 5.59 10.00 4.42 4.00 10.00 6.00
Venezuela 27.34 40.00 12.66 27.65 35.00 7.35
Middle East / Africa (Avg) 6.85 13.14 6.29 5.93 12.28 6.35
Angola 9.40 12.60 3.21 8.43 11.30 2.87
Egypt 8.24 14.00 5.76 13.66 19.50 5.85
Kenya 5.17 11.10 5.94 5.00 10.00 5.00
Malawi 20.20 27.30 7.10 8.15 12.10 3.95
Nigeria 10.67 11.20 0.53 8.19 11.20 3.01
Qatar 3.02 13.00 9.98 3.97 14.00 10.03
Saudi Arabia 3.74 12.00 8.26 3.57 11.50 7.93
South Africa 5.77 9.00 3.23 5.50 10.00 4.50
Sultanate of Oman 3.33 15.00 11.67 3.26 15.00 11.74
Turkey 6.64 12.00 5.36 5.30 12.00 6.70
United Arab Emirates 1.59 12.00 10.42 1.91 12.50 10.60
Zimbabwe 4.45 8.50 4.05 4.17 8.20 4.03

Note: Net indicates net of domestic general inflation rates. The trend rate for the USA has been obtained from Aon Hewitt’s annual
Health Care Trend Surveys (January-June) for 2012 and 2013 as applicable for PPO plans (prior to any plan changes for cost-
containment).

10 Aon Hewitt
 Key Reported The percentage figures below represent the percentages of responses
Causes of Adverse from Aon offices that reported the indicated cause as a contributing
factor in adverse claims experience in their respective countries.
Medical Claim
Experience

Top Global Main Causes

77

55
44 41
34

Cardiovascular Cancer Respiratory Diabetes Gastrointestinal

% Responding

Aside from the cardiovascular cause (which was reported in 77% of the
countries surveyed), the leading causes per region as reported by Aon
offices were:

Asia Pacific Europe Latin America Middle East/Africa

(% of Responses) (% of Responses) (% of Responses) (% of Responses)

1 Respiratory 47 Cancer 60 Cancer 68 Respiratory 67

2 Gastrointestinal 47 Mental Health 45 Respiratory 58 Diabetes 56
3 Cancer 47 Diabetes 40 Diabetes 53 Cancer 33
4 Infectious Diseases 33 Gastrointestinal 35 Prescription Drugs 42 Gynecological 33
5 Gynecological 27 Gynecological 25 Gastrointestinal 42 Accident 33

2013/2014 Global Medical Trend Rate Survey Report 11

 Risk Factors Driving The figures below represent the percentages of responses from Aon
Supplementary offices that reported the indicated risk as becoming a leading factor in
future adverse claims experience in their respective countries.
Medical Plan Costs

Top Global Risk Factors

72

49 49
43
34

High Blood High Stress Obesity High Blood

Pressure Cholesterol Glucose

% Responding

Risk Factors % Responding Risk Factors % Responding

1 High Blood Pressure 72 9 Occupational Risks 15

2 High Cholesterol 49 10 Genetics 11

3 Stress 49 11 Air Pollution 10

4 Obesity 43 12 Disease Transmitting Organism 7

5 High Blood Glucose 34 13 Cancer 5

6 Physical Inactivity 34 14 Kidney Dialysis 5

7 Smoking 28 15 Unsafe Water, Sanitation, Hygiene 3

8 Bad Nutrition 15

12 Aon Hewitt
 The figures below represent the percentage of Aon offices reporting the
indicated risk factors in their respective region.

Asia Pacific Europe Latin America Middle East/Africa

(% Responding) (% Responding) (% Responding) (% Responding)

1 Stress 62 Stress 74 High Blood Pressure 89 High Blood Pressure 100

2 High Blood Pressure 54 High Blood Pressure 58 High Cholesterol 63 High Blood Glucose 33
3 High Cholesterol 54 Smoking 47 Obesity 47 Physical Inactivity 44
4 Obesity 46 High Cholesterol 42 High Blood Glucose 47 High Cholesterol 33
5 High Blood Glucose 31 Obesity 42 Stress 37 Cancer 33

2013/2014 Global Medical Trend Rate Survey Report 13

Global Wellness and The figures below represent the percentages of responses from Aon
Health Promotion offices that reported the indicated wellness program as commonly
provided among the indicated employer groups in their respective
Initiatives countries.

Wellness Programs Reported

as Commonly Provided
(% Responding) 85
79
71 71
63
54

31 29
25

Detection Education Advanced Wellness Coaching

Programs Assessment Interventions Programs
programs

Commonly Provided across all Employers

Provided by Progressive Employers

Detection
(% Responding)
All Progressive
Employers Employers

Physical Check-ups 37 68
Vision Screening 31 60
Hearing Screening 24 49
Mammograms 19 47

Coaching
(% Responding)
All Progressive
Employers Employers

Incentive Programs 3 51
Health Specialists 3 35
Health Coaching Management Systems 1 26

14 Aon Hewitt
Wellness Interventions
(% Responding)
All Progressive
Employers Employers
Quitting Smoking/Tobacco Use 19 49
Physical Activity 13 51
Employee Assistance Program 13 44
Healthy Eating 12 46
Health Weight 10 44
Back Care 10 34
Reducing Risk for Health Disease 9 38

Advanced Assessment
(% Responding) All Progressive
Employers Employers

Heart Health 12 46
Advanced Check-ups 9 37
Substance Use 9 26
Nutrition 7 44
Level of Fitness 0 37

Education
(% Responding)
All Progressive
Employers Employers

Communication Materials on Wellness 26 66

Wellness Kits 21 63
Informational Web Services 19 56
Fitness Education 9 51

2013/2014 Global Medical Trend Rate Survey Report 15

Asia Pacific

Physical Check-ups
Detection

Vision Screening
Hearing Screening
Mammograms
Advanced Assessment

Heart Health
Advanced Check-ups
Substance Use
Nutrition
Level of Fitness
Communication Materials on Wellness
Education

Wellness Kits
Informational Web Services
Fitness Education
Incentive Programs
Coaching

Health Specialists
Health Coaching Management Systems
Physical Activity
Wellness Interventions

Quitting Smoking/Tobacco Use

Healthy Eating
Healthy Weight
Employee Assistance Program
Reducing Risk for Heart Disease
Back Care

0 10 20 30 40 50 60 70 80 90 100

All Employers Progressive Employers

16 Aon Hewitt
Europe

Physical Check-ups
Detection

Vision Screening
Hearing Screening
Mammograms
Advanced Assessment

Heart Health
Advanced Check-ups
Substance Use
Nutrition
Level of Fitness
Communication Materials on Wellness
Education

Wellness Kits
Informational Web Services
Fitness Education
Incentive Programs
Coaching

Health Specialists
Health Coaching Management Systems
Physical Activity
Wellness Interventions

Quitting Smoking/Tobacco Use

Healthy Eating
Healthy Weight
Employee Assistance Program
Reducing Risk for Heart Disease
Back Care

0 10 20 30 40 50 60 70 80 90 100

All Employers Progressive Employers

2013/2014 Global Medical Trend Rate Survey Report 17

Latin America

Physical Check-ups
Detection

Vision Screening
Hearing Screening
Mammograms
Advanced Assessment

Heart Health
Advanced Check-ups
Substance Use
Nutrition
Level of Fitness
Communication Materials on Wellness
Education

Wellness Kits
Informational Web Services
Fitness Education
Incentive Programs
Coaching

Health Specialists
Health Coaching Management Systems
Physical Activity
Wellness Interventions

Quitting Smoking/Tobacco Use

Healthy Eating
Healthy Weight
Employee Assistance Program
Reducing Risk for Heart Disease
Back Care

0 10 20 30 40 50 60 70 80 90 100

All Employers Progressive Employers

18 Aon Hewitt
Middle East/Africa

Physical Check-ups
Detection

Vision Screening
Hearing Screening
Mammograms
Advanced Assessment

Heart Health
Advanced Check-ups
Substance Use
Nutrition
Level of Fitness
Communication Materials on Wellness
Education

Wellness Kits
Informational Web Services
Fitness Education
Incentive Programs
Coaching

Health Specialists
Health Coaching Management Systems
Physical Activity
Wellness Interventions

Quitting Smoking/Tobacco Use

Healthy Eating
Healthy Weight
Employee Assistance Program
Reducing Risk for Heart Disease
Back Care

0 10 20 30 40 50 60 70 80 90 100

All Employers Progressive Employers

2013/2014 Global Medical Trend Rate Survey Report 19

 Appendix
Trend Rate The trend rates shown in this report represent national averages
and are the predicted increase in claims cost. Trend increases for a
Overview
specific company may vary significantly from these trend rates due
to regional cost variations, company plan design, company
demographics and other factors. In addition, insured rate increases
may be higher or lower than these trend rates based on an
insurance company’s profitability, the plan’s claims loss ratio, the
plan design, insured demographics and other factors. It is important
to note that these trend rates might not be appropriate for other
purposes.

Medical trend rate is defined as percentage of change in the cost of

health care prior to any cost-containment measure undertaken by
plan sponsors.

The components of health care trend that we have considered

include:

 Price inflation – This is the projected annual change in the

domestic retail consumer price index health care element of
each country. In absence of information on projected inflation
for the medical plan component in any given country, we have
used the change in the overall consumer price index

 Leveraging impact on fixed amount elements of plan

design – This is the additional cost added to a health plan due
to the leveraging effect of increasing expected claims on
unchanging deductibles, copays, or out-of-pocket maximums

 Utilization – This component reflects an increase in the

demand for medical care services in response to factors such
as increased access to medical services, plan design,
participant age, and new medical technology and services

 Technology advances – This reflects the change in cost due

to new procedures, information, experience, and equipment
replacing older techniques

 Cost shifting – This reflects a provider of medical services

such as government social health care programs transferring
their cost to private sector supplementary plans

20 Aon Hewitt
Contact Information
Francois Choquette
+ 1.415.486.7358
Francois.Choquette@aonhewitt.com

Wil Gaitan
+ 1.312.381.5008
Wil.Gaitan@aonhewitt.com

Tammy Mattson
+ 1.212.441.2089
Tammy.Mattson@aonhewitt.com

Doug Gibbons
+ 1.852.291.7793
Doug.Gibbons@aonhewitt.com

Janine Heijckers
+ 31642985414
Janine.Heijckers@aonhewitt.com

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.

Copyright 2013 Aon plc