Medical inflation in Asia-Pacific is set to rise 11.3% in 2026, remaining above the global average of 9.8%, according to a report. The region shows signs of stabilisation after years of sharp increases, but employers continue to face sustained cost pressure.
Some employers across the region are seeing a degree of stabilisation in medical costs, said Shikha Gaur, Chief Commercial Leader, Health Solutions for Aon in Asia. The universal challenge is finding strategies that will be effective in spite of continued uncertainty.
Aon said Asia-Pacific is the only region where medical inflation is expected to rise slightly year-on-year, by 20 basis points, despite a decline in general inflation. The widening gap between medical inflation and general inflation to 8.9% suggests underlying cost drivers remain strong.
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The report identified ageing populations, chronic disease, higher private healthcare utilisation, imported medical technologies and pharmaceuticals, and lifestyle-related conditions as key factors behind rising costs. Daniel Teoh, Data and Analytics Consultant, Global Benefits for Aon in Asia, cited rising chronic disease, currency exposure on imports, and strain on public healthcare systems as drivers of increased private sector use.
Around one-third of Asia-Pacific markets, including China, Singapore, the Philippines, and India, recorded modest declines in medical inflation rates due to lower utilisation and increased uptake of wellbeing programmes. Most other markets continued to see upward pressure.
Cost containment has become a priority for employers, with 70% of multinationals globally ranking it as their top benefits focus, up from third place last year. In Asia-Pacific, employers increasingly rely on analytics and negotiation strategies.
Aon cited a Philippines-based client that used its Fair Value Assessment model to support negotiations, reducing average renewal offers from insurers to 13% from initial proposals of 32%. The insurers had initially proposed rates of 32%, but the model helped secure lower terms. This example highlights the value of data-driven approaches in cost management.
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The company noted that 86% of countries now report wellbeing initiatives as a key cost-mitigation measure. The report said employers face barriers in implementing cost controls, with 63% of respondents citing employee feedback as the main constraint.
Managing employee reactions and perception can make change difficult, said Sahil Batra, Industry Practice Leader for Pharma and Life Science, Global Benefits in Asia. Cost containment is becoming more of an art than a science, requiring tailored solutions and careful sequencing to protect both budgets and employee trust, he added.
According to the report, there are various strategies employers can use to mitigate rising medical costs. For instance, they can use data analytics to better understand their employees’ healthcare needs and develop targeted wellbeing programmes to address these needs.
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Employers can also work with insurers to negotiate better rates and implement cost-saving measures such as co-payments and deductibles. Additionally, they can consider partnering with healthcare providers to offer preventive care services and promote healthy behaviours among their employees.
These strategies can help employers reduce their healthcare costs while also improving the health and wellbeing of their employees. By taking a proactive approach to managing medical costs, employers can help mitigate the impact of rising medical inflation and ensure that their employees have access to quality healthcare.
The report highlights the importance of balancing cost control with employee satisfaction. It also notes that health reporting systems are becoming more critical as companies seek to track and manage healthcare spending effectively. This aligns with broader efforts to improve transparency and efficiency in corporate health programmes.