Medical inflation rises to 11.3% as employers face cost squeeze

One-third of regional markets posted lower healthcare price trends.

Medical inflation in Asia-Pacific (APAC) is set to rise 11.3% in 2026, remaining above the global average of 9.8%, according to Aon’s Global Medical Trend Rates 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 APAC 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.

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.

“Utilisation is keeping claims high,” said Daniel Teoh, Data and Analytics Consultant, Global Benefits for Aon in APAC.

He cited rising chronic disease, currency exposure on imports, and strain on public healthcare systems as drivers of increased private sector use.

Aon said around one-third of APAC 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 APAC, 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’ initial offers accounted for an average premium hike of 32%, whilst the FVA estimated a fair market rate of 23%,” said Todd Dore, Regional Director, Data and Analytics, Health Solutions for Aon in APAC.

Plan design changes also support cost control. Aon said introducing co-payments for selected services reduced per-member claim costs by 10% in one case, generating about $515,000 in savings for an employer with 9,000 staff.

“Wellbeing programmes encourage preventive care and positive health behaviours to reduce the risk of more expensive treatment later,” said Krystal Tang, Wellbeing Director for Aon in APAC.

She cited a case where targeted wellbeing initiatives led to an 11.2% reduction in health claims.

Aon said 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 APAC.

“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.