Increases to health benefit plan costs slowing down

Inflation factors drop from 15.8 to 14.2 per cent: Survey
|hrreporter.com|Last Updated: 11/03/2011

After two years of increasing inflation in health benefit plan costs, Canadian employers can now expect a break, according to a survey released today by Buck Consultants, A Xerox Company. Insurers have lowered their expected inflation costs for health benefit premiums (including prescription drugs, medical expenses, hospital coverage and dental care) from 15 per cent in 2010 to 14.4 per cent in 2011.

In analyzing the health cost trend assumptions that factor into the premium rate setting of 11 major Canadian insurers, the 2011 Canadian Health Care Trend Survey found insurers have dropped inflation factors for prescription drugs — the fastest-increasing expense paid by group insurance plans — from 15.8 per cent in 2010 to 14.2 per cent in 2011, a 10 per cent drop.

“This is due to two important factors,” said Michele Bossi, leader of Buck’s Canadian health and productivity consulting practice. “In 2010, several provinces implemented generic drug pricing reforms that reduce their cost. Also, the patents expired for several blockbuster pharmaceuticals (such as the top-selling cholesterol drug Lipitor) in 2010, opening the door for lower-cost generic substitutes.”

The survey shows a downward trend in dental cost inflation across the country (from 8.7 per cent last year to 8.2 per cent in 2011), while hospital inflation factors have seen an overall decline since the end of 2007 (from 10.6 per cent in 2008 to 8.2 per cent in 2011). Use of dental services — a factor that is sensitive to economic conditions — has leveled off, perhaps reflecting increased employee confidence in job retention and availability of benefits. A continuing shift from inpatient to outpatient treatments has been reducing employers’ spend on hospital accommodation.

“This year’s survey results are welcome news for employers,” said Bossi. “The general trend reversal for both health and dental costs could mean we’re finally seeing the impact of wellness programs and a healthier workforce. For now, employers can breathe a sigh of relief that benefit cost trends are finally decelerating.”

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