Health benefit plan cost increases slowing significantly for employers: Survey

Insurers lowered expected inflation costs for premiums to 11.7 per cent for 2012
|hrreporter.com|Last Updated: 07/27/2012

Canadian health benefit plan cost increases are slowing significantly for employers, according to a survey by Buck Consultants.

Insurers have lowered their expected inflation costs for health benefit premiums from 14.4 per cent in 2011 to 11.7 per cent in 2012.

This overall trend includes prescription drugs, medical expenses, hospital coverage and dental care.

The 2012 Canadian Health Care Trend Survey analyzes the health cost trend assumptions that factor into the premium rate setting of nine major Canadian insurers.

Insurers have dropped their inflation factors for prescription drugs — the fastest-increasing expense paid by group insurance plans — from 14.2 per cent in 2011 to 12.1 per cent in 2012, found the survey.

"This is due to two important factors," said Sandra Pellegrini, 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, Plavix in 2011, and Crestor, Advair and Symbicort in 2012), opening the door for lower-cost generic substitutes."

Despite this good news, it is important to understand the growing impact of extremely high-cost specialty/biologic drugs as a key driver of costs, said Pellegrini. She cited a study by Express Scripts showing that this group of drugs is projected to grow as a percentage of overall drug spend from 19.5 per cent in 2011 to between 25 per cent and 30 per cent by 2015.

The survey shows a downward trend in dental cost inflation across the country (from 8.2 per cent last year to eight per cent in 2012). Use of dental services — a factor that is sensitive to economic conditions — has gone down, perhaps reflecting increased employee confidence in job retention and availability of benefits, said Buck.

Hospital inflation factors have seen an overall decline in inflation rate since 2008, but this year there has been a slight increase, from 8.2 per cent to 8.4 per cent.

"This may represent the impact of an aging population and the related incidence and duration of hospital stays, despite the continuing shift from inpatient to outpatient care," said Pellegrini.

While costs are still increasing more than inflation, it is important that employers keep to the strategies they are starting to implement on the supply side (through deductibles and claims management) and the demand side (through wellness programs and work-life balance initiatives) in order to continue to tightly manage the costs of their benefits programs, said Joseph Ricciuti, Buck's managing director in Canada.

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