Health, dental benefits costs plateau in 2012: Survey

But expect increases with specialty drugs, aging workforce
|Canadian HR Reporter|Last Updated: 08/13/2013

The increase in cost of employer-sponsored health and dental benefits plateaued in 2012, according to a survey by Towers Watson.

For active employees, the overall employer health-care spend increased just 2.1 per cent in 2012, down from 2.7 per cent the previous year.

Drug costs are trending at negative 0.2 per cent and the cost of dental care is up by only 1.3 per cent from 2011 to 2012, found the survey of 193 organizations representing 875,000 active and retired employees.

"This trend can be explained by a number of factors," said Wendy Poirier, Towers Watson's Canadian health and group benefits leader. "As many commonly prescribed drugs have recently come off patent, employers are seeing the results of increased use of generics at substantially lower costs. They are also benefiting from drug plan management strategies that mitigate waste and increase efficiencies, and the effect of beneficial plan design features such as early exposure to preventative dental coverage."

It is expected that continued moderation of health-care costs is likely for the next 24 months, given expected decreases in generic drug prices and the introduction of new drug management measures, said Towers Watson.

"To combat expected health-care cost increases, employers can broaden their focus and look at how workforce health and productivity strategies might help control the costs of drug, dental and other benefits,” said Poirier.

“Mandatory generic substitution, drug supply limitations and restrictions, therapeutic substitution strategies, drug formularies, preferred provider networks and health-care spending accounts have all proven effective strategies for ensuring sustainable health-care plans."

Caution advised

While the decrease in overall health-care costs is good news for employers, one area to watch is high-cost specialty drugs, which are typically used by less than five per cent of the employee population, but account for 15 per cent to 25 per cent of the total drug spend, said Towers Watson.

"Advances in medical research are producing high-cost drugs to address common health conditions, many of which are chronic and require ongoing treatment for the life of the employee," said Christiane Bourassa, a senior health and group benefits consultant at Towers Watson. "In fact, the use of specialty or biologic drugs is expected to account for 30 per cent or more of drug plan costs in the next three to five years."

The upward trend on health-care expenses, other than drugs covered by employer-sponsored plans, is another area of concern for plan sponsors. For active and retiree plans, the cost of health-care claims, which typically include services such as physiotherapy, chiropractic and naturopathic treatment, is up six per cent from 2011 to 2012, according to the survey.

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