Health benefit costs have doubled since 1990 and show no signs of slowing down, according to a Conference Board of Canada report.
Costs rose from 3.2 per cent of payroll in 1990 to more than six per cent in 2003, according to “Beyond Band-Aid Solutions: Managing Organizations’ Health Benefit Costs.” By 2007, some estimates put that number as high as eight per cent of payroll.
“The upward trend in health benefit costs is a growing concern to employers across the country,” said Judith MacBride-King, director of human resource management research at the Conference Board of Canada. “Many organizations are adopting innovative solutions that include sharing costs with employees, redesigning their plans and supporting the health and wellness of their workforce. Despite their focus on controlling costs, employers are well aware that health benefits are a critical factor in recruiting and retaining human talent.”
More than two-thirds of respondents to the Conference Board’s 2003 compensation planning survey expected to spend more on health benefits in 2004. For 38 per cent of unionized survey respondents, containing benefit costs ranked as one of their top three bargaining issues this year.
Mercer Human Resource Consulting has estimated that employers can expect to spend up to eight per cent of their payroll on these benefits by 2007.
Drug expenditures were the primary factor for increasing costs for 48 per cent of survey respondents and 63 per cent ranked pharmaceuticals in the top three. Dental care ranked second, and hospital and medical services came in third as a contributing factor.
The Conference Board said organizations have adopted a range of strategies in response to skyrocketing costs. Cost sharing with employees, including raising deductibles and co-insurance, is the most common practice among employers with 58 per cent of survey respondents using this option.
For a special look at how N.B Power managed to trim its projected benefit costs by $8.4 million, look for the Guide to Pensions & Benefits distributed with the May 31 edition of Canadian HR Reporter.