Increase includes ‘market inflation’ factor
Insurer trend factors for drug, health and dental costs in 2019 remained relatively stable — a consistent trend for the last several years — with only slight increases in some categories and a decrease in the prescription drug trend, according to a survey by Buck, an integrated HR and benefits consulting, administration, and technology services firm
Based on actual 2018 claim trends, most plan sponsors could expect to see a three to five per cent increase in drug claims. However, insurance providers also add a "market inflation" factor, resulting in a projected increase of almost 11 per cent.
"Although actual drug claims remain relatively stable, insurers continue to project a faster rate of increase due to market inflation," says Lizann Reitmeier, health practice leader in Canada at Buck.
"Insurance providers factor projected market inflation into the rate setting calculation, and this has the potential to drive plan costs both higher and faster than the actual trend in healthcare spending."
On a blended basis, insurers are using an average health trend factor of 11.43 per cent, down slightly from 11.92 per cent last year, found the 2019 Canadian Healthcare Trend Survey.
Prescription drugs: Prescription drug costs represent the majority of private payer health spend and have the greatest influence on employer benefit cost trends, says Buck. Insurers' inflation factors for prescription drugs went from 12.45 per cent in 2018 to 10.99 per cent for 2019.
Hospital inflation: Hospital inflation factors were consistently reducing from 2015 to 2018, found the survey. This trend reversed in 2019 with the insurer trend increasing to 10.03 per cent from 2.60 per cent in 2018. However, this cost represents a relatively small portion of plan spend, says Buck.
Dental utilization: Expected utilization trend of dental services has increased slightly over the past two years to 5.86 per cent in 2019.
"Medical, prescription drug and dental care coverage make up an important component of employees' total compensation," sayd Reitmeier. "To help contain costs, companies need to think creatively about how they can encourage a healthy lifestyle for employees and embrace medical advances in testing and treatment to achieve better health outcomes."
For the survey, Buck asked major Canadian group insurance carriers to provide the annual inflation factors they are using to project health and dental claim costs for the upcoming year in the pricing of their premium rates. It then compared these factors to those provided in previous surveys to get a sense of the long-term health-care pricing trends for group insurance plans.
The full report can be found at 2019 Canadian Healthcare Trend Survey.