July 25, 2012 (PLANSPONSOR.com) - The increase in cost of Canadian health benefit plans significantly slowed for a second consecutive year, according to a survey.
Buck Consultants said insurers lowered their expected inflation costs for health benefit premiums from 14.4% in 2011 to 11.7% this year. This overall trend includes prescription drugs, medical expenses, hospital coverage and dental care.
Inflation factors for prescription drugs—the fastest-increasing expense paid by group insurance plans—has dropped to 12.1% this year from 14.2% in 2011.
“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.”
The survey shows a downward trend in dental cost inflation across the country (from 8.2% last year to 8.0% this year). Use of dental services—which is sensitive to economic conditions—has gone down, perhaps reflecting increased employee confidence in job retention and availability of benefits.
Hospital inflation factors have seen an overall decline in inflation rate since 2008, but increase slightly this year, from 8.2% to 8.4%. “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.
“Buck’s 2012 Health Care Trend Survey has some good news for employers,” said Joseph Ricciuti, Buck’s managing director in Canada. “The drug, health and dental cost trend factors are lower again in 2012. 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.”
The 12th annual Canadian Health Care Trend Survey analyzes the health cost trend assumptions that factor into the premium-rate setting of nine major Canadian insurers.
The complete survey report is available here.