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Jul 4, 2010

Buck’s Canadian health care survey finds drug cost increases stubbornly high

By Workplace Staff
Insurers are expecting overall health care costs for Canadian employer plans to rise 15% in 2010 – the highest growth rate in five years – according to a survey released today by Buck Consultants. This overall health care cost includes prescription drugs, medical plans, hospital coverage, and dental care.

The 2010 “Canadian Health Care Trend Survey,” the firm’s 10th annual study, analyzes the health cost trend assumptions that factor into the premium rate setting of 13 major Canadian insurers.  

Pharmaceuticals, which represent 60 per cent to 70 per cent of health expenditures, remain the fastest-increasing expense paid by group insurance plans with an expected increase of 15.8 per cent in 2010. This is up slightly from last year’s increase of 15.6 per cent.

“This is surprising considering the patents on several high-cost brand drugs are expiring this year, opening the door for lower cost generic drugs,” says Michele Bossi, practice leader of Buck’s Canadian Health and Productivity consulting practice. “We are also seeing a trend among provincial governments toward introducing legislation that will reduce generic drug pricing over the next few years.”

She said counteracting the downward trend is the increased risk to private plans caused by the explosion of expensive biologic drugs into the market. The world of biologics is uncharted territory, making future drug costs difficult to predict.

The biggest jump in cost trends was for medical services and supplies (excluding prescription drugs) which increased to 13.5 per cent from 12.8 per cent last year. This reflects the continuing increase in utilization of paramedical services such as massage therapy, physiotherapy, and chiropractic treatments.

Overall, the results of this year’s survey indicate that health benefit costs continue to rise at rates that easily exceed the cost inflation for most other business expenses. However, employers are increasingly recognizing the role that employee benefit programs play in attracting and retaining employees, and are looking for creative ways to control costs rather than cut benefits.

“There continues to be a gradual shift in focus to the broader concept of workplace wellness, not only to address benefit costs, but also as a tool to improve employee engagement and productivity,” says Bossi. “Employers are beginning to realize that an investment in a healthy workplace culture will yield significant returns, not just in reduced benefit costs, but in improved productivity and employee engagement.”

Buck Consultants’ “Canadian Health Care Trend Survey” summarizes the trend factors used by major Canadian group insurers to project future health care plan costs for calendar year 2010, and into 2011. The survey compares current trends to results for the previous four years. The study provides trend factors by type of coverage: medical services and supplies, hospital, prescription drugs, and dental care. Dental trend factors are segregated into utilization and inflation components.

Click here for a copy of the complete survey report.
 
Buck Consultants, A Xerox Company, provides a full range of human resource consulting and administration services, and has been providing HR consulting and actuarial services in the Canadian marketplace for more than 35 years. News and other information about Buck are available at www.acsbuckcanada.com.

Xerox Corporation is a $22 billion leading global enterprise for business process and document management. Through its broad portfolio of technology, services and outsourcing offerings, Xerox provides the essential back-office support that clears the way for clients to focus on what they do best: their real business. For more information, visit www.xerox.com.