There are less obvious factors driving the evolution of benefits plans, most of them involve absenteeism and the aging population. Absenteeism is on the rise and the duration of each absence is increasing for both occupational or non-occupational accidents or sickness. Absence from work for eldercare is gaining more acceptance as employees' definition of acceptable absence broadens to include post-hospitalization care for a family member.

As well, we will continue to see longer periods of employee absence as workers have to travel to centralized health treatment centres. As homecare resources in the community become more scarce, workers must also travel to care for their aging parents.
Undoubtedly though, the biggest driver of change in the next 10 years will be the tidal wave of baby boomers, currently ages 35 to 54, retiring. A Conference Board of Canada report, Tapping the Talents of People with Disabilities (Spring 2001) states that "more generalized shortages will occur by mid-to late-decade, particularly in Ontario's hot spots, as the number of vacancies begins to exceed the number of job seekers."

Despite all the information on demographics in the media today, most organizations are either unaware of, or not willing to recognize and deal with, the impending manpower crunch. Nor do many employers appreciate the inevitable rise in healthcare costs that start in earnest as both male and female employees enter into the 40-to-45 age group.

Fast forward to 2011 and the significant employee demographic in many organizations will be ages 45 to 64. The baby bust and boomers exiting the workforce will force employers to focus on attraction and retention strategies.

In the next 10 years, employee health benefits, specifically drugs, will have evolved. Paid time-off for personal needs will be widely accepted. Absence and disability management will have finally been fine-tuned, with most employers incorporating best practices. Disabled workers, who represent a source of manpower and retain company knowledge and needed skill sets, are rejoining the workforce in new roles.

Job sharing will be fashionable again. It will include phased-in retirement for both active employees and those in rehabilitative employment. Full health benefits are provided to all employees. A number of employers will have even added post-retirement health benefits. Meanwhile, a means-tested national pharmacare program implemented on a provincial formulary basis will have left the lion's share of prescription drug coverage with employers.

Where are we evolving from? Today, semi-private hospital room and board has become a disposable benefit because of medicare's cost-shift from convalescent care in a hospital setting to homecare. Early discharge makes the semi-private hospital benefit of nominal value and its cost is better moved to the high-need area of drugs.

The Aventis Healthcare Survey, released in May 2001, confirms that employees want unrestricted access to new drugs, especially those that either enhance or sustain their quality of life. The importance of drugs to health and their use in treatment modality is of prime interest to boomers.

Dental and visioncare benefits allow too much anti-selection opportunity for employees against the plan. Recognizing this, employers have started to evolve vision and dentalcare into health spending accounts (HSAs). While absenteeism is currently on the rise, most of the evidence is anecdotal as few white-collar employers have tracking data so they don't notice the increase unless it affects their long-term disability plan.

Flexible benefits plans have grown only incrementally since the early 1980s due to strong resistance from organized labour. As well, employers have been reluctant to pass on the full price of cost escalation that the plans were designed and communicated to do.

In other words, the very cost shifting opportunities that flex allowed employers have been thwarted by organizations that are more paternalistic than they thought. Or more likely, employers intuitively sense the employee attraction and retention issue already and are resisting full cost shifting. As the decade unfolds, the increasing number of aging employees in need of health benefits will undermine these plans.

The initial impact of privacy legislation, notably Bill C-6, is currently being felt as carriers shut down access to employee claim data except in macro form, making it useful only for the large employer. Meanwhile, outsourcing of benefits transactional administration will continue to spread. Internet offerings by carriers are already at the point where employee self-service is no longer a dream but an impending reality. Group benefits, to date, have neither attracted employees nor been a reason for employees to leave the organization. But still, employers are required to provide a competitive benefits package.

The initial evolution of benefits is already under way today. We will continue to see cost shifting to employees, either through flexible plan design, restrictive drug formularies or on a user basis, frozen dental fee guides, core long-term disability with employee top-up choices and more. In the next three to four years, employees will voice significant negative sentiments to these initiatives, and cost shifting will start to reverse.

Within the next five years, employees will express a desire to renegotiate their employment contracts to include paid time-off for personal reasons and additional funds for their HSA. The draconian effects of Bill C-6 will be legislatively weakened and employers will suddenly find themselves increasingly drawn into health management, education and advocacy on the part of aging boomer employees and their aging parents who require eldercare.

The emphasis on health will result in the rollback of restrictive plan designs. Intervention by human rights commissions responding to employees' complaints against plan designs on the basis of discrimination (disability, age, gender) will also force organizations to liberate their benefits plans.

Over the next six to 10 years, health and disability will further dominate the focus of benefits plans. Dental and visioncare will be fully covered under the HSA. Organizations will be under pressure to address employees' concerns in the shrinking labour market. They will adopt a total health management approach to benefits. In order to receive certain drug coverage, employees will have to participate in third-party intervention programs, such as smoking cessation.

Employees continue to look to their employer for health prevention and assistance in times of need, according to the most recent Aventis Healthcare Survey. This is a trend that the study noted over the past three years as well. In the future, under the total health management approach, when an employee returns to work after an operation, the employer's third-party medical unit will review optimum post-operative care options with the individual, and then monitor compliance. This approach will also help employers retain boomers, delaying early and normal retirements.

Demographics is not just an employer issue; it is a healthcare issue as well. The Medical Post reports that the average Ontario doctor is 50 years old. The Canadian Institute of Health Information says that the average Canadian registered nurse is 43 years old. Demographics is also a political issue. Boomers will make up the majority of voters and they will command the respect of politicians and ensure that their health agenda is advanced.

There is controversy over the impact that demographics--and in particular aging--has on healthcare costs. In his book, Boom, Bust & Echo 2000, David Foot wrote that the aging of boomers is "the most critical demographic issue facing the healthcare system at the millennium." The Merck Frosst Handbook on Private Drug Plans, previewed in June, states that the most rapid growth in drug plan costs will come from the boomers between this year and 2011, and onwards to 2016.

Other sources have come to different conclusions. Earlier this year, Ken Fyke, who headed up the Saskatchewan Commission on Medicare, said he was not convinced that an aging population would be a problem or require a massive infusion of cash. Meanwhile, the Canadian Institute of Actuaries' report, Health Care in Canada: The Impact of Population Aging says that demographic pressures are not the driving force behind soaring healthcare expenses.

Yet clearly there is a relationship between age and health consumption--and cost. There is a direct relationship between dollars spent on healthcare and the age of average healthcare consumers. In fact, statistics from several sources show that the amount of money spent on an individual's healthcare starts to escalate dramatically from the time that person is in his or her early 40s and accelerates by his or her early 50s. This is true of both sexes (see "Cost burden").

There is no doubt that in the next decade we will see more change in our healthcare system and in group benefits plans triggered by the aging boomers. Employers will have to broaden their thinking and adopt a health management mindset. Organizations will be motivated by the need to retain productive employees.

To pay for all of this, employers will likely have to adjust their total compensation strategies. What will also change is the energy employers use to communicate this new total compensation and healthcare management strategy, and the speed at which change will take place over these next 10 years. BC