More Canadian employees are living longer and delaying retirement. This trend will affect the costs of group health plans, argues a note by Eckler.
Generally, benefits cease for employees once they turn 65. “While there is no legislation requiring that group plan sponsors extend such coverage past age 65, employee groups are expected to increase pressure on employers to extend health coverage given the new demographic reality,” the note says.
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These situations will result in additional liabilities for group benefits programs, the note argues.
Until a few years ago, consistent annual increases in total health benefits costs of 10% to 15% were common. “While the annual trend is much lower, there is no guarantee that trend rates will not begin to increase again, as many healthcare experts have been forecasting,” the note says.
While considering cost increases in aggregate is important, employers should also pay attention to changes in average per-employee costs, Eckler says. Differences in provincially sponsored programs, such as seniors’ drug plans, result in different impacts on populations across the country.
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“In Ontario for example, an internal Eckler study showed that providing healthcare benefits to employees between ages 65 and 80 is actually less costly on a per-employee basis than providing coverage to employees ages 50 and 64,” the note says.
“Therefore,” the note concludes, “an employer in Ontario who decreases the proportion of their workforce in the higher-cost ages of 50 to 64, and increases their proportion of employees in the lower-cost ages of below age 50 or over age 64, could actually decrease their average per-employee plan costs.”
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Providing health benefits to staff members working past the traditional retirement age could also encourage further delaying of retirement. “All else being equal, this would have the domino effect of reducing the post-retirement benefits liability faced by employers that offer post-retirement benefits,” the note says. While cash costs for active benefits would likely rise, cash and accounting expenses for post-retirement benefits plans could decline, Eckler adds.