Growth in chronic disease and increased drug claims are two of the key factors driving up the cost of private health benefit plans, according to a new report by Innovative Medicines Canada.
It found that chronic diseases accounted for 68 per cent of drug plan claims costs and 79 per cent of growth. Claims costs grew at a 5.3 per cent compound annual growth rate between 2016 to 2019, with more than half of this growth (53 per cent) driven by increased utilization rather than increased costs per claim, said the report.
Non-specialty drugs costing less than $10,000 annually accounted for 71 per cent of total private drug plan claims costs and 41 per cent of the growth. More than three-quarters (76 per cent) of the growth was driven by older drugs launched more than 10 years ago.
In addition to claims costs, the report said insurers’ risk management processes, premium-setting processes and pooling methodology all contribute to actual benefit plan costs paid by plan sponsors, with these additional charges accounting for up to 20 per cent of the total benefit plan cost.
The report found by province, overall cost growth in Ontario and Quebec was below the national rate. Growth in Newfoundland and Labrador was the lowest, while growth in British Columbia was the highest. Increased utilization was the main driver of growth for Quebec, British Columbia, Saskatchewan and Manitoba, while the cost per claim was highest in the Atlantic provinces and Ontario.
While benefits plan members aged 25 to 65 accounted for more than 70 per cent of private drug plan cost growth between 2016 and 2019, the 65+ age group experienced the highest annual growth in the same period.