Spending by Canadians on private health insurance has more than doubled over the past 20 years, but a study published in CMAJ (Canadian Medical Association Journal) finds that insurers paid out a rapidly decreasing proportion as benefits.
The study, by University of British Columbia (UBC) and University of Toronto researchers, shows that overall Canadians paid $6.8 billion more in premiums than they received in benefits in 2011. Approximately 60% of Canadians have private health insurance.
Over the past two decades, the gap between what insurers take in and what they pay out has increased threefold. While private insurers paid out 92% of group plan insurance premiums as benefits in 1991, they paid only 74% in 2011. Canadians who purchased individual plans fared even worse, with just 38% of their premiums returned as benefits in 2011.
“Small businesses and individual entrepreneurs are the hardest hit—they end up paying far more for private health coverage,” says study lead author Michael Law, an assistant professor in UBC’s Centre for Health Services and Policy Research. “It’s essentially an extra health tax on one of our main economic drivers.”
The authors call for greater transparency from private insurers and for the federal government to introduce new regulations.
“Obamacare requires insurers to pay out 80% to 85% of their premium income as benefits, which resulted in $1.1 billion being returned to policyholders in 2012,” says Law. “Our numbers suggest that Canadians are getting a worse deal than Americans.”