Alberta is not the same place it was just 18 months ago when West Texas Intermediate crude oil was trading around US$100 per barrel. That’s about 200% higher than it’s been trading in recent weeks.

The oil bust is having a dramatic impact on the provinces that rely heavily on the energy sector to keep their economies chugging along.

When oil prices are very high, Alberta’s economy becomes overheated and this can create challenges for the HR professional, such as keeping your benefits program competitive in order to attract and retain top talent. Conversely, the current low oil price environment has been much deeper and longer than any cycle in recent memory and when the energy sector suffers, it has negative implications for most of us in Alberta.

Read: Canadian unemployment rate rises to 7.3% for first time in three years

Read: Alberta EI recipients double in a year

Thousands of employees in Western Canada, in many different industry sectors, have lost their jobs in the economic downturn. Despite a sense that this would reduce benefits program costs, it can have the opposite effect.

Extended healthcare and dental costs are up sharply for many Alberta employers year over year. There are many factors that can contribute to rising costs, but there’s evidence to suggest that a recent increase in dependent claims is at least partially responsible.

If your employee’s spouse has been laid off and no longer has benefits, their claims are going to start hitting your plan from first dollar. Additionally, if the spouse’s plan was the first payer for their dependent children’s claims, your plan will now be picking up these costs as well.

Basically, the number of individuals claiming under a plan may have increased lately, even though the number of employees in the plan may not have changed. This is going to impact per capita costs.

Read: Sounding Board: The link between oil prices and rising disability claims

In these uncertain times, it’s also not uncommon for employees to increase the use of their extended healthcare and dental benefits. Employees who suspect a looming layoff might be more likely to stop putting off dental work or the purchase of new glasses.

Those stressed from increased workloads due to layoffs or because of apprehension about losing their jobs may be more prone to visit paramedical practitioners, such as massage therapists, psychologists and acupuncturists.

So what can you do about these cost increases? Firstly, don’t panic. This could end up being a story of short-term pain that diminishes when the economy turns around. Nevertheless, if these cost increases are simply more than your budget will allow right now, then you may need to consider increasing employee cost sharing and/or reducing coverage.

Read: Further dip in oil could benefit investors

Neither of these options will be popular with employees, especially for families recently reduced to one income. But effectively communicating these changes could help mitigate employee backlash.

Requesting proposals from other carriers could also provide some short-term cost relief, but beware of deep discounting by the insurers to gain your business only to see your rates boomerang at your first renewal. While there are many other tactics you can use to help better manage costs over the long term (i.e., drug plan management, employee wellness initiatives, etc.), most are unlikely to provide any immediate cost reductions.

It remains to be seen how long it will be before oil prices rebound. When the economy improves, however, your plan should see some per capita cost relief as these unemployed spouses re-enter the workforce and start claiming under their own benefits programs.

Read: 5 ways low oil prices and the falling loonie can affect the federal books

Kenneth MacDonald is associate vice-president, national accounts at Hub International Canada West. These are the views of the author and not necessarily those of Benefits Canada.
Copyright © 2020 Transcontinental Media G.P. Originally published on benefitscanada.com

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