When it comes to the cost of health benefits in 2017 and beyond, it’s no surprise industry experts are projecting increases across the board, from five to eight per cent for dental plans and up to 20 per cent for long-term disability coverage. So what are the trends for the coming year for the various components of benefits plans?
Spending on specialty drugs is on track to grow quickly to $5.6 billion for private plans by 2020, according to Express Scripts Canada’s 2015 drug trend report. “We anticipate specialty spend to continue . . . and grow to be over 40 per cent of overall spend within the next five years,” says John Herbert, director of strategy, product development and clinical services at Express Scripts Canada.
The projected increases in the specialty drug category will continue to put pressure on the cost of drug pooling, according to Herbert. “Simply having high-amount pooling doesn’t make these costs go away. It’s just sort of shuffling around the exposure of these costs.”
Read: Drug prices review, decumulation among top issues for 2017
Grace Tso, a partner in health and benefits at Mercer, says employers can expect increases in drug-pooling costs to exceed 50 per cent this year and predicts specialty medications, which represented roughly 30 per cent of drug spending in 2015, will rise by about 10 to 15 per cent in 2017. “You’ve got a growing proportion of costs there, accelerating at a much higher level than your traditional drugs, which we’re expecting to be flat line,” she says.
Despite the concern about high-cost medications, Mike Sullivan, president of Cubic Health Inc., notes plan sponsors can’t ignore the importance of managing traditional drugs as that category makes up twothirds of spending and a larger number of claims. “We’re only focused on the 1.5 per cent of claims on the specialty side and the ultra high-cost side. But I really think they have to think about what they can be doing to optimize the two-thirds of spending that accounts for almost 99 per cent of claims.”
For dental costs, Mercer is projecting an increase of five to eight per cent, which includes dental fee-guide changes of between two and 3.5 per cent, says Tso.
Plan usage, of course, is another factor. “Employer to employer, it’s going to really depend on the demographics of the group,” she says, noting some groups may have a bigger need for more expensive services, such as orthodontic work. “But in general, it’s about five to eight per cent that we’re recommending for our clients in terms of budget projections.”
Long-term disability costs
The drivers that will affect long-term disability costs in 2017 include an aging population, the prevalence of mental-health issues and low interest rates, says Tso, who’s projecting average increases of between 10 and 20 per cent.
“I think the major one is mental and nervous,” she says. “This is an area [in which] we have seen a constant level of claims and incidences over a period of many years now. One of the areas we’re working with our clients on is helping them to create policies and processes that create a healthy and safe environment for mental health in the workplace.”
The costs associated with paramedical benefits will continue to rise due to growing utilization and because the area is making up a greater percentage of employers’ overall spend, says Tso, who’s projecting an increase of 10 to 15 per cent.
“In employers’ plan design, they don’t cover paramedicals at 100 per cent. There’s a limit and out-of-pocket cost, and we’re seeing people are willing to pay it. It’s telling employers that this really is something employees value and it’s about how to best provide and deliver that benefit to them.”
Jennifer Paterson is the managing editor of Benefits Canada.
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