Group benefits costs to spike 8% in 2017: Aon Hewitt

Medical costs for group benefits plans will jump eight per cent in 2017, Aon Hewitt predicts.

The number includes a 1.9 per cent spike in the general inflation rate, leaving a 6.1 net increase for medical costs.

The jump is largely due to increasingly expensive specialty drugs, as well as Canada’s aging population. “Employers [are] not only wanting to retain employees longer to fill their talent gaps, but it’s employees themselves being healthy enough, wanting to work longer,” says John Tompkins, senior vice-president and chief broking officer for health and benefits at Aon Hewitt Canada.

Read: Tackling the challenge of health-care innovation 

Tompkins also points to ongoing funding conversations between the federal and provincial health ministers. If Ottawa stands firm in its decision to reduce the rate of increase to transfer payments for health care, provincial governments may download costs to employers and individuals by, for example, taxing health and dental benefits, he says.

“We’ve got a whole kettle of boiling water going right now,” says Tompkins. “I’m not sure if we’re the frogs in the boiling water and just staying in there as it’s being gradually turned or if we’ll jump out at some point.”

Read: The debate over drug formularies

Currently, many Canadian employers are capping costs, rather than refusing to cover certain products or services, he says. So while paramedical claims are rising quickly in comparison to prescriptions drugs, they’re less of a concern since plans tend to have caps in place.

To further increase employee well-being and productivity, Tompkins suggests using data from insurers and wearable devices to target different segments of the workforce. Knowing the diagnoses behind prescriptions and long-term disability claims, for example, is useful in determining which information or incentives will help which employees make healthy decisions.

Read: Look beyond plan design and expenses to control benefit costs

The current rapid pace of cost increases follows a more moderate trend previously that reflected government efforts to lower generic drug prices, the Aon Hewitt analysis noted. The increase in Canada is in line with global predictions of an 8.2 per cent rise. However, some regions, such as Europe, are seeing more moderate increases at 5.7 per cent.