Survey shows second straight year of declining dental-cost inflation for Canadian employers

The 2012 "Canadian Health Care Trend Survey," the firm's 12th annual study, analyzes the health cost trend assumptions that factor into the premium rate setting of nine major Canadian insurers.

The survey shows a downward trend in dental cost inflation across the country (from 8.2 percent last year to 8.0 percent in 2012). Use of dental services — a factor that is sensitive to economic conditions — has gone down, perhaps reflecting increased employee confidence in job retention and availability of benefits.

Insurers have dropped their inflation factors for prescription drugs — the fastest-increasing expense paid by group insurance plans — from 14.2 percent in 2011 to 12.1 percent in 2012, a 15 percent drop.

"This is due to two important factors," said Sandra Pellegrini, leader of Buck's Canadian Health and Productivity consulting practice. "In 2010, several provinces implemented generic drug pricing reforms that reduce their cost. Also, the patents expired for several blockbuster pharmaceuticals (such as the top-selling cholesterol drug Lipitor in 2010, Plavix in 2011, and Crestor, Advair and Symbicort in 2012), opening the door for lower-cost generic substitutes."

"Despite this good news however, it is important to understand the growing impact of extremely high-cost specialty/biologic drugs as a key driver of costs," said Pellegrini. She cited a study by Express Scripts showing that this group of drugs is projected to grow as a percentage of overall drug spend from 19.5 percent in 2011 to between 25 and 30 percent by 2015.

Hospital inflation factors have seen an overall decline in inflation rate since 2008, but this year there has been a slight increase, from 8.2% to 8.4%. "This may represent the impact of an aging population and the related incidence and duration of hospital stays, despite the continuing shift from inpatient to outpatient care," said Pellegrini.

"Buck's 2012 Health Care Trend Survey has some good news for employers," said Joseph Ricciuti, Buck's managing director in Canada. "The drug, health and dental cost trend factors are lower again in 2012. While costs are still increasing more than inflation, it is important that employers keep to the strategies they are starting to implement on the supply side - through deductibles and claims management - and the demand side - through wellness programs and work-life balance initiatives — in order to continue to tightly manage the costs of their benefits programs."

Buck Consultants' "Canadian Health Care Trend Survey" summarizes the trend factors used by major Canadian group insurers to project future health care plan costs for calendar year 2012. The survey compares current trends to results for the previous four years. The study provides trend factors by type of coverage: prescription drugs, medical services and supplies, hospital, and dental care. Dental care trend factors are provided by utilization, fee inflation, and a composite trend.

The complete survey report is available for no cost at: www.buckconsultants.com/ca/en/Newsandevents/Surveys.aspx

(Sources: Buck Consultants and Xerox Canada)