Canadian Health Care Costs on "Hold", but set for "Fast Forward", Towers Watson Survey Finds

Employer health and productivity strategies key to future health care cost management

TORONTO, Aug. 13, 2013 /CNW/ - According to a new survey by global professional services company Towers Watson, the increase in cost of employer-sponsored health and dental benefits plateaued in 2012. The survey shows that for active employees, the overall employer health care spend increased just 2.1% in 2012, down from 2.7% the previous year, and far below the double-digit increases seen not so long ago. According to the survey, drug costs are trending at -0.2% and the cost of dental care is up by only 1.3% from 2011 to 2012.

"This trend can be explained by a number of factors," said Wendy Poirier, Towers Watson's Canadian Health and Group Benefits Leader. "As many commonly prescribed drugs have recently come off patent, employers are seeing the results of increased use of generics at substantially lower costs. They are also benefiting from drug plan management strategies that mitigate waste and increase efficiencies, and the effect of beneficial plan design features such as early exposure to preventative dental coverage."

Caution Advised
While the decrease in overall health care costs is good news for employers, one area to watch is high-cost specialty drugs. According to Towers Watson research, specialty or biologic drugs are typically used by less than 5% of the employee population, but account for 15% to 25% of the total drug spend.

"Advances in medical research are producing high-cost drugs to address common health conditions, many of which are chronic and require ongoing treatment for the life of the employee", said Christiane Bourassa, a Senior Health and Group Benefits consultant at Towers Watson. "In fact, the use of specialty or biologic drugs is expected to account for 30% or more of drug plan costs in the next three to five years."

The upward trend on health care expenses, other than drugs covered by employer sponsored plans, is another area of concern for plan sponsors.  According to the survey, for active and retiree plans the cost of these health care claims, which typically include services such as physiotherapy, chiropractic and naturopathic treatment, is up 6% from 2011 to 2012.

"It is important for employers to keep an eye on the increased utilization of these health care services," said Bourassa. "They can be an important part of a wellness program, but left unmanaged may increase active and retiree costs unnecessarily, due to the effects of an aging plan membership and the continued de-listing of services covered by government programs."

Health Benefits Core to Workforce Strategy
It is expected that continued moderation of health care costs is likely for the next 24 months, given expected decreases in generic drug prices and the introduction of new drug management measures. However, increasing utilization of high-cost drugs combined with an ageing workforce will start to push cost increases back towards their historic trend.

Wendy Poirier concluded, "To combat expected health care cost increases, employers can broaden their focus and look at how workforce health and productivity strategies might help control the costs of drug, dental and other benefits.  While employers have added more prevention and support to their benefits foundation, more work is needed to understand the cost drivers and to implement specific actions to manage both current and future costs. Mandatory generic substitution, drug supply limitations and restrictions, therapeutic substitution strategies, drug formularies, preferred provider networks and health care spending accounts have all proven effective strategies for ensuring sustainable health care plans."

About the Survey
Towers Watson's Canadian Health Care Cost Survey was completed by 193 organizations representing 875,000 active and retired employees across all major industries and regions of Canada. The survey gathers information on health plan enrollment, cost sharing, administration costs and paid claims to provide Canadian plan sponsors with insights to shape effective and sustainable health care strategies.

About Towers Watson
Towers Watson (NYSE, NASDAQ: TW) is a leading global professional services company that helps organizations improve performance through effective people, risk and financial management. The company offers solutions in the areas of benefits, talent management, rewards, and risk and capital management. Towers Watson has 14,000 associates around the world and is located on the web at towerswatson.com. 

SOURCE: Towers Watson

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