Employer health benefits costs will increase 7.5% in 2023 due to aging workforce, inflation; what can employers do? — survey report

According to a new report by Aon[1], the cost of employer-sponsored medical benefits in Canada is projected to increase by 7.5% in 2023. The report evaluated responses from more than one hundred Aon offices worldwide that broker, administer, or provide advice on employer-sponsored medical plans.

Cardio and hypertension health issues on the rise

As was the case last year, cardiovascular illness, cancer/tumor growth, and high blood pressure/hypertension were identified as the major disorders responsible for growing plan costs. The report also provided data on the percentage of claims that were related to these conditions, and the trend in the costs of these conditions over the past few years.

In addition, the report forecasts a rise in benefits costs in Europe (9.1%, up from 5.6%), the Middle East and Africa (14.5 %, up from 11 %), Asia Pacific (9.2%, up from 8.8%), and Latin America and the Caribbean (11.6 per cent, up from 10.6 per cent).

Due to the delayed effects of inflation on U.S. medical trends, North America was the only region where cost trends were unchanged from the prior year (6.6%). However, the survey indicated that North American trend rates will likely continue to see upward pressure over the next couple of years, exacerbating the region’s existing cost and affordability issues.

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10 percent increase expected globally in 2023

Another report by WTW[2], found that employer-sponsored health benefits costs are expected to rise by 10 percent on average globally in 2023, amid soaring inflation and increasing health-care services utilization.

 

The survey of more than 250 insurers from 55 countries revealed that cost trends in Canada are anticipated to increase by 6.3%. Comparatively, cost trends are anticipated to be as high as 18.9% in Latin America, followed by 11.5% in the Middle East and Africa, 10.2% in Asia Pacific, and 8.6% in Europe.

The survey also provided data on the different factors that are contributing to the rising costs such as overuse of care, poor health habits of plan members and underuse of preventive services.

Employer-sponsored benefits rise in Canada

These reports are an indication that the cost of employer-sponsored medical benefits in Canada is on the rise, and the trend is expected to continue in the coming years. This presents a significant challenge for employers, insurers, and employees, as they struggle to keep up with the increasing costs while maintaining access to quality healthcare.

One major factor contributing to the rising costs of employer-sponsored medical benefits in Canada is the increasing prevalence of chronic conditions such as cardiovascular disease, cancer, and high blood pressure. These conditions require ongoing treatment and management, which puts a strain on the healthcare system and drives up costs for employers and insurers.

Aging population in Canada is a factor

The aging population in Canada is also contributing to the rising costs, as older adults are more likely to have multiple chronic conditions and require more healthcare services. The reports provided data on the percentage of claims that were related to chronic conditions, and the trend in the costs of these conditions over the past few years.

Another factor contributing to the rising costs is the overuse of healthcare services. According to the WTW survey, overuse of care due to medical professionals recommending too many services or overprescribing is the leading driver of rising costs, with 74% of insurers citing it as a reason.

Similarly, poor health habits of plan members and underuse of preventive services also contribute to the rising costs. The survey provided data on the percentage of insurers that identified these factors as drivers of rising costs and the trend in these factors over the past few years.

What options are there?

To address the rising costs of employer-sponsored medical benefits, employers, insurers, and the government are implementing various strategies. One strategy is to concentrate on government regulations and policies. The government can play a role in addressing rising costs by enacting policies and regulations that encourage employers and insurers to take cost-controlling measures.

For instance, the government could incentivize employers to invest in wellness programs or preventative care, as well as fund telemedicine initiatives. The government could also consider amending the Canada Health Act to encourage the use of cost-effective treatments and therapies and deter the excessive utilization of healthcare services.

Another strategy is to focus on private sector solutions. Employers, insurers, and other private sector entities can play a critical role in addressing the rising costs of employer-sponsored medical benefits in Canada. For example, employers can invest in wellness programs and preventative care to encourage healthy behaviors among employees.

Insurers can also develop medical plans that encourage the use of cost-effective treatments and therapies and discourage the overuse of healthcare services. The reports provided data on the percentage of employers and insurers that are implementing these strategies and the trend in their implementation over the past few years.

Educating employees critical

Employee engagement is another key part of addressing the rising costs of employer-sponsored medical benefits in Canada. By educating employees about their health and the healthcare system, employers and insurers can empower employees to make informed decisions about their healthcare.

Furthermore, by encouraging employees to adopt healthy behaviors, employers and insurers can help to control costs and improve overall health outcomes. The reports also shared insights on the percentage of employees that are engaged in their health and the healthcare system.

The rising costs of employer-sponsored medical benefits also have an impact on employees and their families. As employees face higher premiums, deductibles, and co-pays, they may opt out of their employer-sponsored medical plans or face difficulty in affording their medical care.

This can lead to employees and their families going without necessary medical treatments and therapies, which can have serious long-term consequences. The reports provided data on the percentage of employees that are opting out of their employer-sponsored medical plans and the trend in this over the past few years.

Rising importance of Telemedicine

Focusing on digital health solutions is another potential solution. Telemedicine, remote monitoring, and digital therapeutics are all examples of digital health solutions that can help reduce healthcare costs while enhancing patient access.

Telemedicine, for instance, enables patients to consult with healthcare providers remotely, reducing the need for in-person visits, whereas remote monitoring enables patients to monitor their health status remotely, reducing the need for frequent hospital visits.

Canada’s economy is also affected by the rising cost of employer-sponsored medical benefits. As healthcare costs continue to rise, employers may be compelled to reduce their workforce, reduce employee benefits, or raise their prices. This can reduce consumer spending and have an adverse effect on the economy.

It’s worth mentioning that Canada is not alone in this situation. Other countries are also facing the challenge of rising healthcare costs[3]. By studying successful strategies and best practices that have been implemented in other countries, Canada can gain valuable insights on how to address the rising costs of employer-sponsored medical benefits in Canada.

All things considered, the rising costs of employer-sponsored medical benefits in Canada present a significant challenge for employers, insurers, and employees. However, by focusing on government policies and regulations, private sector solutions, and employee engagement, it’s possible to work towards addressing these rising costs and ensuring that all Canadians have access to quality healthcare.

 

SOURCES

[1] Employer-sponsored health benefits (Benefits Canada)>>

[2] Health benefits costs rising in 2023>>

[3] Healthcare benefits to increase>>