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Medical cost inflation in Canada is trending lower than the global averages.


TORONTO, November 1, 2018 – According to the 2019 Global Medical Trend Report recently released, medical plan costs paid by employers around the world are set to rise nearly 8 percent in 2019, outpacing average general inflation of nearly 3 percent. The expected average increase before plan changes in medical and pharmacy cost for employer-sponsored medical plans in 2019 of 7.8 percent is slightly lower than the 8.4 percent in 2018 due to employer cost containment measures, tighter procurement of medical goods, new health improvement initiatives and lower rates of projected inflation worldwide. 
 

Distinctive trends in Canada


In Canada, for the second year in a row, medical cost inflation is trending lower than both the global and the North American averages. That is a reversal from multi-year trends earlier in the decade that had seen inflation approach global norms (approximately 8%). 

According to Aon’s analysis of extended health care plans, medical costs in Canada are expected to rise by 6.0% in 2019, which is essentially the same increase as was expected during 2017. Assuming an annual general inflation rate of 2.1% for 2019, the net medical trend rate is expected to be 3.9%. 

A medical inflation rate lower than the overall global trend is welcome news for employers providing employee benefits in Canada. The future is uncertain, however. Canadians are still exposed to some of the highest prescription drug costs in the world. A move is afoot to explore a National Prescription Drug Plan, but no one is sure what form that plan could take, when it could be launched or whether all provinces would be participate. There are still many unknowns about this initiative, as it is only in the consultation phase at this point. Plan sponsors should continue with their current benefit and drug plan strategies, and start to contemplate changes only when more concrete information about any national program is released.

Canadians are fortunate to have access to new and emerging levels of care, but that access comes with a price. “In Canada, cost inflation is largely driven by expensive prescription drug therapies, since many core health care services are provided through provincial programs,” said Greg Durant, Senior Vice-President and Chief Actuary, Health and Benefits, Aon in Canada. “These therapies, while expensive, are also often game-changers in that they keep can keep employees active and productive to a degree that would be impossible otherwise.” 

“While continued moderate cost inflation is good news, it is typically achievable only through good governance and close scrutiny of plan design and cost drivers. In our experience, employers looking to mitigate control cost increases and ensure sustainable utilization – all while balancing employees’ access to care - must examine the key characteristics of their employee population and determine the best solutions and plan management options going forward,” added Durant.

 

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For further information please contact the Aon media team: Alexandre Daudelin, +1.514.982.4910.

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