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‘A little more tempered’: Benefit costs in Canada expected to rise 5% next year, below global average

“A little more tempered.” That’s how Nabil Merali, the Toronto-based senior vice-president, health Canada co-lead at Aon, described the forecast for the rising costs of group benefits for plan sponsors in 2024.

The average medical trend rate in Canada for 2024 is expected to be 5%, a significant drop from the 7.5% recorded this year, according Aon’s Global Medical Trend Rates Report 2024.

The trend rate looks at the percentage increases in medical plan unit costs — insured and self-insured — to address things like projected price inflation, technology advances in the medical field, plan utilization patterns, and cost shifting from social programs.

While inflation is still running “hotter than we expected,” Merali is starting to see Canada revert to more historical increases in costs, which are typically four to five per cent year over year. The 5% forecast for Canada is 2.6 percentage points higher than general inflation, but is still low compared global average which is forecasted at 10.1%.

There has been a lot of churn around costs coming out of the pandemic — including cancer diagnoses and other diseases not being picked up because people didn’t visit  health professionals, which has added pressure to benefit plans, he said.

“Some of that pent-up demand has already been met in Canada,” said Merali. “For example, group sponsors were exposed to very high dental inflation last year.”

That’s because patients started visiting dentists again as practices returned to normal. The same was true for paramedical benefits.

“Also, what we’re seeing thankfully, is prescription drug costs coming down,” he said. “Plan sponsors are adopting a lot of the best practices to control or bend the cost curve.”

Biosimilars coming on the market are also mitigating rising costs, and organizations are being more forceful about reigning in spending — including caps on dispensing fees and the use of virtual pharmacies.

Mandatory generics

One opportunity he sees is for employers to steer away from brand-name drugs. “A lot of plan sponsors still don’t have mandatory generics or lowest-cost alternatives,” he said.

In unionized environments, the absence of mandatory generics is more prevalent, because it’s often subject to collective bargaining. Nevertheless, there is evidence of some progress on this front.

“If you look at some of the public agreements out there, we are starting to see organizations are adopting that because the money can be redirected elsewhere,” aid Merali. “I can get more value and, ultimately, still have the medical needs met. They weren’t very aggressive in attacking that.”

Top health issues

The most pressing concerns are the increasing prevalence of diabetes and challenges around mental health, said Merali.

“Diabetes is number one, mental health is number two,” he said. “This is a global problem, and we know that COVID has only amplified it. There are a lot of solutions available to employers, though.”

Expanding psychological coverage and adding other paramedical providers that support early intervention are good tactics to adopt, he said. There are also a lot of online tools, particularly when it comes to mental health, that employers can offer to workers.

Autoimmune disorders are also a driving force behind increased costs — because the drugs to treat them can be very expensive.

“Although the percentage of the workforce that is being diagnosed with autoimmune disorders is increasing, biosimilars are helping control that inflation because the drugs are cheaper than the original biologics,” said Merali.

From a global perspective, the top three medical conditions driving plan costs are:

1. Cardiovascular
2. Cancer/tumor growth
3. High blood pressure/hypertension

The Ozempic effect

Drugs like Ozempic are grabbing a lot of headlines as well. Originally developed for diabetes, they are being used “off label” to help people lose weight.

“You’re seeing claims come through, with no other claims that would indicate the member is diabetic,” he said. “So you make the assumption that this probably being used for off-use. The carriers are looking at their adjudication practices and tightening that up.”

But the best advice is to go back to what has been told to clients for decades, he said. That includes promoting an active lifestyle and weight management, which in turn leads to more engaged and productive employees with fewer diseases.

The Aon report is based on insights from 113 Aon offices that broker, administer or advise on employer-sponsored medical plans.