It may seem too good to be true, but it looks like increases in health benefits plan costs are slowing. According Buck Consultants’ Canadian Health Care Trend Survey, the overall trend in cost increases slowed significantly for a second consecutive year, and insurers have lowered their expected inflation costs for health benefits premiums from 14.4% in 2011 to 11.7% in 2012.

This overall trend includes prescription drugs, medical expenses, hospital coverage and dental care.

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

According to Sandra Pelligrini, leader of Buck’s Canadian health and productivity consulting practice, the dip is the result of two factors: generic drug pricing and the expiration of patents on some pharmaceuticals.

“In 2010, several provinces implemented generic drug pricing reforms that reduce their cost,” she explained. “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.”

It’s not all good news, though. Pelligrini pointed out that while the cost reductions are a positive sign, employers still need to be aware of the growing impact of high-cost specialty and biologic drugs as a key driver of costs.

Pellegrini cited a study by Express Scripts that showed that this group of drugs is projected to grow as a percentage of overall drug spend from 19.5% in 2011 to between 25% and 30% by 2015.

Dental cost inflation also showed a downward trend across the country, from 8.2% last year to 8% 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.

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.

Joseph Ricciuti, Buck’s managing director in Canada, warns employers to remain cautious and diligent despite the good news. “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.”

Copyright © 2022 Transcontinental Media G.P. Originally published on benefitscanada.com

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