Transcript IP27 Richard Larouch.. - Institut canadien des actuaires

Canadian
Institute
of
Actuaries
L’Institut
canadien
des
actuaires
2007 Annual Meeting ● Assemblée annuelle 2007
Vancouver
2007 Annual Meeting
Assemblée annuelle 2007
IP-27 GROUP HOT TOPICS
Health Care Inflation and
Utilization Factors used by
Workers’ Compensation Boards
June 29, 2007
Richard Larouche
Health Care in Group Insurance
2007 Annual Meeting
Assemblée annuelle 2007
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Health care plans in group insurance
provide for:
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Drugs
Paramedical
Hospital
Vision care
Out of Canada
Other
2007 Annual Meeting
Assemblée annuelle 2007
Health Care in Group Insurance
Drugs
Paramedical
Hospital
Vision Care
Out of Canada
Other
Health Care in WCB’s
2007 Annual Meeting
Assemblée annuelle 2007
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Health care benefits provided by
workers’ compensation boards
include:
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Hospital
Physicians
Drugs
Other professionals (physiotherapists, …)
Medical devices
Independent living
Other
2007 Annual Meeting
Assemblée annuelle 2007
Health Care in WCB’s
Hospital
Physicians
Drugs
Other Professionals
Medical Devices
Independent Living
Other
Drug Expenditures
2007 Annual Meeting
Assemblée annuelle 2007
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Drug expenditures represent about 18% of
total Canadian health expenditures (about
$21 billion)
Drug costs increase at a rate higher than
inflation, as a result of a number of factors:
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Drug price changes
Government policies
New drugs
Aging population
Medical developments
Change in consumption (drug mix, utilization, …)
Drug Expenditures
2007 Annual Meeting
Assemblée annuelle 2007
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Annual increase in the 8% to 9%
range
Shift towards more expensive drugs
Increase in costs partially offset by
greater use of generics
Utilization accounts for 3% to 4% of
the increase
Health Care in WCB’s
2007 Annual Meeting
Assemblée annuelle 2007
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Overall, health care costs in WCB’s
increase annually by about 6% to 9%
Increases vary by benefits
Larger increases for benefits paid to
claimants on long term disability, such
as:
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Independent living
Drugs
Medical devices
Health Care in WCB’s
2007 Annual Meeting
Assemblée annuelle 2007
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Recent studies done by some WCB’s
indicate that:
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Inflation rates for all benefits combined
are in the 5% to 7% range
Utilization has increased by about 2%,
essentially for payments on claims
several years after the accident
Small decline in escalation factor in 2004
and 2005, but reversing trend in 2006
Assumptions Used by WCB’s
2007 Annual Meeting
Assemblée annuelle 2007
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Health care escalation assumptions
currently used by WCB’s to value their
claim benefit liability:
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Higher than general inflation assumption
To recognize additional inflation and
increase in utilization
Rate in addition to general inflation
ranging from 1% to 4.25%, for an
average of about 2.5%
Assumptions Used by WCB’s
2007 Annual Meeting
Assemblée annuelle 2007
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To our knowledge, a “select and
ultimate” escalation factor is not used
by any WCB
Could be considered in the future, in
line with accounting assumptions