Have you noticed recent increases to your employee benefits costs? You’re not the only one. We’re seeing rates go up for a number of reasons, from inflation and heavy usage of certain coverage to incremental increases to the Saskatchewan dental fee guide.
Employee benefits costs are based on several different factors like your industry, type of employee occupations, demographics, your plan design, and claims history. To understand more about these fundamentals, check out our post on how much benefits cost, and read on to explore the top three recent drivers that could be increasing your benefits costs.
1. Inflation is driving employee benefits costs
It’s no secret that Canadians are affected by inflation across the country, and benefits plans are impacted as well. The cost of services has been rising steadily over the last couple of years. For example, charges for a massage may have been $60 two years ago. The average cost of a massage today can be upwards of $90 in Saskatchewan.
Keep in mind that every time costs like these go up for the individual, the carrier costs rise as well. As higher claims come in, premiums will go up too so that costs can be covered. Paramedical services like physiotherapy, podiatry, and massage therapy have increased substantially in the last few years. We’ve seen drug costs rising too. These are common claims in a group benefits plan so it’s no surprise that they play a role in driving the overall employee benefits costs up.
2. Long-Term Disability Claims and employee benefits costs
Heavy usage of long-term disability is a big driver of rising benefits costs for two reasons. First, there’s been an increase in the incidence of claims – between COVID and mental health issues, the reality is that more employees than ever are taking long-term leave from work. And second, the length of claims is shifting with an employee’s potential return to work taking longer than usual.
The challenge with heavier and increased usage is in the way that carriers set the employee benefits costs for this type of coverage. Long-term disability is usually a “pooled” benefit for a carrier, meaning that a carrier pools their clients together to cover the cost of long-term disability claims. But with the pool depleting faster due to heavy usage, rates need to go up to compensate and fill the pool. Carriers also rely on investment returns to help keep their LTD pool healthy. Returns have been lower and less predictable in the last few years. Carriers are legislated to maintain level of their pool proportionately to their risk, and thus the decrease in investment returns means they have had to increase rates.
It looks like carriers are starting to revisit this model to balance things out so groups using more of the long-term disability benefit pay more than those who do not, but this remains unfamiliar territory for now.
3. The Impact Of The Saskatchewan Dental Fee Guide
The Saskatchewan dental fee guide is released every year as a baseline for dental service fees. Insurance carriers rely on the guide to set the employee benefits costs of dental coverage. In the past, the fee guide has increased about 1.8 to 2.2% year over year. We saw a huge leap in 2022 to 6.23%. The increase was high again in 2023 at 6%. That’s a 12% increase in the last two years alone. And as we explained above, this kind of inflation creates a bit of a vicious circle when it comes to employee benefits costs – when claims get higher, premiums inevitably go up too.
Remember that a carrier will only pay dental claims based on what the dental fee guide recommends. However, there is no legal requirement for a dentist to set their rates based on the guide. This means that there can be a significant discrepancy and cost to the individual, but it’s not all bad news. Most dentists in the province do try to stick to the fee guide as much as possible. And, there’s no reason why a person can’t ask their dentist to consider adjusting to better align with the guide.
Inflation, heavy long-term disability usage, and significant increases to the dental fee guide in Saskatchewan have all driven an increase to group benefits costs in the last few years. If you’re wondering how your employee benefits plan is impacted and want to understand more about your current costs, get in touch with us today.