Recent report released by IMC on growth rates for health insurance premiumsRelease Date: 08/20/2018 Staff Reference: Stephen Frank
August 20, 2018
Ms. Pamela Fralick
Innovative Medicines Canada
55 Metcalfe Street, Suite 1220
Re: Recent report released by IMC on growth rates for health insurance premiums
I am writing to you regarding the recently released report by Innovative Medicines Canada called Cost Drivers Analysis of Private Drug Plans in Canada 2012-2016.
While the report provides some insightful analysis in terms of data on private drug plans in Canada, I am disappointed in the editorial approach IMC took to discuss insurer premium increases against drug costs. For example, Figure 20 of your report features a trend factor based on data from three insurers and makes a direct comparison to aggregate drug cost inflation. The report has a stated objective of identifying and quantifying the key cost drivers in the private drug market. However, it appears to have gone well beyond its scope, which unfortunately creates some inaccurate impressions for the reader – namely that premiums may be rising at three times the rate of drug costs.
In fact, aggregate industry data shows clearly that total industry premiums trend closely with total benefit costs. For example, as shown in the table below, extended health benefit premiums have grown at an annual rate of 3.9% over the period 2012 to 2016 while costs actually rose at a slightly higher rate of 4.2%.
Avg. Annual Growth Rate
|Extended Health Insurance Claims Paid ($ billions)|
|Extended Health Insurance Premiums ($ billions)|
Source: CLHIA Health Survey data
Given the above, I think it would be appropriate for IMC to take steps to modify the content of your report to ensure that readers understand clearly the current reality in the market when It comes to premium growth and levels. Insurers operate in an intensely competitive environment where cost control by plan sponsors is a key focus for them. This ensures that premiums and other prices insurers charge are always appropriate and at a level that our clients understand and will support.
I’d be happy to discuss further at your convenience.