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2007 Annual Meeting ● Assemblée annuelle 2007 Vancouver

Canadian Institute of Actuaries. L’Institut canadien des actuaires. 2007 Annual Meeting ● Assemblée annuelle 2007 Vancouver. IP-27 GROUP HOT TOPICS Health Care Inflation and Utilization Factors used by Workers’ Compensation Boards June 29, 2007 Richard Larouche.

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2007 Annual Meeting ● Assemblée annuelle 2007 Vancouver

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  1. Canadian Institute of Actuaries L’Institut canadien des actuaires 2007 Annual Meeting ●Assemblée annuelle 2007 Vancouver

  2. IP-27 GROUP HOT TOPICS Health Care Inflation and Utilization Factors used by Workers’ Compensation Boards June 29, 2007 Richard Larouche 2007 Annual Meeting Assemblée annuelle 2007

  3. Health care plans in group insurance provide for: Drugs Paramedical Hospital Vision care Out of Canada Other 2007 Annual Meeting Assemblée annuelle 2007 Health Care in Group Insurance

  4. 2007 Annual Meeting Assemblée annuelle 2007 Health Care in Group Insurance

  5. Health care benefits provided by workers’ compensation boards include: Hospital Physicians Drugs Other professionals (physiotherapists, …) Medical devices Independent living Other 2007 Annual Meeting Assemblée annuelle 2007 Health Care in WCB’s

  6. 2007 Annual Meeting Assemblée annuelle 2007 Health Care in WCB’s

  7. 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: Drug price changes Government policies New drugs Aging population Medical developments Change in consumption (drug mix, utilization, …) 2007 Annual Meeting Assemblée annuelle 2007 Drug Expenditures

  8. 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 2007 Annual Meeting Assemblée annuelle 2007 Drug Expenditures

  9. 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: Independent living Drugs Medical devices 2007 Annual Meeting Assemblée annuelle 2007 Health Care in WCB’s

  10. Recent studies done by some WCB’s indicate that: 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 2007 Annual Meeting Assemblée annuelle 2007 Health Care in WCB’s

  11. Health care escalation assumptions currently used by WCB’s to value their claim benefit liability: 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% 2007 Annual Meeting Assemblée annuelle 2007 Assumptions Used by WCB’s

  12. 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 2007 Annual Meeting Assemblée annuelle 2007 Assumptions Used by WCB’s

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