Employers lack effective strategy to manage health-care costs: Survey

While 57 per cent of Canadian employers plan to increase employee headcount in 2019, that growth could become a financial burden, according to Gallagher’s 2018 Benefits Strategy & Benchmarking Survey – Canada Edition.

That’s because employers will now bear additional health-care costs, particularly for prescription drugs.

And a majority (64 per cent) don’t have an effective strategy for managing these expenses and almost none leverage advanced tactics to cut prescription drug costs, found the survey of 468 employers.

“Because we are in a tight labour market, organizations understand the importance of offering competitive benefit packages,” said Leslie Lemenager, head of Gallagher’s Canadian employee benefit consulting operations.

“But today’s workforce encompasses five generations, and each wants a benefits package that addresses their own individual set of needs. To win the war for talent, while keeping costs sustainable, employers need to look beyond the most expensive options and incorporate data to ensure they offer benefits that are cost-effective, competitive and appealing to key talent.”

More than half (55 per cent) of employers say high prescription costs are a top cost-management challenge, and 64 per cent mandate generic or least-cost alternative drugs to cut costs.

However, just five per cent use expense management tactics — such as step therapy, streamlining the supply chain or mail-order options — which can significantly reduce drug expenses.

Only 46 per cent of Canadian employers have an employee wellbeing strategy, found Gallagher.

Most Canadian employers believe their benefits are competitive, but base that conclusion on perception rather than data, said Gallagher. For example, 60 per cent feel their workforce is highly engaged, but only 42 per cent have conducted an engagement survey since 2016.

In addition, 32 per cent say they lack any communication strategy, making benefits education or feedback difficult.

“Employers cannot afford to offer the same health-care and retirement packages year after year,” said Lemenager. “Employee demographics are diverse and their needs are changing constantly. Organizations that recognize this, and continue to adjust accordingly, will do a better job of recruiting and retaining top talent.”

The full report can be found at www.ajg.com/CNBS-2018.