What drives the costs of benefits?

According to the Conference Board of Canada, between 2010 and 2011, benefits costs escalated by an average of 6.2%, more than twice the rate of inflation.

Contributing to this figure are the increasing health risks among Canadians. According to the 2010 Sun Life Canadian Health Index, 63% of us demonstrating three or more unhealthy behavioural patterns relating to physical activity, tobacco use, daily fruit and vegetable intake, hours of sleep each night, coping with stress and maintaining a healthy weight.

Added to the mix is the effect of an aging population, which not only creates varying generational demands within an organization but also puts added pressure on drug costs as a result of the increase in multiple medications taken at once. In 2011, 50% of Canadians were taking three or more medications at once, and 7% were taking seven or more, according to IMS Brogan.

Even more alarming is the cost of absenteeism, which costs $572 per employee per year, according to the Conference Board of Canada. Statistics Canada adds that 73% of the reasons for absenteeism are due to employee illness or disability. It doesn’t stop there. StatsCan also states that lost productivity from presenteeism is found to be 7.5 times greater than lost productivity from absenteeism.

With 22% of Canadian workers experiencing depression, according to a recent Ipsos-Reid survey, it is no surprise that mental health is the fastest growing category of these high disability rates and represents more than 25% of open claims, contributing to a 6% increase in the disability leave rate in 2011, according to Manulife Financial.

As you can see, controlling costs is no easy task.

What we do know is that employees truly value their benefits programs to the extent that 37% of employees are willing to pay a higher premium in order to maintain their current levels of benefits, according to the 2012 Sanofi Health Survey.

So what can we do to ensure employees are able to continue to enjoy their current level of benefits?

It all starts with proper employee communication as educated employees make smart consumers and users of benefits programs. Employers, benefits consultants and insurance companies share a responsibility and must work together to establish both short- and long-term health and wellness initiatives.

Strategies include analyzing and implementing the proper funding arrangements, finding a proper balance between cost-saving tools and creating employee value, as well as considering proactive programs such as employee assistance plans, physician referral programs and wellness plans.

For more immediate results, consultants may look to advise clients on proper fraud detection and prevention techniques, oversights in fine-print contract wording and the elimination of potential waste for benefits paid unnecessarily.

Peter Demangos is managing director of PDF Financial Group Inc.