Although employer medical costs in the United States have risen steadily for decades, the rate of growth has been slowing in each of the past five years until now, according to a PricewaterhouseCoopers Health Research Institute report.
The report—Behind the Numbers: Medical Cost Trends for 2009—finds that actual medical costs are expected to grow 9.6% in 2009, compared with a rise of 9.9% in 2008 and double-digit increases in prior years.
“While the continued slowing of medical cost growth is welcome, the fact that the rate of growth may no longer be declining as sharply is worrisome and could have implications for employers and workers,” says David Chin, M.D., leader of the Health Research Institute.
In the past, employers have tried to restrain increases in the insurance premiums their workers pay by changing their health plans or by increasing co-payments or deductibles. However, employers’ use of this strategy may be declining. Increasingly, employers are adopting plan designs that help workers “earn” discounts or bonuses for behaviour that keeps them healthy.
According to the report, employers are responding in a variety of ways:
• Wellness programs and initiatives to personalize the experiences of health plan members are on the rise. Health plans, which are competing for a slowly eroding number of employer-based members, are increasingly focused on personalizing member experiences to attract and retain large corporate accounts.
• Employers will rely on prevention and disease management programs to temper costs in 2009 rather shifting higher levels of cost-sharing onto workers.
• The number of privately insured continues to slowly decrease, which increases cost shifting, makes it more difficult to control costs and increases competition among health plans as they try to keep cost growth in check without sacrificing member satisfaction.
To read the report on the PricewaterhouseCoopers website, click here.
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Teachers’ Makes Another Investment in Chile
The Ontario Teachers’ Pension Plan and Morgan Stanley Infrastructure have signed an agreement to buy SAESA, a Chilean electric distribution, transmission and generation company.
They are buying the firm from Public Service Enterprise Group, a power company based in New Jersey, for US$870 million plus more than $400 million in debt.
Ownership of SAESA will be shared equally by Teachers’ and Morgan Stanley Infrastructure.
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“SAESA Group is a well-run company with diversified electricity assets and a strong market position in Chile’s regulated energy sector, making this an excellent investment for our portfolio,” says Stephen Dowd, Teachers’ vice-president, infrastructure.
SAESA is the second-largest electricity distributor in Chile in terms of geographical coverage, serving 16% of the population and providing electric service to about 2.6 million people.
Last August, Teachers’ announced plans to buy up to 100% of Esval, a public water and wastewater company in central Chile. And in May 2007, Teachers’ agreed to buy two private water and wastewater companies: 100% of Aguas Nuevo Sur Maule and a controlling interest in Empresa de Servicios Sanitarios del Bio-Bio.
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Transitioning into Retirement Harder: Survey
Fewer retirees say their transition into retirement was as easy as they thought it would be, according to a survey.
The 2007/2008 Fidelity Canadian Retirement Survey shows that only 39% of retirees reported that their transition into retirement was easier than they expected—a drop of nine percentage points over last year.
“Considering the volatility of the financial markets and other investment issues investors faced in late 2007 and early 2008, many recently retired Canadians might be feeling a little less than secure about their retirement,” says Peter Drake, vice-president, economic and retirement research, at Fidelity Investments Canada.
While many Canadians have a plan for how they are going to accumulate their retirement savings, very few have a plan for where their income will come from once they are no longer working.
Only 23%—the same as last year—report that they have a retirement income plan. However, most of those with a plan say their plans consider future healthcare expenses, inflation and the possibility they will live longer than the average life expectancy.
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Supreme Court Reserves Judgment in BCE Case
The Supreme Court of Canada has reserved judgment on whether to approve the privatization of BCE after hearing the company’s appeal Tuesday morning.
The telecom company wants a Quebec Court of Appeal ruling overturned, which ruled that the leveraged buyout deal is unfair to existing bondholders.
Last year, a consortium led by the Ontario Teachers’ Pension Plan offered to take BCE private. It hopes to close the deal by the end of this quarter.
The Supreme Court did not indicate when it would make a decision in the case.
Click here to visit our special section, The Rise of Private Equity for more information about the BCE deal.