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Canadians spend more than they receive in private insurance: study

The study, by University of British Columbia and University of Toronto
researchers, shows overall Canadians paid $6.8 billion more in premiums
than they received in benefits in 2011.

Approximately 60 per cent
of Canadians have private health insurance. Typically obtained as a
benefit of employment or purchased by individuals, private health
insurance usually covers prescription drugs, dental services, eye care
costs and other health-care services not paid by public health care.

Over
the past two decades, the gap between what insurers take in and what
they pay out has increased threefold. While private insurers paid out 92
per cent of group plan insurance premiums as benefits in 1991, they
paid only 74 per cent in 2011. Canadians who purchased individual plans
fared even worse, with just 38 per cent of their premiums returned as
benefits in 2011.

“Small businesses and individual entrepreneurs
are the hardest hit – they end up paying far more for private health
coverage,” said study lead author Michael Law, an assistant professor in
UBC’s Centre for Health Services and Policy Research. “It’s essentially
an extra health tax on one of our main economic drivers.

“Our
findings suggest that private insurers are likely making greater
profits, paying higher wages to their executives and employees, or
spending more on marketing,” Law added.

The authors call for greater transparency from private insurers and for the federal government to introduce new regulations.

“(In
the U.S.) Obamacare requires insurers to pay out 80 to 85 per cent of
their premium income as benefits, which resulted in $1.1 billion being
returned to policyholders in 2012,” said Law. “Our numbers suggest that
Canadians are getting a worse deal than Americans.”