TELUS Health (formerly LifeWorks) accounting assumptions survey for Ontario hospital post-retirement benefits
TELUS Health (formally LifeWorks) recently conducted our 3rd annual survey of accounting assumptions for 60 Ontario Hospitals & Other Related Health Care Facilities with respect to their post-retirement medical and dental benefit provisions. The 2022 report is now available and presents the most commonly used assumptions, including:
- Retirement Age
- Benefit Take-up Rates
- Percentage electing Family Coverage
- Expected Future Retiree Claim Costs
These assumptions are set by hospital’s management based on a combination of recent experience and forward-looking expectations. Medical and dental coverage for retirees generally expire at age 65 for most hospital workers.
Some key findings of the survey are as follows:
- The most common retirement age assumption for hospital workers is age 60. This is likely heavily influenced by the employees’ pension plan early retirement incentives.
- Cost sharing arrangements of retiree medical plans have a high degree of influence on the voluntary take-up rates of coverage. Interestingly, when benefits are fully paid for by the retiree, it is expected that 55% of them will participate in the plan. When the cost sharing is set at 50%, it is expected that 75% of retirees will participate in the plan. This relatively high rate demonstrates the need for cost certainty amongst pre-age 65 retirees with respect to their medical and dental retiree coverage.
- Most retirees are expected to elect a covered spouse at retirement, with an average assumption of 64%. However, there is a wide range from hospital to hospital with this assumption, as it varies from 35% to 100% electing family coverage at retirement. This shows us that not every hospital has the same demographic profile and highlights the importance of our work in helping our hospital clients select customized best-estimate accounting assumptions.
- A new component of our survey was to look at the expected future retiree claim costs assumption used for each surveyed hospital. Health claims vary from $1,334 to $4,875 while dental claims vary from $363 to $1,303. These are extremely wide ranges demonstrating the differences by hospital in both the plan provisions and experience. The health claim range has become wider than in last year’s survey. This may be due to changes in claiming patterns and behaviours in the post-COVID period. For hospitals in the upper range, we would recommend a review of the plan ranging from the provisions to the administration of benefits.
This survey will allow hospitals in Ontario to benchmark their post-retirement benefit accounting assumptions in comparison to their industry. TELUS Health (formally LifeWorks) will continue to be performing this survey annually and over time we expect that the results will reveal more demographic trends.