Thank you.
Madame Chair, members of the committee, I'm very pleased to have the opportunity to be here today on behalf of the Canadian Life and Health Insurance Association. We welcome the opportunity to share our views with the Standing Committee on Health.
Today, I will provide you with an overview of the types of services and support that our industry provides to Canadians in terms of chronic diseases and aging. I will also provide some general thoughts on potential policy changes we feel should be considered to help Canadians adequately provide for their needs and health care as they age.
It is particularly appropriate to engage in this discussion in 2011, as baby boomers are beginning to retire this year. The aging demographic is critical to understanding the future pressures on long-term care in Canada. Although we are living better and longer, the older we get, the more likely we are to be managing a chronic disease and the more frequent our contact with the health system becomes.
As of today, roughly 7% of Canadians over the age of 65 reside in health care institutions. Also, consider that one in eleven Canadians over the age of 65 is affected by Alzheimer's disease or a related dementia, and about 50,000 strokes occur in Canada each year, with stroke being the leading cause of transfer from hospital to long-term care. As the relative age of Canadians rises in the coming decades, it's quite reasonable to expect that these numbers will rise dramatically. It's important to ask whether Canadians are ready for the financial and other implications of this.
It's critical to acknowledge up front when discussing this issue that Canadians are by and large responsible for funding their own care in old age. Within this context, the private insurance market currently plays an important role in helping Canadians plan and save for their long-term care needs, although, as I'll discuss shortly, more needs to be done.
Long-term care and critical illness insurance products are types of supplementary coverage that may become payable when an individual is struck with a debilitating, severe, or chronic illness. These types of plans provide benefits that are over and above the typical income replacement coverage. While these solutions have been available to Canadians for some time now, it is fair to characterize both markets as being underdeveloped.
With respect to critical illness, a typical policy helps pay the costs associated with life-altering illnesses. If you become sick with an illness covered by your policy and survive the waiting period, you receive a lump sum cash payment and you are free to decide how to spend the money. Types of diseases vary by plan, as does the amount you will be paid, which ranges from $10,000 to several million. In 2010 there were 1.2 million Canadians with critical illness insurance. Cumulatively, the industry paid out roughly $200 million in benefits.
With respect to long-term care, there are generally two types. One reimburses the insured for eligible expenses received on a given day, up to a pre-set maximum. The other is the income-style plan, which offers a pre-set monthly payment amount. Typically these benefits are payable when an individual can no longer perform at least two essential activities of daily living, so bathing and dressing or bathing and feeding themselves, for example. As of 2010 there were only about 385,000 Canadians with long-term care coverage, and the industry paid out $12 million in benefits.
It's clear to us, in particular, that the long-term care market is very underdeveloped in Canada. Most Canadians simply do not know that the government will not cover their long-term care needs. In addition, Canadians are very sheltered from the costs of health care, and as a result they are often surprised at the price of long-term care solutions. This lack of knowledge prevents individuals from purchasing such coverage. Together these factors make long-term care solutions a challenging product for insurers to sell in the Canadian context. It should be noted that this situation differs materially from that in the U.S., where the long-term care market is much more developed and consumers are more proactive in seeking coverage.
Accordingly, we believe the government has an important role to play, both in educating Canadians about the need to save for their long-term care and in providing support for such activity by providing tax and financial incentives to assist them in taking more responsibility for their long-term care needs through the purchase of long-term care insurance. In terms of the insurance industry, I can say that we are actively exploring options to offer this product at as low a cost and as effectively as possible.
The life and health industry also offers important income replacement supports to employers and workers that help them deal with their illness and return to work as quickly as possible. In 2010 the life and health industry provided 4.6 million Canadians with short-term disability coverage and more than 10 million Canadians with long-term disability protection.
Typically a group plan provides three different levels of coverage for an employee. The first to kick in would be your sick leave, which is typically at a full rate of pay for a short period of time, typically a few days to a couple of weeks, and that depends on the employer. Short-term disability kicks in when your sick leave runs out. Most STD plans pay a portion of normal earnings, say up to about 70%, for a period of time. Fifteen to 26 weeks is fairly common, although that can differ by employer. Finally, long-term disability starts when short-term disability runs out. Typically these plans will cover 60% to 70% of normal earnings. These benefits are payable for up to two years if you remain disabled from your own occupation. Beyond that, benefits continue for those who remain disabled from any occupation.
As an industry, however, we strongly embrace the concept that work is healthy and that preventing disability in the workplace is possible. That is clearly in the individual's best interest as well as the employer's. As a result, many plans include rehabilitation provisions designed to help individuals return to work. For example, benefits may be continued while a person participates in return-to-work programs or undergoes vocational training. These types of programs support individuals who may not be able to return to their usual jobs after a period of disability, but can return to the workforce in a different capacity.
Employers rely on our industry's return-to-work support and rehabilitation expertise to assist their employees. Our member companies work closely with employers who may need assistance understanding and implementing accommodation requirements.
In addition, our industry provides employers with stay-at-work programs, where supports are provided on the job to prevent deterioration of a condition. We also provide dedicated workplace wellness initiatives to promote both physical and mental health in the workplace.
On this latter point, it's important to recognize that one of the leading causes of disability today is related to mental health conditions, and they can also be chronic in nature. The CLHIA is proud to support initiatives that promote mentally healthy workplaces. In the fall of 2009, the CLHIA released guiding principles to support good mental health in the workplace. These principles are best practice benchmarks for our member companies on mental health in their own workplaces.
In summary, the life and health insurance industry in Canada plays an important role in helping Canadians who've had the misfortune of contracting illnesses, both acute and chronic in nature, and need ongoing long-term care. We work very closely with employers to help employees return to work, and to avoid illness and disability altogether where possible. That being said, more can be done to educate Canadians on the reality of who is responsible for their care as they age, as well as to help them save adequately for this eventuality.
It will be my pleasure to answer any questions you have.
