The PBO says health and dental costs per member drove most of the federal growth
Ottawa's employer bill for public service benefits grew at more than triple the rate of most Canadian provinces over the past four years, and the tab is still climbing.
The Parliamentary Budget Office (PBO) projects federal public service insurance plan costs will reach $4.4bn by 2030-31, up from $3.5bn in 2024-25, according to a June 2 report prepared in response to a motion from the Standing Senate Committee on National Finance (NFFN).
Those costs represented roughly 5 percent of the $71.4bn in total federal personnel expenditures in 2024-25.
The federal average annual growth rate of employer costs hit 11.3 percent from 2020-21 to 2024-25, according to the report, compared to a range of 3.0 to 7.7 percent across British Columbia, Saskatchewan, Manitoba, and Ontario over the same period.
Growth was strong across all jurisdictions in 2024-25, with rates exceeding 8.0 percent, the PBO noted, with Saskatchewan posting 16.7 percent and British Columbia recording 15.9 percent that year.
Health and dental costs per claimant were the primary drivers of federal growth.
The Public Service Health Care Plan's (PSHCP) average cost per member rose from $1,486 in 2020-21 to $2,284 in 2024-25, a compound annual growth rate of 11.3 percent.
The Public Service Dental Care Plan's (PSDCP) cost per member grew from $703 to $1,169, at 13.6 percent annually, while the Pensioners' Dental Services Plan (PDSP) recorded the steepest climb, from $251 to $785, at 33.0 percent average annual growth.
The Disability Insurance (DI) plan was the exception, with costs per member declining from $2,659 to $2,110 over the same period, the report noted.
Looking ahead, workforce reductions tied to the federal Comprehensive Expenditure Review (CER) are expected to reduce active employee membership in the PSHCP and PSDCP.
However, the office projects those declines will be partially offset as departing employees transition into retirement through the Early Retirement Incentive (ERI) and retain access to health and dental benefits.
The PBO assumed that 47 percent of full-time equivalent reductions represent retirements, allocating more than 6,000 reductions to the pensioner pool.
Despite moderating membership, price and utilization growth will outstrip the anticipated membership decline through 2029-30.
Membership growth is then projected to rebound in 2030-31, pushing overall plan costs higher toward the end of the projection horizon.
The PBO cautioned that cost comparisons across jurisdictions are not straightforward, as the scope of coverage, cost-sharing arrangements, employer premium rates, and administrative structures can differ substantially across plans.
