GroupNews – March 2019

Eckler’s GroupNews monthly newsletter provides commentary on the issues affecting Canadian group benefit plans.

In this edition:

• OHIP+ changes to take effect April 1, 2019
• Quebec reduces Health Services Fund contributions
• Manitoba decreases Retail Sales Tax
• Saskatchewan expands dental services coverage
• Advisory Council on the Implementation of National Pharmacare provides preliminary recommendations
• Ontario introduces significant healthcare reform
• PMPRB report: High-cost drugs continue to dominate the new drug landscape
• Report on 2019 health and dental trend factors

Benefit plan management

OHIP+ changes to take effect April 1, 2019

The Ontario government has issued the final regulation and a notice on the upcoming changes to OHIP+. Since January 1, 2018, OHIP+ has been providing prescription drug coverage for eligible Ontario residents under age 25. As reported in the July 2018 edition of GroupNews, the new Ontario government announced changes that make the program second payor for those with private plan coverage.

An announcement in the 2018 Economic Outlook and Fiscal Review indicated that this change would take effect in March 2019. The notice confirms the effective date of the changes will be April 1,  2019.

The changes affect OHIP-insured children and youth age 24 and under, as  follows:

• Eligible residents who do not have coverage under a private plan will remain eligible for the Ontario Drug Benefit program through OHIP+, and will continue to receive benefits from the program without co-payments or deductibles.
• Ontario residents who have a private plan will be required to access prescriptions through that plan. Residents and families who have significant out-of-pocket costs despite having private coverage can apply for additional financial support through the Trillium Drug Program, which remains available to all OHIP-insured Ontarians with high prescription drug costs compared with their household income.
• Residents with or without a private plan who are eligible for the Ontario Drug Benefit program through social assistance, home care services or residence in a long-term care home will not pay co-payments or deductibles.

For the purposes of OHIP+, private plan means an employer, group or individual plan that provides coverage for drug products, or funding that can be used to pay for drug products, regardless of whether:

• It covers the particular drug for which coverage is sought;
• The child, youth or other individual in the private plan is required to pay a co-payment, deductible or premium; or
• The child or youth has reached the annual maximum under the private plan, and no further coverage is available.

Impact: The change to OHIP+ will likely affect both private plan sponsors and their participating members. Plan sponsors have enjoyed a temporary reduction in drug costs (from January 2018 to March 2019) that will no longer be available, and they will need to adjust their benefit plan budgets accordingly. Members could see an increase in out-of-pocket drug costs, since private plans may not cover the entire cost of some prescriptions. Additionally, OHIP+ applicants should be aware of the process for applying to the Trillium Drug Program to avoid delays in claims payment.

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Benefit plan management

Quebec reduces Health Services Fund contributions

Under the Act respecting the Régie de l’assurance maladie du Québec, employers are required to make contributions to the Health Services Fund (HSF) in respect of wages paid to employees. Prior to
March 28, 2018, the rates were determined based on payroll and activity sectors, as follows:

On February 26, 2019, the Quebec government introduced legislative measures announced in Quebec’s 2018-2019 Budget that will reduce the employer’s contribution rate to the HSF for small and medium-size businesses.

Bill 13: An Act to amend the Taxation Act, the Act respecting the Québec sales tax and other legislative provisions includes amendments on how employer contribution rates are calculated, as follows:

• The payroll threshold for the 4.26% rate will increase from $5M to $5.5M in 2018, to $6M in 2019 and 2020, to $6.5M in 2021 and to $7M in 2022. As of 2023, this threshold will be automatically indexed, per the yearly increase in average weekly earnings of the industrial composite in Quebec, as established by Statistics Canada.
• The rate for employers with payroll of less than $1 million will gradually decrease from 1.5% to 1.25% as of August 16, 2018 in the Primary and Manufacturing sectors, and from 2.30% to 1.65% as of January 1, 2020 in the Service and Construction sectors.

Impact: Small and medium-size businesses with total payroll below the threshold for the 4.26% HSF contribution rate will benefit from these reductions. Employers should ensure their 2018 contributions were properly calculated since, as part of the transition, HSF contribution levels were modified on March 28, 2018 and then again on August 16, 2018, leading to three different rates being applied in 2018.

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Benefit plan management

Manitoba decreases Retail Sales Tax

With an expected implementation date of July 1, 2019, the Manitoba government is decreasing the Retail Sales Tax (RST) paid on premiums for group insurance contacts from 8% to 7%. The announcement made by Finance Minister Scott Fielding in Manitoba’s 2019 Provincial Budget applies to premiums for group life insurance, disability, critical illness, and accidental death and dismemberment policies. (RST does not apply to premiums paid on group health and dental insurance.)

Keeping its commitment to reduce ambulance fees, the Manitoba government also announced that ambulance fees will be lowered to a maximum of $250 by the end of the government’s first term.

Impact: Plan sponsors with members in Manitoba will enjoy a corresponding reduction in their total benefit plan expenditure, and should ensure this change is reflected in their premium remittances to insurers.

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Benefit plan management

Saskatchewan expands dental services coverage

On March 5, 2019, the Saskatchewan government announced expanded coverage of insured dental services in the province. As part of a new agreement between the Ministry of Health and the College of Dental Surgeons of Saskatchewan, coverage for cleft palate and palate treatment for infants, children and adolescents will be provided as an insured service. Dental coverage for cancer patients will also be expanded to include dental extractions.

Impact: While many of these costs may have previously been paid out of pocket, employers in Saskatchewan may experience reduced benefit costs if coverage of these services is included in their dental plan. According to the announcement, approximately 1,300 individuals will benefit from the expanded services; therefore, the impact to any individual employer is not expected to be significant.

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Benefit plan management

Advisory Council on the Implementation of National Pharmacare provides preliminary recommendations

On March 6, 2019, the Advisory Council on the Implementation of National Pharmacare (the Council) issued an interim report to the Canadian government, with recommendations on the possible implementation of a national pharmacare strategy. The Council was formed in 2018 with a mandate to provide independent advice to the Minister of Health and the Minister of Finance on how to best implement national pharmacare in a manner that is affordable for Canadians and their families, employers and governments.

The report provides an update on the Council’s work so far, an assessment of the challenges and opportunities in the national pharmacare sphere, and recommendations on core principles and foundational elements that the Council feels are necessary to successfully implement a national pharmacare strategy.

Core principles, as identified by the Council, include:

• Ensuring all Canadian residents have access to prescription drugs based on medical need, without financial or other barriers;
• Ensuring coverage is consistent and portable across all Canadian jurisdictions;
• Providing access to a comprehensive, evidence-based formulary, with special consideration for drugs for rare diseases;
• Designing and delivering a system in partnership with patients;
• Creating a partnership between federal, provincial and territorial governments, and Indigenous peoples; and
• Incorporating a robust pharmaceutical management system that promotes safety, innovation and sustainability of prescription drug costs.

The report also identifies three initial recommendations for implementing national pharmacare:

1. Create a national drug agency to oversee national pharmacare;
2. Develop a comprehensive, evidence-based list of prescribed drugs – a national formulary – to harmonize coverage across Canada; and
3. Invest in data on prescription drugs and information technology systems.

The final report is expected to be completed later this spring. In the meantime, the 2019 Federal Budget continues to move toward a national pharmacare strategy, as discussed in our March 20, 2019 Special Notice.

Impact: Moving toward a national pharmacare strategy will have a significant impact on the administration of drug plans across all jurisdictions, and the Council’s final report may provide insight into next steps toward that goal. However, until the federal, provincial and territorial governments have a clear mandate and plan in place, the impact on plan sponsors will be minimal.

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Legal & legislative news

Ontario introduces significant healthcare reform

On February 26, 2019, the government of Ontario introduced Bill 74, The People’s Health Care Act, 2019. If passed, Bill 74 would enact the Connecting Care Act, 2019, which would authorize the creation of Ontario Health – a corporation responsible for managing health services across the province.

Bill 74 would give Ontario Health, and the Minister of Health and Long-Term Care, the legislative authority to issue “integration decisions” to health service providers and integrated care delivery systems to create a new integrated care delivery system that the government feels is more cost-effective. Bill 74 also provides the Minister and Ontario Health with wide-ranging powers to order local health integration networks, Cancer Care Ontario, eHealth Ontario and the Ontario Health Quality Council to dissolve and transfer all or part of their assets, rights, obligations and employees to Ontario Health, if required.

Bill 74 provides Ontario Health and the Minister with broad powers to “integrate the health system” by:

• Coordinating services and interactions between different persons and entities;
• Partnering with another person or entity in providing services;
• Transferring, merging or amalgamating services, operations, persons or entities;
• Starting or ceasing to provide services; and
• Ceasing to operate, dissolving or winding up the operations of a person or entity.

Impact: If Bill 74 is passed as drafted, it will result in significant reform to the delivery of health care in Ontario. Changes to oversight of health service providers, funding, integration of services and the introduction of new health delivery organizations could have a major impact on wait times and treatment costs. It is not clear at this time if “downloading” of previously publicly paid services to private plans is intended or will occur.

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Research

PMPRB report: High-cost drugs continue to dominate the new drug landscape

The Patented Medicine Prices Review Board (PMPRB) has released a report with information on new drugs entering Canadian and international markets. It also provides information on trends in new drug launches from 2009 to 2016.

The report finds that new drugs launched from 2009 to 2016 account for almost one third of brand- name drug sales in Canada in 2017. High-cost orphan drugs to treat rare diseases or disorders account for 42% of new drugs launched in 2016, and 45% of those launched in 2017 – a notable increase from an average of 33% from 2009 to 2014.

In addition, more than one quarter of new drugs developed in 2016 and 2017 are for cancer treatment. Many of these are high-cost drugs, with four of the drugs costing more than $5,000 per 28-day treatment. The average cost for oncology drugs was $13,700 for a 28-day treatment. The cost of non-oncology drugs was also high, with 31 of the 37 non-oncology medicines introduced in 2016 and 2017 costing more than $10,000 per year, on average.

Impact: The PMPRB report indicates that high-cost drugs may be the norm for new drug launches. As a result, privately sponsored benefit plans will most likely continue to face substantial pressures from rising drug costs, particularly due to increased prevalence of high-cost drugs.

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Research

Report on 2019 health and dental trend factors

Every year, Eckler informally surveys several insurance carriers to assess the health and dental trend factors they expect to use in their 2019 group insurance renewal ratings.

Trend factors are the expected increases in claims costs due to: inflation in the costs of medical and dental goods and services; utilization; and the impact of newer, more expensive drugs and procedures. These “standard” trend factors would then be adjusted for each specific plan design. For example, a plan with 80% reimbursement would likely experience lower utilization increases than a plan with 100% reimbursement, because of the 20% co-pay.

Health care

The insurers surveyed generally provided trend factors ranging from 11.5% to 13%. It’s important to note that health care is made up of many elements, which trend differently. Here are some examples:

• Vision care usually has a maximum benefit, and claimants are expected to claim the This benefit is sometimes referred to as “inflation proof,” because the upper end of the cost only changes when the plan sponsor agrees to change it. That said, vision care can be subject to a utilization trend (i.e., more people claiming the benefit than before). Since most plans limit vision care claims to once every 2 years, it is important to consider the impact of changes in the insured population over the entire upcoming period. For example: Will there be hiring or layoffs? Is the group aging? Will more people need glasses?
• Drugs used to be one big category, but now, there are different trend patterns for “specialty” drugs versus “traditional” Specialty drug trend is increasing because of new treatment options and greater use of existing drugs. Traditional drug trend is not increasing at the same rate – but, as the Canadian population ages, there will likely be more utilization impact from drugs for high cholesterol, diabetes and high blood pressure.
• The paramedical benefits trend continues to increase as awareness and popularity of massage, chiropractor and physiotherapy services However, like vision care, these benefits usually have a maximum, either per practitioner or on a combined basis. Insurers also monitor reasonable and customary limits to make sure providers are charging similar amounts for similar services.
• The cost of high amount pooling protection – sometimes called “stop loss pooling” – has increased significantly in the past few years and will likely increase over the next year as This protection used to be for one-off catastrophic claims, like someone getting into a serious accident while travelling, or someone needing private nursing care and ancillary health items (e.g., drugs, equipment or hospital charges). Now, many pooled claims are for recurring high-cost drugs, and the number and cost of claims will likely continue to increase.

Dental

Insurers expect a 5.5% to 7% utilization trend PLUS a fee guide trend of 2% to 4.2% outside of Alberta. This is a significant trend, and plan sponsors should keep it in mind when preparing for their next renewal.

Dental costs are regulated by provincial fee guides set by the dental associations. While fee guides determine the cost of each procedure, usage is increasing. Consumers are more aware of dental health now than in the past, and schools screen young children to catch problems early. There are also more cosmetic procedures available, which are generally not covered by private plans. Finally, dentists are promoting their services more, and most know what is and isn’t covered under private plans.

Impact: While plan sponsors can make the case for a lower trend factor if their claims base supports it, these trend factors continue to be higher than general inflation and will have an impact on 2019 renewal rating proposals.

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