Extended health and dental benefit plan experience in the face of COVID-19

What has recent extended health and dental plan experience looked like – and what’s coming next?

Highlights

• Insurance industry: the industry generally responded quickly to the crisis, implementing supporting measures for, among others: travel insurance, short-term disability eligibility rules, coverage for insureds on temporary layoffs and, in some cases, reduced insurance premiums;
• Recent claiming experience: An experience study we conducted among our large self-insured clients showed a significant decrease in health and dental claims in the past month, as follows:

Context

It has now been close to two months since provinces across Canada implemented varying levels of restrictions on a wide variety of businesses and activities to help “flatten the curve” of COVID-19 infections. Governments are now beginning to ease restrictions in certain regions and allow for certain businesses to restart their operations and for individuals to have increased levels of contact.

The insurance industry has also been impacted by the restrictions and it has generally responded quickly and effectively to the challenges faced by group benefit plan sponsors. Actions have included:

• Extending out-of-country travel limitations for members unable to get back to Canada;
• Adjusting waiting periods and adjudication processes for short-term disability claims arising from COVID-19;
• Extending provisions that apply to continuation of coverage for plan members on temporary layoffs;
• Providing greater flexibility for the acceptance of virtual appointments with certain providers, such as physiotherapists; and
• Providing premium reductions for fully insured medical and dental policies to reflect expected lower claiming levels due to limited access to many services.

Recent experience

Eckler is closely tracking the claims experience of many of our large clients across the country who self-insure their extended health and dental benefits. We recently reviewed the claiming patterns up to the end of April 2020 and have noted several consistencies across this segment of clients:

March:

The total value of claims paid under extended health plans was up to 5% higher when compared to February as a result of:

• Increased prescription drug claims as some plan members stocked up on required maintenance medications
• Partially offset by decreases in non-drug claims beginning in the latter half of the month

Paid claims for dental plans generally showed a 25% to 30% reduction between February and March

April:

Aggregate extended health claims were down by up to 40% from March as a result of:

• A decrease in prescription drug claims of 20% to 30%, and
• A decrease in non-drug benefits of 50% to 70%

Dental paid claims experienced a reduction of 80% to 90% compared to March given dental treatments were limited to emergencies only.

What’s next:

As provinces move to implement the initial phases of their reopening plans, paramedical practitioners and dentists are likely working hard to establish safe and appropriate ways to start treating patients. Given the challenges involved in sourcing personal protective equipment – especially important for dentists – and the “new norm” on physical-distancing protocols, we should expect to see a gradual resumption of services with initial claiming activity below pre-COVID-19 levels. As a result, we expect the potential “catch-up” spike in paramedical and dental claims will likely be spread over a period of time. We will closely monitor claiming patterns and will provide an update on our observations when the May and June experience is available. We also expect there to be a clearer indication of the pandemic’s impact on disability plans at that stage.

We will also provide updates on whether the Canada Revenue Agency is expected to provide any flexibility on the carry-over rules applicable to healthcare spending accounts.