Jackson And Associates
Current Trends

Quebec Premium Tax Decrease

Effective January 1, 2013, the Quebec government lowered its premium tax rate from 2.55% to 2.3%. The rate is expected to remain at this level until March 31, 2019 when it is scheduled to further reduce to 2%.

For most insurance companies, this will affect their rates for the following services:

  • Administration fees for Administrative Services Only (ASO) plans
  • Early Intervention absence management services
  • Health Care Spending Accounts
  • Cost plus arrangements

In most cases, these changes in rates/charges will appear in the insurance company’s February billing.

Industry Drug Pooling – Additional Information

Certain Canadian insurance companies have joined together to create an insured pool to share in the risk associated with high priced, recurring drug claims. This is called the Extended Drug Policy and Protection Plan (EP3) and additional information is now available, including:

  • Once a plan member and their dependents reach the initial threshold of $50,000 or more for two consecutive calendar years, any subsequent amounts in excess of $25,000 (the ongoing threshold) will be submitted into this new industry pool
  • Accumulation toward the initial threshold started on January 1, 2012 and continues for two consecutive years, to the end of 2013. Claims incurred in 2013 that are in excess of $25,000 will be the first claims eligible for submission to this new pool
  • All plans that are eligible for this pooling arrangement will receive an EP3 Statement in 2013 which will include information about stop loss thresholds, stop loss basis (e.g. per individual, per family) and confirmation if there are any people excluded under the plan.

All plans are automatically covered under EP3 with the exceptions:

  • Any drug plan with an annual maximum equal to or less than the ongoing threshold of $25,000 per individual or the initial threshold of $50,000 per family
  • Any plan with deductibles greater than or equal to $1,100/single and $2,200/family
  • Any Administrative Services Only (ASO) funding arrangements, and
  • Any refund-accounted (experience-rated) funding arrangement

If your benefit plan changed its funding arrangement to a prospectively-rated, non-refund arrangement on or after June 7, 2011 (the date the industry confirmed the EP3), some plan members could be excluded if the family’s total annual drug spend was in excess of $25,000. Any such exclusion should be contained in the EP3 statement.

Trends in Drug Benefit Management

There is agreement between plan sponsors, insurance companies, drug benefit administrators and plan members for the first time in recent years on one issue – the increase in drug costs year over year. The challenge is developing a strategy to manage these costs while ensuring the intent of the drug benefit is not compromised.

Part of the reason for these increases has been the growth in biologic medicines. The biologic drug differs from the brand name in that it is biologically produced while the brand name drug is synthetically produced. Biologics are large, complex therapies usually created through the modification of living cells and are sensitive to minor changes in the manufacturing process. In most cases, they are injected or taken intravenously. Synthetic drugs, normally referred to as brand name drugs, are produced by mixing ingredients together. Biologics have grown in productivity as they have provided more effective treatment for people suffering from some of the most serious medical conditions, including rheumatoid arthritis, cancer, rare blood disorders, multiple sclerosis and diabetes.

Once a brand name or biologic drug has ended its patent protected period, then a generic version of the brand name drug can be manufactured while, in the case of biologics, a biosimilar drug can be available. In both cases, the medicine is similar but not identical to the original medicine however will cost less (up to 80% for a generic equivalent of a brand name drug and up to 30% for a biosimilar(these biosimilars are commonly referred to as the term Health Canada coined – subsequent entry biologic (SEB))

One trend in cost containment strategies is to mandate that generics are used and that a brand name or biologic can only be used once assurances, usually a written confirmation from an attending physician, have been provided stating that the appropriate generic treatments have not met expectations for treatment of the disease.

Another trend is towards Tiered Formularies where a higher percentage of the cost for the generic drug is paid than for the brand name or biologic. There are a number of drug benefit administrators available that have the technology to adjudicate the claim in this manner while the plan member is actually at the pharmacy.

In the United States, there have been a number of options for an employer to consider for the management of their drug benefits, referred to as pharmacy benefit managers. This approach has been growing in Canada and now includes actual pharmacy chains, e.g. Costco Pharmacy and Managed Health Care Services Inc., who provide competitive pricing on drugs as well as on the dispensing fees charged.

There are now ample options available to the plan sponsor to meet the needs of their plan members while also ensuring the costs are managed effectively to ensure the integrity of the benefit’s coverage.