Benefit Cost Trends

Not a surprise that benefit costs are going up but what is an acceptable level for any increase is always good to know. Based on an Aon Hewitt study completed in December 2016, the projected cost increases for benefit plans in Canada is 8%.

Two areas that bear watching and should promote possible plan design changes are Drugs, due to the increase in new brand name and biologic drugs coming to market but also the cost of pooling charges that insurance companies incur for high cost claims incurred by any individual and these latter costs are also passed on to the plan sponsor.

Other studies suggest the following ranges for cost drivers under Medical:

• Dental will increase between 5 to 8% including Fee Guide adjustments
• Paramedical services are expected to increase by 10 to 15% primarily due to an increase in the number of people using the services, and
• Long Term Disability is expected to increase between 10 and 20% due to the higher incidence of mental health issues and the insurance companies inability to offset costs due to low returns on reserves due to the low interest rates

Taxability of Employee Benefit

There are a number of factors impacting plan design of benefits that are driven by the changing demographic within most organizations. This can result in confusion regarding what is a taxable benefit and what benefits are tax-free.

Here are some guidelines:

• Automobile allowances are non-taxable to the employee provided the amount is reasonable and, for 2016, it was $0.54 for the first 5,000 kms and $0.48 thereafter
• Employer contributions to a medical or dental plan are not taxable to the employee however the employer paid premiums for Life insurance, AD&D and Critical Illness are all taxable
• Benefits received by the employee from a Health Care Spending Account that are listed under the Income Tax as eligible are not taxable while benefits from a Lifestyle Account such as nutrition counselling, club memberships, yoga, et al are taxable

It’s important to review Canada Revenue Guidelines as even major social events for employees are taxable if the price per employee exceeds $100.00

Dental Fee Guide Changes

Following are the provincial dental guide fee changes that will be factored into pricing for the Dental benefit under an employer sponsored benefit plan.

* The Alberta Dental Association has not published a Fee Guide since 1997 so you will find some variance between how each insurance carrier sets their own benchmarks

It’s important to note the Fee Guide is an average as each classification has its own adjustment. For example, in Ontario, Basic Diagnostic will increase 1.95% and periodontal 2.07% - both of which are covered under a Basic Dental benefit and highly utilized so the actual impact on benefit costs will change based on actual claims.

Pharmacogenomic Testing Available

Now available at most pharmacies, the process for pharmacogenomic testing is pretty straightforward. After a person’s DNA is swabbed in the pharmacy, the results are sent to both the pharmacist and the attending physician with recommendations based on current medications they’re taking as well as future medications that could be considered. The patient receives a personal myDNA card and, in a recent trial, 46% of patients tested had a major genetic finding directly relevant to at least one of their current medications, while 36% of patients were referred back to their attending physician and had a medication change.To date, there has not been any payers use this testing to manage costs, whether it is a public or private payer plan.

B.C Expands Drug Coverage

Starting in March, British Columbia’s Pharmacare plan is expanding its drug coverage for hepatitis C treatments. The province negotiated through the Canadian Pharmaceutical Alliance to procur four new treatment options through three hepatitis C drug manufacturers.Also effective March 1, the maximum markup for certain hepatitis C drugs covered by Pharmacare will decrease including Harvoni, Sovaldi, Holkira Pak and Galexos.