Jackson And Associates
Current Trends

Provincial Changes Impact Benefit Costs in Manitoba and Quebec

Effective July 15, the Manitoba government introduced Bill 39 and, more specifically in Information Bulletin 061, outlined how a new Retail Sales Tax (RST) of 7% would apply to group benefit plans.

Initially, the government had applied a new RST to “certain prescribed insurance products” which, under a group benefit plan, was limited to Basic Life. When the tax was finally rolled out however it was applied to Life, Disability (both short term and long term), Critical Illness and Accidental Death & Dismemberment. The tax does not apply to Health, Dental, or Long Term Care benefits.

In Quebec, the government made amendments to the Drug Plan under the Regie de L’assurance Maladie (RAMQ). There is an amendment effective July 1 that increases the maximum out of pocket from $963 to $992 per insured. The amount that RAMQ reimburses, i.e. 68%, did not change.

Both of these changes will impact employers who have employees in Manitoba and/or Quebec.

Responsibility for Accomodation Rests with both the Employer and the Employee

In a recent Ontario arbitral award (Complex Services Inc v Ontario Public Service Employees Union) the employer’s duty to accommodate employees with disabilities was outlined as compulsory unless such accommodation would cause undue hardship on the part of the employer. It further stated that the duty to accommodate also requires employees to disclose confidential medical information regarding their disability to employers in order to help facilitate the accommodation process.

Based on past case law, the following information will generally be required:

  • The nature of the illness, how it manifests as a disability and any work-related restrictions,
  • Whether the disability is permanent or temporary in addition to the anticipated time frame for improvement
  • The restrictions or limitations that flow from the disability, particularly as they relate to the employee’s duties and responsibilitites,
  • The basis for the medical conclusions, including the tests or examinations performed (but not necessarily the test results or clinical notes)
  • The treatment, including medication (and possible side effects), which may impact the employee’s ability to perform their job, or interact with management, other employees and customers

The decision also held that employees have an obligation to permit an independent medical review of their confidential medical information for the specific purpose of accommodating disabilities in the workplace. This includes the employer reviewing the employee’s medical information with a medical specialist in order to ensure that the disability is properly accommodated.

Although medical information is generally considered private and confidential, the employee’s right to privacy is not absolute and it was determined that an employee seeking accommodation cannot thwart the employer’s attempts to accommodate by keeping their medical information entirely private.

Balancing Benefit Costs

The costs of providing group benefits continues to increase each year however it is important to review the link between the costs of each benefit. In the Towers Watson study, Pathway to Health and Productivity, they noted the following trend in costs as a percentage of payroll:

Casual Absence
Workers' Compensation
Short Term Disability
Long Term Disability

Furthermore this results in a total cost of 7.7% of payroll in 2009 to provide these benefits increasing to 10.4% of payroll in 2011. The costs of the Medical coverage could be significantly impacted with the emergence of a number of new biologic drugs in 2014.

According to the Green Shield Canada 2011 Drug Study, biologics are resulting in the high costs of treatments for a few plan members driving up the the overall drug spend, e.g. 5% of all claimants accounting for 43% of total drug costs. While the impact of Lipitor getting a generic equivalent is having a very positive impact on drug plan costs this year, the introduction of new biologics for the treatment of other disease states does pose a threat if an appropriate strategy for managing this benefit is not in place. A number of insurance companies have developed solutions to ensure the right drug is prescribed at the right time to promote the best outcome for the insured while maintaining a focus on cost. All of these solutions make use of a pre-authorization questionnaire that the employee is required to have the attending physician complete. This form will identify the nature of the ailment as well as what treatment has already been provided and the results/outcomes of that treatment. This information is then reviewed by the drug plan administrator and a decision made on whether the brand name or biologic drug will be provided. The employer may want a limited supply of the drug to be supplied while this decision is being made and most of the drug plan administrators can accommodate this.

While reducing the size of the drug formulary may seem like a good strategy for managing costs, scaling back on a drug benefit is not always beneficial to an employer. For example, an increase in drug costs is an indication that employees are accountable for their health and seeking treatment for health conditions. In a case study profile in Chenier, Wellness Metrics in Action, it was determined that drug costs continue to increase annually yet the company’s group insurance premiums have reduced each year since 2007, in part due to reductions in absence and disability costs.

Prior to affecting a change in any one benefit, it is important to understand how it will impact the plan member's health and productivity which, if not properly managed, can increase other benefit costs.