What is Drug Pooling?

In 2013, the Canadian Life and Health Insurance Association (CLHIA) – the not-for-profit organization that represents the insurance industry – worked with its member insurers to establish a framework to pool recurring high-cost drug claims. For plan sponsors with insured drug benefits, this provided more protection from a one-off large claim and also allowed for them to move their business to another insurer as required. To administer the program, CLHIA established the Canadian Drug Insurance Pooling Corporation (CDIPC) to oversee the participation of the 24 Canadian group benefit insurers.

For the plan sponsor, it’s important to note there are two levels where high cost drug claims are pooled together. The first is within the insurance company’s clients who have fully insured drug benefits and those high cost claims are placed in an extended policy protection plan (Referred to as EP3). The level at which these claims are pooled is negotiated between each plan sponsor and their insurer. The second level of pooling is when the costs of a recurring high-cost drug claim exceeds the thresholds specified by CDIPC for two consecutive calendar years when this pool supports the EP3 by removing much of the impact of high-cost recurring drugs.

The best way to view this is that the 24 participating insurers have agreed to spread the cost and the risk of these high-cost claims. For the plan sponsor, it’s important to ensure the proper pooling level is in place for your plan and also to ensure your administrator is part of the CDIPC.

Drug Plan Trends Report

Data provided by Telus Health, which manages the drug card administration for two of Canada’s largest group benefit insurers, indicates that in 2015, 47% of all clients were in drug plans that mandated generic substitution compared to 33% in 2013. One of those insurers, Sun Life, indicates by the end of 2016, 90% of their drug plans included mandatory substitution and 88% required prior authorization for any brand name or high cost drugs.

The trends in costs varies by location where those province’s with universal drug programs automatically kick in when plan members reach an annual deductible based on their income. This applies to British Columbia, Saskatchewan and Manitoba where the cost for specialty drugs accounted for less than 20% of spending for private plans compared to 30% in the Atlantic provinces. In Ontario, the government’s plan to automate its paper-based Trillium program by the Fall of this year will significantly improve insurer’s ability to co-ordinate with the public plan once plan member’s drug costs exceed a certain percentage of their income.

There is some noise in the system about product listing agreements providing negotiated discounts from list prices for, most often, high-cost specialty medications. These are between pharmaceutical manufacturers and insurers and pharmacy benefit managers (your drug card administrator) but it’s difficult to get details due to requests for confidentiality from the manufacturers.

One of the largest cost drivers for drug continues to be adherence and chronic disease management. The solution includes targeted communications and programs that deliver health-related messages and reminders directly to plan members.

Public Sponsored Drug Programs

All Ontarians under the age of 65 are eligible for the Trillium drug program. To use the program, the person must pay a deductible of approximately 4% of their household income however this threshold can vary depending on the number of people in the household and combined net incomes. Premiums paid by an individual for private insurance, whether through an employer-sponsored plan or not, can count towards the deductible. The benefit year for the program begins August 1 and patients who register partly through the benefit year will have their deductible prorated.

Currently, members of a private plan that are also members of the Trillium program and who have not met their quarterly deductible, must pay out of pocket for any drug costs not covered by the employer-sponsored plan. They then submit the paper receipts to determine if the costs exceed the deductible and this process can take six weeks or longer. The technology changes expected this Fall that are outlined in the article above will allow pharmacies to submit prescription claims online. This will track when a privately insured patient reaches their quarterly deductible, after which the Trillium plan will pay the pharmacist directly.

In British Columbia, the program works differently where a resident can register for the Fair Pharmacare Plan, which offers income-based help for expensive medications. Depending on household income, the deductibles and reimbursement levels for eligible medications varies.

In Nova Scotia, residents can register for the Family Pharmacare Program which is designed to assist those who do not have drug coverage or are experiencing high cost drugs not fully covered by their employer-sponsored plan. The Program is always the payor of last resort and the deductibles and reimbursement levels are calculated based on family size and income.

Claim Trends in Benefit Plans

A report from the Fraser Institute states 79% of adult Canadians tried at least one form of complementary or alternative medicine. Nearly half (44%) of the respondents had tried massage while chiropractic care was a close second at 42%. Yoga, acupuncture, osteopathy and naturopathy are also growing in popularity while use of high dose vitamins and herbal therapies are both in decline.

These treatments are most popular among respondents aged 35 to 44 and use rises with income and education level.

Health insurance covered a significant portion of the costs for massage therapy (69%) and Chiropractic (76%).

Saskatchewan Implements Tax Change

Effective July 1, 2017, the provincial sales tax (PST) of 6% will apply to all insurance premiums. There will be exceptions for reinsurance, self-insurance, and annuity contracts.

Plan sponsors are advised to monitor this development with their advisor and/or insurance carrier to determine its impact on your benefit plan.