Group Benefits

Medical Benefit Costs to Rise but Salaries Are Frozen

The costs of employer-sponsored medical benefits are expected to increase by 6.0% in Canada outpacing the general rate of inflation by 3.8% according to a medical trends report by Aon. The impact of COVID-19 combined with a focus on managing costs has more employers turning to Well-being programs including preventive strategies that include health screenings and promotional programs for healthy eating and physical activity.

More than a third (36%) of Canadian companies participating in Morneau Shepell’s annual salary projection survey froze salaries in 2020. Compared to the pre-pandemic forecast of 2%. Almost half (46%) indicate they are uncertain whether to continue to freeze salaries while 13% have already committed to doing so in 2021. The reason for this action can be traced to the fact the majority (76%) of respondents reported that the pandemic is having a negative impact on revenue.

New Online Mental Health resources

The federal government has introduced a number of initiatives to support the well-being of workers. They include the following:

• Free e-courses by the Canadian Centre for Occupational Health and Safety (CCOHS)
• Access to podcasts through the CCOHS portal on a range of mental health subjects
• Access to a resources hub through the Mental Health Commission of Canada website which has detailed and credible information on mental health and wellness

Using Analytics to Track Costs and Overall Employee Health

According to Telus Health, which is a Prescription Benefit Manager for several Canadian insurance carriers, analytics can provide insights into future costs as well as drive strategic decision making.

One key area for plan sponsors is drug adherence as their data indicates it accounts for the large percentage of overall eligible claim costs. Non-adherence is calculated using a medication possession ratio – the time between when a plan member refills their maintenance medication compared to the number of days’ worth they have.

In the Telus top 10 drug classes by eligible amount, four were found to have significant non-adherence rates, Depression, which accounts for 5.1% of the Telus total book of business, has a 23% non-adherence rate. Second was Diabetes, which represents 10.6% of the Telus book, which had a 24.8% non-adherence and 65.8% of asthma patients were non-adherent. There are reasons as people taking anti-depressants may start to feel better and then skip doses while asthma tends to have a seasonal component which can impact on refills.

Using analytics to take a deep dive into specific therapeutics classes can be an indicator of other issues. The Telus example was diabetes where the analysis found 13 other conditions associated with this ailment including cholesterol disorders and blood pressure issues. Both of the latter can be assisted with a well-designed Wellness strategy which will help those individuals and also reduce drug claim costs.

Insurers Introducing Block-level Contract Amendments

Some of the larger Canadian insurance companies that have large blocks of group benefit business are introducing changes to their entire block of business as amendments to a plan sponsor’s contract and they are often being done outside the standard renewal.

One example is with Sun Life who, effective October 1st, has implemented the first phase of its reference drug program. This program creates categories for drug therapies and identifies the most “cost-effective drug within a therapeutic class”. While plan members with Sun Life will still have access to all drugs within the class, they will only be reimbursed up to the eligible cost of the chosen “cost-effective” medication. The first phase will involve two drugs to treat neutropenia, a condition that involves an abnormally low number of neutrophils, a type of white blood cells. The program will eventually expand to include other therapeutic categories.

Another example of a block-level amendment is by Canada Life who are using their block of business as bulk-buying power and introduced virtual care as a standard feature for all clients with under 400 plan members. Unlike Sun Life, Canada Life is introducing the change at renewal time.

Plan sponsors are advised to review the nature of the block-level amendment to determine what impact it will have on their plan and to be cautious if benefits are being provided to a union group and changes to benefits are included in the collective bargaining agreement.

Group Savings

Regulator Allows DB Pension Contributions to be Deferred

The Financial Services Regulatory Authority of Ontario (FSRA) is providing employers with the option to defer contributions to certain Defined Benefit (DB) pension plans to help employers during the COVID-19 pandemic while providing safeguards for funding plan members benefits.

Eligible private sector employers will be able to defer up to six months of pension contributions from October 1, 2020 to March 31, 2021. However, all deferred contributions must be paid with interest and in accordance with a schedule by March 31, 2022. DB plan sponsors will also have 120 days, instead of 60 days, to make a catch-up contribution if a valuation report is filed before April 1, 2021.

For employers that choose to defer contributions, there will be restrictions to help ensure that the funds made available from the contribution deferral are used to maintain business operations based on guidelines from FSRA.

Legislative

Ontario Minimum Wage Increasing

Effective October 11th, the general minimum wage for employees in Ontario increased by 25 cents to $14.25 per hour.

Minimum wage in other jurisdictions are as follows:

Mandatory Compliance Dates for Ontario Employers

The Accessibility for Ontarians with Disabilities Act (AODA) governs the process for developing and enforcing standards across Ontario. All private-sector employers with 20 or more employees must file a 2020 Accessibility Compliance Report by December 31, 2020. This report is compulsory and confirms that the organization has met its current accessibility requirements under the AODA.

As more Ontarians will be working from home in 2021, the AODA requires organizations with 50+ employees make their websites and web content accessible by January 1, 2021.

For more information on AODA, please refer to https://www.ontario.ca/laws/statute/05a11

CPP Maximum Pensionable earnings to Rise

The maximum pensionable earnings under the Canada Pension Plan (CPP) for 2021 are increasing to $61,600 from the 2020 amount of $58,700.

The employee and employer contribution rates for 2021 will be 5.45%, up from 5.25% in 2020. The self-employed contribution rate will be 10.9% up from 10.5% in 2020.

The maximum employee and employer contribution to the plan for 2021 will be $3,166.45 each up from $2,898 in 2020 while the maximum self-employed contribution will be $6,332.90 up from $5,796 in 2020.