This year has seen a shift in how employers are looking at group benefits legislation and plan design.

When Bob Dylan wrote the classic folk tune, “The Times They Are A-Changin’,” he spoke of a period of rapid social and economic change. Forty years later, Atlantic Canada is undergoing big changes of its own.

Years of worker out-migration have led to a fundamental shift in the region’s demographics that will magnify the effects of the impending baby boomer retirements. And health-related studies continue to show that Atlantic Canadians are trailing the rest of Canada when it comes to overall health and wellness. Looking at Atlantic Canada’s demographics, coupled with its exposure to a potential global recession, it is not surprising that employers and employees alike are becoming increasingly concerned about the future of their benefits plans.

Private plans that remained viable during a time of relative prosperity now face key issues that have a direct impact on the continued affordability of these plans. While plan sponsors have some control over plan design, claims education and health and wellness initiatives, governments continue to implement legislation that affects privately sponsored benefits plans throughout the region. Actively managing these issues in the face of anticipated labour shortages is becoming increasingly complex.

Plan Design Options

Employers looking to make an impact on their benefits costs typically focus on plan design. This stems from the intrinsic desire to improve the return on investment by providing only the essential services required for optimal employee health, at the lowest possible cost. Some commonly used plan design elements include generic substitution and quantity limits imposed on different drugs. Since many plans already have these basic controls in place, the focus is shifting to more involved methods of controlling affordability.

One plan design that is currently less common in Atlantic Canada is the deferred-pay drug card arrangement. This allows for real-time adjudication at the pharmacy. Members are notified at point of sale regarding the available coverage and the amount eligible for reimbursement. With a deferred-pay drug card, plan members pay 100% of the cost to the pharmacy, and the insurer reimburses members by cheque or direct deposit.

This type of plan design can present a difficult communication challenge for employees who are accustomed to a direct-pay arrangement. However, it offers the same adjudication benefits associated with a direct-pay card and also helps employees to better understand the true cost and impact of their drug claims.

Although members are asked to pay the full cost of medications at the pharmacy, reimbursement processes are flexible and even allow for the coordination of drugs with other health benefits, such as an annual plan deductible. Within 24 to 48 hours, or once a minimum threshold has been reached (whether this is a dollar amount or a time period), the insurer reimburses the plan member.

With the use of real-time adjudication, members can re-evaluate their drug purchases at the pharmacy. “Based on my experience and statistical analysis, having to pay for a drug when a less expensive option may be available is partly responsible for the cost difference between deferredand direct-pay cards,” says Johanne Brosseau, a senior consultant with Aon Consulting, Inc. “Some will wait three days and buy the drug only if symptoms persist, as recommended by their doctor, or ask the pharmacist or the doctor for a less expensive alternative.”

The most significant benefits of a deferred-pay drug card include the following.
• Potential decrease in the number of members, as families that can choose between private plans may elect not to participate in a plan with this type of arrangement.
• Proper adjudication of employee eligibility (e.g., employees who are terminated or laid off will no longer have drug claims paid due to a delay in insurer notification).
• Increased capacity to communicate information to plan members (e.g., introducing new controls or plan parameters through messages printed on the cheque or direct deposit slip before and after implementation).
• Impact on doctors’ prescribing habits, since members may request the lowest-cost alternatives.

The most obvious drawback to this approach is resistance from plan members who already use a pay-direct drug card. This is especially true as out-of-pocket costs rise. There is also an increased reliance on effective communication from the pharmacist to the member regarding the results of the real-time adjudication. As members have to pay an increased cost upfront, it is very important that they leave the pharmacy with a clear understanding of what is covered and the amount they will be reimbursed.

For those reluctant to manage costs at the consumer end of the process, adopting a managed formulary approach is also an option. Under a managed formulary, plans can exclude new drugs that offer very little or no benefit over existing ones, or reimburse them only when specific conditions are satisfied. Plan sponsors interested in making changes should undergo a detailed review of the existing policy to get a better understanding of the mechanism through which new medications are added to the list of eligible drugs.

Government Initiatives

While plan sponsors are free to redesign their benefits plans, they have little control over the legislation that may affect them. For example, the government of New Brunswick has proposed legislation that would allow pharmacists and midwives to prescribe certain medications in the province. As plans typically allow only those drugs prescribed by a physician to be reimbursed, a decision will have to be made on whether to amend plans to allow drug claims from these new sources.

Should this trend continue, plan sponsors in Atlantic Canada will have to balance the benefits of greater access to health professionals against the potential for increased claims costs within certain classes of medications. The decision-making and amendment process can be simplified with the help of insurers and consultants that have been involved with plans in other jurisdictions.

For individuals who do not have access to private plans, Nova Scotia and Newfoundland & Labrador have made changes to public plans over the past several months to promote wider access to drug coverage. The Family Pharmacare Program in Nova Scotia assists those who do not have drug coverage or who require high-cost medications not covered by private plans. All residents are eligible to apply for the program, which has an annual deductible based on family income. Those with coverage under a private plan can coordinate their claims between the two plans.

In addition, Newfoundland & Labrador has added seven new drugs to its provincial drug formulary effective Aug. 1, 2008, including high-cost Remicade and Enbrel for treatment of moderate to severe forms of plaque psoriasis. Differences in legislation across the region make it more difficult for employers to ensure that the benefits plan provides equitable coverage across the board, highlighting the need to stay well informed of current legislation.

Wellness and Engagement

Tough economic times cause increased levels of stress, which compound the effects of illness and disease—many of which are more prevalent in Atlantic Canada. Given that employees are a company’s most valuable assets, current economic conditions reinforce the need for programs to promote employee engagement, wellness and chronic disease management.

The Public Health Agency of Canada and the Laval University Chair on Obesity study indicate that, in Canada, the number of obese adults has increased from 5.6% in 1985 to 14.9% in 2003. According to the World Health Organization, the number of people with diabetes is expected to double by 2025, with obesity as one of its principal causes. Based on Public Health Agency statistics, 13% of Canadians suffer from musculoskeletal problems, representing $4.4 billion in direct and indirect costs. In recent years, the news has become dominated by statistics like these, linking lifestyle choices to a multitude of serious health conditions.

One could also argue that the outmigration of young talent and retirement of a large baby boomer cohort are leading to a culture of disengagement in Atlantic Canada. Engagement is not just a connection but also a commitment that is reflected by productivity, pride, intention to stay, responsibility and trust. “Given the shortages and mobility of talent today, employers must behave like sellers of employment opportunities. This means, the fundamentals of sales and marketing now apply to the traditional HR function,” says Scott Bunker, senior vice-president, human capital practice, with Aon Consulting. “A particular focus must be placed on clearly communicating why employees should join or remain at your organization.”

Strong employee engagement starts with commitment. When aligned with the right employee behaviours and actions, engagement drives an organization to achieve its desired level of performance. Disengaged organizations are plagued with expensive turnover and absenteeism. Engaged employees who understand the goals and direction of the organization are not simply enthusiastic about their work; they also truly want to achieve the organization’s business priorities.

An engaged organization can more effectively launch wellness programs and initiatives. And an employer that is concerned about employee health and introduces measures to improve it will inevitably reap positive results, substantially affecting benefit costs.

Strategies for Success

Plan sponsors can access important data, such as drug and disability claim reports, through the insurer. When analyzed, these reports can provide an overall picture of the health of the organization and pinpoint key indicators of future health problems and costs. But simply looking at the data is not enough.

The main goal of workplace wellness is to create a culture that facilitates the improved health of the individuals who will ultimately improve the health of the organization. In the eyes of the employee, the most important aspect of health promotion is buy-in from senior management. Branding a communication plan that is consistent with the employer’s mission and values can ensure the program’s visibility throughout its existence and gain instant recognition from employees.

A health-profile questionnaire can make employees more aware of personal lifestyle habits, and highlights the risks of cardiovascular disease, diabetes and other illnesses of which they may not be aware. This tool is very useful to an organization because it confirms the health priorities uncovered by quantitative analysis. Furthermore, employees who participate in the questionnaire are more likely to accept responsibility for their own health and well-being.

Once the analysis is complete, health priorities can be established and the framework for target interventions can be implemented. For example, if a drug claim report indicates that there is a high use of drugs used to correct cholesterol and diabetes, perhaps the employer should consider holding healthy-eating seminars.

The short-term benefits of running health promotion programs are difficult to measure. Typically, tangible results cannot be expected until the program has been in place for at least three years. However, the importance of long-term financial benefits to measure success becomes more apparent as the program progresses.

To measure return on investment, some organizations will content themselves with monitoring the change in benefits plan costs, while others will seek more accurate measures. The choice will depend, for the most part, on the size of the organization and the available budget. But regardless of the method selected, employers in Atlantic Canada have a vested interest in playing an important role in improving employee health. Stronger employee morale, decreased workers’ compensation costs or claims, and reduced absenteeism are real benefits. Few would argue that wellness programs are not effective in these respects.

Strength in Adversity

Atlantic Canadians have faced tough challenges in the past, and while the times continue to change, issues relating to managing the affordability of benefits plans will likely remain. Employees want access to the best benefits for themselves and their families. Older workers will choose to leave the workforce. And affordability will remain a key issue for HR professionals. But perseverance in the face of adversity is something for which this region is famous, so employers should be confident in their ability to deal effectively with the challenges that lie ahead.

Uriel MacGillivary is a senior consultant, Matt MacLean is a senior consultant and Leslie Falcone is an analyst with Aon Consulting’s Halifax office.

uriel.macgillivary@aon.ca;
matt.maclean@aon.ca;
leslie.falcone@aon.ca

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© Copyright 2008 Rogers Publishing Ltd. This article first appeared in the December 2008 edition of BENEFITS CANADA magazine.

Copyright © 2018 Transcontinental Media G.P. This article first appeared in Benefits Canada.

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