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© Copyright 2000 Rogers Media. The following article first appeared in the June 2000 edition of
BENEFITS CANADA magazine.
By Andrea Davis
Employers propping up public system
Canada is now second only to the U.S. among G-7 countries when it comes to the percentage of private funds
supporting our healthcare system. As of 1997, 30% of domestic healthcare spending actually came from the
private sector, with drug, dental and vision care--expenses largely picked up by plan sponsors--accounting
for the bulk of private healthcare spending.
The news comes from Health Care in Canada 2000, the first annual report of the Ottawa-based Canadian
Institute for Health Information (CIHI), released this spring. The report, compiled with Statistics Canada,
provides a detailed snapshot of healthcare services across Canada.
During a press conference to release the report, federal Health Minister Allan Rock said that government
parties need to take a closer look at which healthcare services are not paid for by medicare and possibly
extend coverage.
Rock concedes that the Canada Health Act was set up decades ago to cover hospital stays and doctors' visits
when these two sources comprised the majority of health expenditures. Times have changed whereas the Act
hasn't, Rock admits.
Indeed, the CIHI report reveals that Canadian drug costs now surpass physician expenses as the greatest
portion of domestic healthcare spending. According to a related study recently released by IMS Health,
Canadians now spend $13 billion a year on drugs--the fastest growing segment of healthcare. Prescription
drugs account for more than half of this figure at $7.3 billion in 1999, up by almost $4 billion in the
last 10 years. By 2004, this amount is expected to hit $11.3 billion.
"The system requires both additional public funding and better management of funds," says Rock. He adds
that the report--which compares services in regions across Canada and to countries around the
world--creates a guideline for "best practices so that taxpayers get the best value for their tax dollars."
The full report can be downloaded from the institute's Web site at www.cihi.ca. --Kathryn Dorrell
Nasdaq comes to Canada
he structure of Canadian capital markets took an unexpected turn last month when the Quebec government and
the U.S.-based stock exchange Nasdaq announced a deal had been struck to open Nasdaq Canada in Montreal.
The first part of the deal will see Nasdaq terminals placed on the desks of Quebec brokers. Step two of the
plan calls for a full Canadian market on the Nasdaq system, listing Canadian stocks for international and
domestic trading. The Quebec government is fast-tracking legislation through the Quebec legislature and
brokers are expected to have Nasdaq terminals by September. A full exchange will be set up by early 2001 to
begin listing Canadian companies.
Some Quebec business leaders were quick to describe the deal in a positive light. By joining Nasdaq,
Canadian companies listing on the exchange will have access to deeper liquidity and larger pools of
capital. "Of course the Caisse is very glad with that. It's a good opportunity for both investors and
business," says Suzanne Brochu, spokesperson for the Caisse de dépôt et placement du Québec.
"They will have better access to financing. And for investors, this is an opening to the world markets."
As the deal is the first major broach of the Canadian market by an outside player, the move is an obvious
threat to the Toronto Stock Exchange (TSE). The TSE, though, was quick to issue a press release saying that
it is still in talks with Nasdaq.
"We were briefed on the Quebec partnership over the course of our ongoing discussions with Nasdaq. We
welcome this initiative that has clearly set a precedent--raising the issue of reciprocal access for U.S.
investors into the Canadian market. The TSE intends to press forward to gain equal opportunity within the
U.S. market," says Barbara Stymiest, president of the TSE.
Dan Sullivan, chairman of the TSE, later spoke out, calling the deal a political one.
In the global finance world, the Quebec initiative is one small part of Nasdaq's overall strategy of
creating an international, 24-hours-a-day trading platform.
Nasdaq recently reached a deal with the London Stock Exchange and the Deutsche Bourse to create iX (a
globally linked, pan-European exchange). There is also a deal with the Osaka Securities Exchange to form
Nasdaq Japan.--Jeff Sanford
New capped index
eacting to the concerns of plan sponsors looking for a benchmark, but unable to use the Toronto Stock
Exchange (TSE) 300 index because of its overweighting in Nortel Networks, Standard & Poor's has
announced the launch of a new index aimed at institutional investors.
The new TSE 300 Capped Index is for Canadian pension and mutual fund clients who are subject to
diversification restrictions on portfolio holdings. The index will be capped and recalculated quarterly so
that no single stock makes up more than 10% of the overall weight.
According to David Blitzer, managing director at Standard & Poor's, the demand for such a product
prodded the company into offering it.
"Clearly there's a lot of concern among plan sponsors and others because of the so-called Nortel problem.
It's clear that there's a lot of interest in being able to look at a benchmark that's been rearranged so
that it follows the 10% rule," says Blitzer. "If a year from now no one looks at it, maybe it'll go away,
but the response suggests a lot of people will be looking at it on a regular basis."
This is the first time that Standard & Poor's has developed such a product. "This is the only one we've
done but outside the U.S. it's not unusual to find one or two stocks with very big numbers. Finland with
Nokia is probably the worst case," says Blitzer.
Nevertheless, he thinks Canada is a special case. "I don't think most of these other markets have the
combination of the foreign content rules and the 10% [rule]. To some extent it's a combination of those two
that seemed to be the driving force," he says.--Jeff Sanford
Standard Life to hold vote
owing to pressure from policyholders, Standard LifeAssurance Company has agreed to hold a vote on
demutualization. The board of directors agreed to the vote after a group of policyholders presented the
proposition at Standard Life's general meeting in Edinburgh, Scotland. According to company policy, if a
group of 50 or more policyholders makes a request, the request is considered valid.
"We reviewed [the] five resolutions that were valid so the board has decided to call a special meeting of
the company within the next three months and there will be a vote on demutualization," says Claude Garcia,
president of Standard Life's Canadian operations and a member of the Standard Life board of directors.
The debate comes after a spate of insurance companies have demutualized. Garcia says, though, that the
board of directors of Standard Life would prefer to maintain a different growth policy.
"The board and the executive will not recommend demutualization to policyholders," says Garcia. "Our
strategy is based on organic growth. We are very successful in terms of new business and increasing market
share and our growth plans. I'm not saying we'll never buy anything, but essentially we're not relying on
that as the main source of growth. Because of that we don't think we need to demutualize."
A group of pro-demutualization policyholders have been pushing for a vote on demutualization, the most
recent call coming in February. That request was denied by the board.
"Mutuality has served us very well in the past and we believe it will serve us well in the future," says
Garcia.
--Jeff Sanford
Private plan usage
anadian pharmacists are eager to help plan sponsors manage their drug costs, according to a new study,
2000 Survey on the Impact of Claims Processing, by industry publication Pharmacy Post.
Employers could use the help, considering half of the report's respondents say that the number of private
plan prescriptions has increased over the past few years. Pharmacists estimate that 31% of the
prescriptions they process are paid by private plans, 41% by public plans and 28% are paid out of pocket.
Pharmacists also say pay-direct cards have increased their workload, with 90% of respondents reporting an
increase in pay-direct cards over the past few years--63% define the increase as "significant" and say 70%
of their private-plan prescriptions are now processed using these cards.
On average, private plans reject 10% of submitted claims, the study found, with two out of three customers
expressing surprise or unawareness about their coverage. Just over half of plan members are angry at their
employer or the insurer when such incidents occur, say pharmacists.
Other highlights include the fact that almost two out of three pharmacists are frustrated by their
relationship with private insurers, and 66% note that patient care has suffered as a direct result of time
spent on claims processing.
At the same time, 58% are confident that they'll be receiving cognitive fees from private insurers in the
future.
Four out of five respondents report spending "somewhat" or "significantly" more time on matters to do with
private plans over the past three years. Most of the time is spent explaining coverage to patients and
talking to insurance companies.
--Kathryn Dorrell, with files from the Pharmacy Post
New drug for Alzheimer disease
ith the number of senior citizens on the rise in Canada, employees could increasingly be faced with having
to arrange care for elderly parents or relatives. Statistics Canada reveals that of the two million
Canadians who look after older family members or friends, two-thirds are in the paid workforce. The
Alzheimer Society, meanwhile, estimates that approximately 316,000 Canadians have Alzheimer disease and
related dementias. By 2030, that number is expected to jump to 750,000.
There's a new drug on the market to treat mild to moderate Alzheimer disease that may ease the burden for
caregivers. The drug's manufacturer, Novartis, is currently "working very hard to get it on provincial
formularies," says Ger van Amersfoort, president of Novartis Pharmaceuticals Canada Inc.
The drug, Exelon, is a cholinesterase inhibitor that prevents the breakdown of a neurotransmitter called
acetylcholine, which is thought to play an important role in memory. Exelon is available in three- to
12-milligram strengths. Cost of treatment is about $5 per day, or about $1,800 a year.
Order forms for the Canadian Pension Fund (CPF) Investment Directory and the Money Purchase Plan (MPP)
Directory are now available online.
The CPF directory profiles more than 1,000 Canadian pension funds and includes a ranking of the pension
funds by asset size. The MPP directory includes profiles of 1,700 defined contribution plans, group
registered retirement savings plans and deferred profit sharing plans.
Visit www.benefitscanada.com/cpforder. html to order the CPF directory and
www.benefitscanada.com/mpporder.html to order the MPP directory.
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