As innovative medicines become more widely covered in workplace drug plans, employers are tasked with finding new ways to control costs while ensuring members receive the best value.
“Obviously, this is good because such offers provide more treatments for employees and their families that can help get them back to the workplace sooner rather than later,” says Hosam Azara, reward and pension manager at Rolls Royce Canada Ltd. “However, when [our drug plan] was first implemented, we didn’t anticipate paying more than $5,000 per claimant per year — now we’re paying approximately 100 times that amount for some claimants.”
This situation isn’t unique to Rolls Royce’s benefits plan. Telus Health’s 2021 drug trends report, published in June, found specialty drugs remained the single biggest factor influencing private drug plan management in 2020, accounting for a third of overall costs despite being used by just 1.3 per cent of total claimants.
In a mission to control costs and maintain the plan, Rolls Royce began looking at usage in 2017. “We saw some patterns and decided to look at how we could do better in terms of consumer behaviour,” says Azara. “It’s not uncommon to see claims exceeding $150,000, so the question is, ‘How do we preserve the value of the plan while not making it more restrictive?’ We can’t slow the growth rate associated with medical costs.”
The project also involved a pharmacist as an impartial third party who helped identify areas of savings by monitoring employees’ claims patterns. At the end of 2018, the company launched a targeted communications campaign with the goal of reducing overall benefits costs by improving consumer habits.
“Employees need to understand that their behaviours dictate the costs of benefits. They need to ask themselves, ‘Am I spending in the right way? Is medication going to waste? Am I getting too many pills for something that isn’t recurring?’ They need to think this is no different from when they’re grocery shopping.”
Philippe Laplante, principal responsible for Eckler Ltd.’s group benefits practice in Montreal, says plan sponsors are increasing their use of targeted communications, mainly because of an aging population and the prevalence of chronic disease, which he notes can account for as much as 35 per cent of drug plan costs.
“For targeted communications to be worth it, you need to address something that will bring significant savings. . . . However, a targeted communication is one of the most effective ways of cutting costs. Often, [a plan sponsor] is going to look at drug usage and how plan members can change some habits to save costs. For example, an employer wants to put a measure in place to encourage employees with chronic diseases to use mail-order pharmacies.”
Plan sponsors typically see better results as communications become more targeted toward individual plan members’ behaviours, says Laplante. “The first level is often a general communication advising employees to check out a new measure and asking them to change their habits. This doesn’t usually have a big economic impact and employees don’t change their behaviour as much. Repeat communication — in the form of a campaign, for example — usually has better results and it also sets the basis for the next steps. If members don’t change their behaviours and costs increase, you can go to the next step where you can put an economic incentive or, in some instances, a reimbursement restriction in place.”
Rolls Royce’s campaign was rolled out through several channels, including a series of sessions during work hours to ensure employee participation, says Azara. “I told [employees] the cost of the plan was rising. I showed them the rates and explained the reasons behind the increases and that I was considering either a more-restrictive design change in terms of the offer or would otherwise introduce measures to keep it the way it is. . . . Some employees weren’t aware of the impact of their behaviours on the benefits cost. Some said, ‘What would you give me to change my behaviour? I’m happy with the status quo, so what do I get as an incentive to change?’ We said, ‘If you don’t change, the outcome will be a reduction in benefits coverage.’”
To further reduce costs, Rolls Royce entered a life insurance pooling arrangement across the company’s global operations between its insurer and an Italy-based reinsurer. As a result, the company was able to reduce insurance rates across all regions, resulting in a “clear and direct savings,” a message that was enthusiastically received by employees.
“It was communicated in terms of what [employees] can do [with the new arrangement], what we’re doing for them and what the insurance carrier is doing for us as well,” says Azara. “It was received positively because we could get within our objective to reduce costs without reducing coverage. . . . We were able to reduce our costs not just at Rolls Royce Canada, but in different regions throughout the world, just by connecting the dots and leveraging the overall relationship that we have with our consultants, insurance carriers and reinsurer.”
Laplante says insurance pooling is on the rise among large employers, as they seek to decrease volatility in premiums and reduce administration fees. “We’re seeing more consolidation in the market. Virtually every employer that has many acquisitions or subsidiaries will, at some point, consider some form of pooling, either at the country level or internationally. This is a huge trend.”
Rolls Royce’s cost-savings strategies have also had an impact on company culture and employee retention, by setting an example through responsible spending and putting employees first, says Azara. “It’s about what we offer and, by ensuring there’s a mechanism to control costs, we avoid reducing the coverage so implicitly it keeps the plan as rich as it is now. Employees see they get to keep what they have just by making some small changes.”
Blake Wolfe is an associate editor at Benefits Canada.