Thinking long term
To help plan sponsors take a longer-term approach, providers are currently focusing on three elements:
- encouraging plan sponsors to act now to implement solutions already available to them;
- conducting research to establish the business case for certain drug plan cost management, disability management and wellness initiatives; and
- helping with plan member education to encourage cost-conscious behaviour change.
“The point of these discussions is to focus on long-term financial stability, not just on meeting this year’s budget,” says Parent. “We need to help employers determine what they can do today that will help tomorrow.”
But while employers are listening, many are slow to make changes.
Tim Clarke, Canadian health and benefits innovation leader with Aon Hewitt, attributes this partly to employers not wanting to take anything away from employees. “In general, employers are prioritizing people over costs. It can be challenging to engage employees in tough economic times, so when cost reductions are imperative, they want to ensure those with significant health issues are protected in their time of need.”
And it may seem that there is no pressing reason to take immediate action. According to the Canadian Life and Health Insurance Association (CLHIA), total extended health claims grew by just 2.6% in 2010—well below the average annual growth over the past five years of approximately 7.5%. This moderate cost increase is due primarily to a slowdown in the pace of prescription drug cost growth, thanks to a number of high-volume brand drugs coming off patent.
Over the past decade, CLHIA data indicate that drug costs grew at an average of 9% a year, but in 2010, the growth rate was 3%.
“We were very encouraged by the willingness of the provinces to come to the table with us [the CLHIA, representing the insurance industry] to discuss how generic drug reform can benefit both private and public payers and allow us to better manage costs,” states Stephen Frank, CLHIA’s vice-president, policy development and health.
Organizations such as Canadian Tire Corp., however, are grappling with future cost increases now.
“While it may be two to four years before costs really start to escalate, we recognize the landscape is changing and want to be proactive,” states Jackie Goldman, vice-president, HR programs. “We’re currently considering implementing cost management strategies that will be as least disruptive as possible to our employees.”
Making informed decisions requires good information. Willows encourages sponsors to have their advisors and insurers provide individual data with respect to demographics, disease states, drug usage and disability claims. “Plan sponsors may get caught up in generalities. Specific data is always more useful.”
Adds Mark, “It’s the provider’s responsibility to make sure the information is meaningful and can drive actions. It’s ideal if an integrated view can be provided—drug, LTD, STD, EAP and workers’ compensation data—if it’s available.”
Armed with this information, employers can implement solutions. “There is no silver bullet for benefits cost savings,” Mark points out. “However, employers should start with the ‘low-hanging fruit’: generic substitution, co-ordination of benefits, management of dispensing fees and drug markups, for example. Make sure all the basics are covered.”
Understanding the ROI
Beyond encouraging plan sponsors to consider the available solutions, providers pinpoint two areas of focus for cost-containment: drug coverage expenditures and disability management claims.
“Plan design changes—such as evidence-based adjudication controls, more robust prior authorization and integrated health case management for high-cost drugs—can help plan sponsors strike the balance of containing costs while still providing a comprehensive drug benefits plan,” says Brad Fedorchuk, vice-president, group marketing, with Great-West Life.