How health benefits plan design is changing

Today’s health benefits plans are under pressure. Our labour force is changing. Based on data compiled in 2015 by Statistics Canada, 46 per cent of today’s active workforce are millennials, 30 per cent are Generation X and the baby boomers count for a shrinking 24 per cent of workers today. Plan sponsors are facing new challenges in ensuring their plans are meeting their employees’ needs today and in the future. More importantly, it may be time to disrupt the very nature of benefits plan designs and the continual adversarial game of catchup at renewal.

The 2015 and 2016 Sanofi Canada Healthcare Survey surveys show 94 per cent of Canadian plan members are generally satisfied with their plans. This number might be optimistically high and not entirely accurate. Two-thirds (64 per cent) of respondents said they wish they had more control over their benefits plans compared to 36 per cent who were satisfied with a controlled or traditional design. Yet, 79 per cent of all plans in Canada are traditional, with only 23 per cent of plans having a flexible plan architecture.

It’s not clear whether combination plans, where insured benefits and benefits that are funded by alternative methods (administrative services only, health-care spending accounts, etc.) comprise a complete plan. This suggests there’s a dichotomy in our collective understanding of what Canadians really want.

Read: Sanofi survey finds low employer satisfaction with benefits for vision, major dental care

Today’s benefits plan sponsors must also recognize and wrestle with the fact that there’s only so much money available. Changing demographics in Canada’s active workforce would suggest it’s time to examine the social contract that exists between employers and employees. What have plans covered in the past? Is this sustainable?

One area of growing concern is the cost associated with rapidly rising paramedical services, which require plan sponsors to pay for services that require little, if any, documented proof of actual medical need. Is this sustainable or even wise?

A 2015 study by Green Shield Canada identified registered massage therapy claims as the fastest rising claim type. The 2015 Sanofi survey provided detailed claims data for all plan members who submitted health claims in that year. Actively claiming plan members submitted, on average, 9.5 claims for drugs, 7.3 claims for paramedical services such as registered massage therapy, 3.7 claims for dental and 2.7 claims for vision benefits.

Read: What is driving the rising demand for paramedical services?

Diving more deeply into these numbers, registered massage therapy represents 57 per cent of all paramedical services claims, followed by chiropractic and physiotherapy. The age profile — 68 per cent of claimants are 18-34 — suggests registered massage therapy can be considered a lifestyle benefit.

What does this all mean?

If the millennial workforce is the fastest growing segment of the market, and millennials and plan family members of millennial age and younger are submitting the largest number of paramedical (primarily registered massage therapy) claims then it must be because there’s demand. Millennials don’t see themselves as needing drug benefits and place little value on that benefit. Because of this, many have maximized whatever value they can from the other elements of their plans. This in turn puts pressure on traditional plans.

What can we do?

In the past, many plan sponsors required a doctor’s note for members seeking paramedical services. Today, fewer carriers are asking for these medical referrals. The motivation for this seems to be that getting approval is a fait accompli and an inconvenience. Doctors will generally issue a medical note on request, recognizing paramedical services are usually beneficial for patients, even if they aren’t a medical necessity.

Some carriers and sponsors are considering longer-term qualification periods for benefits (i.e. 10 initial visits paid at $10 each and then 100 per cent coverage to a maximum of $500 for each service). The idea is to weed out the recreational user and provide services for those who truly require chronic or therapeutic care. Other carriers are installing new cost-control measures by bundling all paramedical services into one lump-sum allocation and even suggesting a change from per insured coverage to per certificate coverage.

Read: What are the goals of massage therapy as an employee benefit?

This keeps the funding for these services within the core plan and may allow the sponsor to take advantage of more cost-efficient adjudication or cost allowances within insured plans, rather than within health spending accounts, where per-claim adjudication fees may be higher. In either case, these new strategies encourage members to become better consumers of health care.

Larger organizations may consider installing flexible plans where members can choose the benefits they want from a cafeteria-style menu or modular programs that bundle benefits like the offerings from your phone, television or internet provider. These programs strongly appeal to millennials but aren’t entirely risk-free because they can quickly go into deficit if not managed properly.

Put simply, the demands for flexibility are making the industry question traditional approaches.

New hybrid benefits plan models are being introduced through third-party administrators that are carving out the drug benefit as a fully insured benefit and combining it with an ASO-funding model for non-drug extended health and dental coverage. Life, long-term disability and perhaps other benefits, such as critical illness and accidental death and dismemberment, would be offered as traditional insured coverage. These new models offer additional opportunities to provide sustainable funding for paramedical claims without surprises at year end.

Read: The appeal of ASO plans

Today, more than ever, plan sponsors — especially small- and medium-sized companies — need to consider many factors when choosing a benefits plan, challenge conventional wisdom and disrupt the status quo. They will need to decide whether to stay with a traditionally designed defined benefit plan, move to a defined contribution style of benefits plan — for example, an ASO plan with hard limits and plan caps — or choose a hybrid solution by adopting one of the new paramedical claims’ cost-control measures now being offered.

Change is hard and demographics are playing a greater role in the way we need to consider the design of benefits plans. As recent Nobel Laureate Bob Dylan once said, “The times they are a changin’.” It’s time we changed with them.