A recent arbitration decision underlines the pivotal role that collective bargaining agreement language plays in the extent to which employers and their insurers can make unilateral changes to benefits plans.

“From the employer’s perspective, the less said about the benefits plan, the better,” said Brian Smeenk, a labour law expert at Fasken Martineau DuMoulin LLP’s office in Toronto.

“The greatest flexibility to make unilateral change arises from language that says little more than that the employers will pay the premiums for an extended health plan.”

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But the language before arbitrator Matthew Wilson in the dispute between Unifor Local 41-0 and Nestle Purina was quite different. The collective bargaining agreement specifically prohibited the company from making “any changes in its present employee benefit plans,” all of which were specified in the agreement. Complicating the issue, however, was a further provision that “controversies about the administration of these plans” wasn’t arbitrable.

In that context, Wilson ruled that Nestle could limit the number of times employees could fill maintenance drugs at pharmacies. But he also ruled the agreement prohibited the company from implementing a pre-authorization requirement for certain drugs and from limiting the spousal co-ordination of other benefits.

At the heart of Wilson’s ruling is the distinction between administrative and substantive changes.

The limitation on filling prescriptions discouraged employees from making multiple visits for the same prescription by limiting the payment of the dispensing fee to five times each benefit period. Union lawyer Micheil Russell of CaleyWray Lawyers in Toronto acknowledged that all the employee had to do was reduce the number of visits by increasing the volume of their refills each time but he maintained that workers shouldn’t have to change the way they filled their prescriptions without the union’s consent.

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Still, Wilson ruled the change was administrative, not substantive, as it targeted the “frequency and method of reimbursement,” rather than the “actual benefit entitlement.”

“The level of coverage for the dispensing fee has not changed, nor has the level of coverage for the prescription drugs. Rather, the only change for the employee is that she receives a larger quantum of prescribed medication in fewer visits,” wrote Wilson. “This is an administrative change as contemplated by Article 23.02 and permitted under the collective agreement.”

The requirement for pre-authorization for certain drugs, however, was a substantive change. The benefits plan originally required employees to provide only basic information, such as a prescription and drug identification number. The insurer,  however, imposed a new requirement to determine whether or not its list of preferred drugs was more appropriate than the physician’s prescription.

The mere fact that Nestle covered any costs associated with the physician’s filling out the form, however, didn’t give the company the right to impose the new requirement.

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“Several obvious questions arise from the pre-authorization process,” Wilson noted. “Who decides what medications are recommended and what is the basis for the recommendation? What happens if there is a dispute between the physician who prescribed the medication and the insurance company? Will the list of drugs subject to the pre-authorization process increase over time and if so, on what basis?”

All of those issues affected the substantive benefit entitlement because the end result was that the employee might not get coverage for a drug that was available before the change took effect, Wilson found. “In effect, a new criterion has been imposed on the approval of the benefit plan.”

The same was true of the change to co-ordination of spousal benefits. Previously, excess expenses incurred by spouses who had reached their limit were covered for the submitted amount through co-ordination of benefits. In other words, if the member hadn’t reached the maximum allowed, the plan would cover any excess incurred by the spouse up to the cap.

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The change limited the coverage to the reasonable-and-customary amount for that benefit.

“Up until the change was made, the submitted claim for the spousal portion was covered up to the stipulated benefit limit. It was not reassessed to determine whether it fell within the reasonable and customary level,” wrote Wilson. “So, the portion of the spousal claim that would have been covered prior to the change will no longer be covered. This is more than an administrative change. This is a reduction in the benefit.”

Ultimately, Russell says, the difference between an administrative and a substantival change comes down to a financial analysis.

“Will the actual benefit change or will there be a new cost or particularly onerous requirement imposed on the employee?” he says. “If the answer is yes, it’s a substantive change.”

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Copyright © 2018 Transcontinental Media G.P. Originally published on benefitscanada.com

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