While drug plan costs are increasing for plan sponsors, the causes for these increases may depend on which part of Canada a plan sponsor resides in, says Philippe Laplante, a principal responsible for the group benefits practice in Eckler Ltd.’s Montreal office.
Over the past three years in Quebec, the average annual increase of recommended pricing per insured certificate has been between eight per cent and 23 per cent depending on the size of the group, says Laplante. He adds that this high rate of inflation is expected to continue as several new expensive therapies are expected to come onto the market, particularly new medication to treat certain cancers as replacements for chemotherapy.
“If you want a comprehensive plan, you have to protect yourself from high claims and in Quebec, it’s mandatory. You can’t offer less than [Régie de l’assurance maladie du Québec] — employers put a cap on drug expenses so they need to buy pooling protection. Outside of Quebec, you could cap your plan but your employees aren’t protected if they need a high-cost drug. Unfortunately, the pooling charge is going to increase a lot.”
In 2019, Laplante says pooled claims in Quebec represented approximately $115 million out of the $3.7 billion total claims on the private drug insurance market, an approximate three per cent share. From 2014 to 2019 the number of certificates in Quebec with claims exceeding $300,000 per year rose from 12 to 64, with the corresponding costs rising from $6.4 million to $32.8 million, a rise of over 500 per cent in five years, he says.
However, Dave Patriarche, founder of Mainstay Insurance Brokerage Inc., says across Canada, changes in stop-loss protection policies have had more of an impact on smaller plan sponsors than the cost of drugs. “Stop loss isn’t the protection it used to be 20 years ago. If you look at the average increase on drug spend over the past five years, it’s less than five per cent a year. Drug prices aren’t out of control. The problem is when a small company gets hit with a high-cost drug claim, it blows their rates apart.”
To combat cost increases, he says fully pooling all small-group drug claims would have the biggest impact. “You have a pool where everyone pays the same rate for the same benefit plan. At the end of the year, you look at how much claims went up and divide the increase evenly across members. It creates the biggest savings across the board, with little administration.”
And while the possibility of a national drug-pooling strategy is still further out on the horizon, it’s likely the Quebec pooling model will provide the basis, says Joe Farago, executive director for private payers and investment at Innovative Medicines Canada. He explains that he believes such a move could benefit small- and medium-sized plan sponsors and their members, as well as for insurers, in spreading risk for costs related to treating rare diseases.
“As we see greater advancements in cures for hard-to-treat diseases, if insurers are going to cover these drugs, it may make sense to look at the Quebec model and possibly have a national pool to spread the risk of small- to medium-sized plans,” says Farago.