Regardless, the decision to assign benchmarks could have ramifications for plan sponsors in the future. In the short-term, if benchmarks are met, the need for private healthcare may fade into the background temporarily because publicly funded healthcare will have improved, notes Tim Clarke, senior benefits consultant with Hewitt Associates in Toronto. He adds that benefits costs could also come down if benchmarks are expanded to include things such as diagnostic services. And employers could get employees back to work faster, saving themselves insurance payouts.
The problems arise, however, if benchmarks are not met. In that case, employees would look to private clinics for care and, in turn, could go to their employers to cover those services, adds Clarke. “Employers will make that decision, if private clinics become available, on a case-by-case or service-byservice basis as to whether to cover it.”
Jasmine Ghosn, a private practice health lawyer in Toronto, says it will be incumbent upon plan sponsors to review insurance policies in light of the new benchmark. Says Ghosn, “Even though we see the 10 provinces working together to try to establish these benchmarks, there’s always going to be a check and balance in place available to citizens through the court. In light of that, it would be important for employers to review their existing contracts.”
Clarke says plan sponsors will need to take a proactive and strategic approach. “If you can be proactive in terms of communicating the healthcare strategy to your employees, something that says ‘here’s something we try to provide’ and then broaden the framework…” plan sponsors will give themselves the room and flexibility to allow for new services to be added or even removed from health plans. He adds that it would be wise for employers to have their strategy in place within the next year or so.
In the meantime, both Clarke and Ghosn agree that employers should review policies with insurance providers to make sure benefit issues can be resolved ahead of time.
THE NORWAY WAY
Norwegian pension providers are getting ready for a spike in business with the introduction of mandatory employer contributions to employee pension funds. The new pension requirement, which comes into force in July 2006, has been set at 2% of gross pay.
Meanwhile, Norwegian employers are eyeing their own pension provision before the regulation takes effect. Most nervous of all are employers in the hotel and restaurant industries, which have some of the lowest levels of pension coverage.
GERMANY’S STANCE ON DC
Germany’s occupational pensions association, Aba, has spoken out against defined contribution(DC)plans. Aba managing director Klaus Stiefermann says German employers are mistaken if they believe a switch to DC from defined benefit is the best option for employers.
Stiefermann was quoted in the European press as saying, “The main problem with DC is that while the investment risk is passed onto the employee, an employer in Germany is confronted with new risks, namely those associated with choosing the right scheme and adequately advising employees.”
SQUEEZING THE TOP
It’s not just the little guy getting their pension plans cut. Verizon, the secondbiggest U.S. telephone company, said it would cut retirement plans for managers to save US $3 billion over 10 years. The New York-based company’s 50,000 managers will stop earning pension credits after June 30, 2006, and those hired after Jan. 1, 2006 won’t earn benefits.
Verizon’s pension changes won’t affect current retirees. Managers who have been at the company fewer than 13.5 years also won’t receive subsidized pension medical benefits.