An upcoming Sun Life Canada drug plan change that will be implemented outside of plan sponsors’ renewal periods is calling attention to the practice of block-level contract amendments.
Sun Life is set to implement the first phase of its reference drug program on Oct. 1, which the insurer says will help plan sponsors with drug plan sustainability by creating categories of drug therapies and identifying the most cost-effective drug within a therapeutic class. While plan members will continue to have access to all drugs within the class, they’ll only be reimbursed up to the eligible cost of the chosen cost-effective medication.
The first phase will involve two drugs to treat neutropenia, a condition that involves an abnormally low number of neutrophils, a type of white blood cell. The program will eventually expand to other therapeutic categories and include biologics, biosimilars and other synthetic drugs.
Blake Waddell, a group benefits advisor with Waddell Insurance Brokers Ltd., says the change would have violated his plan sponsor clients’ contracts with Sun Life, which specify when the insurer is able to make changes to benefits offerings and give plan sponsors a 31-day period to opt out of changes. After a conversation with the insurer’s chief legal officer, he was able to opt them out of the program until renewal time.
Dave Patriarche, president of Mainstay Insurance Brokerage Inc. and founder of Canadian Group Insurance Brokers Inc., also opted his plan sponsor clients out of the reference drug program until their respective renewal periods. The program itself is a good idea, he says, but he disagrees with the rollout.
“It’s a great option to give employers,” he says. “If . . . [Sun Life] . . . came out and said, ‘Hey, would you like to save five per cent [on your drug plan spending]?’ I think a lot of people might take it. [But] they’re not giving you a choice.”
In an emailed statement to Benefits Canada, Marie-Chantal Côté, Sun Life Canada’s vice-president of market development for group benefits, said the insurer was committed to providing benefits that meet the needs of plan sponsors and members.
“We continuously review and improve our plans,” she said. “It’s important that we provide all clients with access to innovative solutions that help improve the sustainability of their plans. Our goal is to create new products and solutions that meet the needs of the plan sponsor while also helping plan members to live healthier lives.”
The reference drug program is an example of a common industry practice called block-level amendments, where an insurer implements a program change for its entire block of business rather than asking all of its plan sponsor clients at renewal time whether or not they’d like to make it part of their plan. Block-level amendments can be introduced in multiple ways — at a set date outside of the contract renewal period or as an amendment that will be inserted in all plan sponsor contracts going forward.
These types of changes make sense when insurers need the heft of their blocks for bulk-buying power, says Ryan Weiss, vice-president of product and experience for group customer at Canada Life. “It’s quite common in the market for insurance carriers and advisor firms [to] negotiate a block-buy price on product or service X. What [we] can do in exchange for that is bring down the rate significantly and offer more value to sponsors.”
For example, Canada Life implemented a block amendment to make virtual care a standard feature for its under-400 life block of business, made up of small- and medium-sized employers.
A block amendment also makes sense when it would preserve the “financial viability and responsiveness” of plan sponsors’ contracts, says Weiss. He provides the example of a marketplace change such as a new medical technology or high-cost drug that contract language didn’t contemplate. “We don’t want to have plan sponsors beholden to a contract where they can’t be protected until renewal.”
Canada Life recently introduced what it calls responsive contracts, which allows the insurer to immediately make changes it deems necessary on a block level, but gives plan sponsors 60 days to decide whether they’d like to opt out. “If a new technology came out that was super fantastic on a certain medical condition but not currently within the bounds of [what’s considered a] medical device, under the current contract every sponsor would have to create an amendment to say they actually do want to cover this because it lowers costs and improves patient outcomes. If you have a whole block, there’s a lot of administrative work.”
Outside of those “necessary” situations, Canada Life introduces block changes as a contract amendment at renewal time.
One challenge insurers face when making a block-level change is making sure it’s understood by plan sponsors, says Suzanne Lepage, a private health plan strategist. “A good advisor can help navigate that, but [they need to ensure] their communications tools effectively communicate the change that’s happening in the plan.”
Block amendments may also introduce legal implications for employers. Mitch Frazer, partner and chair of the pensions and employment practice at Torys LLP, notes that depending on how union contracts are worded, a block amendment could put employers in breach of their collective agreements. “The devil is in the details, because collective agreements will have language dealing with benefits and then there will be a side letter as part of the collective agreement what those benefits are. Some are not detailed at all and some are very detailed.”
Depending on the change, if a block amendment takes away certain coverage and an employer isn’t aware, it could be at risk of essentially being self-insured for that benefit, says Stephanie Kalinowski, chair of the pension, benefits and executive compensation practice at Hicks Morley Hamilton Stewart Storie LLP. “That comes up in a unionized environment, where the arbitrator will say, ‘Yes, you agreed to provide this specific benefit and it’s no longer provided by your carrier, but that doesn’t change your collective agreement obligation to cover that expense.'”
Frazer notes insurance is a highly regulated industry and companies often put wording in their contracts that allows them to make changes. “They’re looking at things from the perspective of running a business, but also trying to be reasonable, as much as people may not see it that way. They are a regulated industry . . . [so] if they’ve got too far beyond what would be reasonable, the government might jump in. . . . There is a balance; it’s not like this is completely unchecked.”
While Lepage notes block amendments can be implemented across all areas of a benefits plan, she keeps track of the ones specifically related to drug plan changes. “We’re seeing a lot of changes in drug plans because there’s concerns about the growing cost of drug plans and finding ways to manage those costs and make them sustainable. That seems to be the area of biggest concern for sponsors.”