Ontario’s move to expand its youth pharmacare program to seniors in 2019 could be a significant win for plan sponsors offering retiree benefits.
“A company would see significant balance-sheet reduction and lower accounting expense, as well as lower cash costs,” says Nabil Merali, senior vice-president and Ontario market leader for health and benefits at Aon Hewitt. “A fairly significant win to plan sponsors.”
Ontario’s Liberal government confirmed in its 2018 budget on Wednesday that, if re-elected in June, Ontarians age 65 and older would receive their prescription drugs for free as of Aug. 1, 2019. Under the current Ontario Drug Benefit program, seniors pay a yearly deductible of up to $100 for drugs, as well as a maximum dispensing fee of $6.11 for each prescription drug. The government’s proposals would eliminate those costs to seniors and, where applicable, any retiree benefits plan they’re a part of.
The provincial government currently pays between 50 per cent and about 65 per cent of drug costs for people over age 65, with the remainder often falling to group or retiree benefits plans, according to Ellen Whelan, a principal at Eckler Ltd. “The $100 and $6.11 are worth about one-quarter of those costs,” she says. “On a present-value basis, that could be $5,000 to $20,000 per plan member . . ..”
However, savings for plan sponsors may depend on the type of benefits plan they offer and the views of stakeholders such as unions, says Merali. “There’s a real chance that if the employer is not subject to other increases in costs, the unions may want that money reinvested in benefits programs, health-care spending accounts or other various enhancements,” he says.
Further complicating the issue are retiree benefits plans where the member makes contributions, says Merali. “For those plans, employers — as well as the carriers — are going to have to act fairly quickly, if the government is picking up the copayment here. Individuals are maybe going to want to see some reduction on their pricing.”
Merali also questions where the Liberals will find the money for the program. According to the government’s news release, it’s expecting to invest $575 million by the year 2020/21 to align the seniors’ program with its relatively new youth pharmacare program, also known as OHIP+. “Within that same release, they expect the number of seniors to double by 2041,” says Merali. “That $575 million is a fairly material promise.”