As 2018 draws to a close, and the benefits and pension industry looks ahead, what’s next for the year’s biggest topics?

Stephen Frank, president and chief executive officer of the Canadian Life and Health Insurance Association, is expecting a shift from Canadian and global regulators in the way they govern how customers are treated: an issue that’s moving from the consumer space into the group environment.

For benefits and pension plans, this shift will translate into insurers facing greater expectations around their interactions with advisors in how they distribute services and products, says Frank, acknowledging that fair treatment of the customer, or plan member, is a broad concept.

Read: CLHIA announces tweaks to advisor compensation disclosure guideline

“It can mean everything from how we design and develop new products for the market. It can be how we pay and incent the advisors and brokers to sell the product. It can be what’s disclosed to customers and how it can be the oversight that insurers need to provide on our distribution channels.

“All of those things are going to change from what they’ve looked like in the past. I think advisors and plan sponsors will start to see some of that in the coming year, and it will be an ongoing journey.”

G19 moving ahead

Career cribsheet

July 2017 — present:
president and chief executive officer, CLHIA

Sept. 2016 — July 2017:
senior vice-president of policy, CLHIA

June 2011 — Sept. 2016:
vice-president of policy development and health, CLHIA

Mar. 2010 — June 2011:
director of policy development and analysis, CLHIA

Sept. 2004 — Mar. 2010:
director of global treasury management, BMO Capital Markets

Sept. 2000 — Sept. 2004:
senior manager of financial strategy, BMO Financial Group

Sept. 1999 — Sept. 2000:
economist, financial sector policy division, Department of Finance

Sept. 1997 — Sept. 1998:
associate, MacKay Financial Sector Task Force

In terms of the interaction between plan sponsors, insurers and advisors, it’s been nearly a year since the CLHIA introduced its proposed compensation disclosure guideline, known as G19, which would require insurers to disclose to plan sponsors the compensation they pay to intermediaries for group benefits and retirement services.

Since January, backlash from the industry has included discussions about who should ultimately have responsibility for this type of disclosure, as well as the potential implementation dates. The CLHIA said it would be phasing in the guideline over the next three years. New sales for group retirement services would come first, with insurers disclosing anticipated compensation to contract holders starting July 1, 2019, and disclosure for renewal business beginning in 2020. New sales for group benefits would begin disclosing anticipated compensation Jan. 1, 2020, with compensation disclosure for renewal business beginning in 2021.

Read: CLHIA changing timeline for G19 compensation disclosure

Frank says the CLHIA is moving ahead first with disclosure for the group retirement industry and then providing a bit more time for group benefits, because it’s “a bit more of a complicated channel and so we want to take our time and make sure we get it right.”

The guideline is part of the broader discussion around transparency and potential conflicts of interest, he notes. “The CLHIA guideline is one of many different ways that you can try and mitigate that risk through ensuring that plan sponsors, and ultimately customers of a whole variety, understand what their advisor has been paid, and can make an assessment on what incentives may or may not have been created as a result.

“It’s an effort to incent greater transparency in the market and it’s something the industry is really committed to. We have to recognize it’s an expectation from the regulators now, too, that these things are addressed, and there’s much more disclosure than we’ve had in the past. It’s a good example of the kind of change that you’ll start to see.”

In terms of the industry’s response to the guideline, there have been strong views on both sides, says Frank, and the CLHIA will be taking that feedback into account as it moves forward. “We want to make sure we’re working as closely with the advisor community as we can to make sure we get it right,” he says. “That’s what we’re trying to achieve here.

Read: Benefits Alliance Group highlights conflicts of interest in CLHIA’s compensation disclosure guideline

“I don’t think we’re hearing any objection to the concept of the importance of disclosure and the importance of transparency. It’s a discussion on how best to do that in a way that’s responsive to everybody’s needs in the system, so that’s the discussion we’re having. We welcome the feedback and we’re going to continue towards working collaboratively with advisors on how to implement increased transparency.”

Q&A

Q How long have you been at the CLHIA?

A I’ve been at the CLHIA for eight and a half years. I’ve been president for just over a year, about 14 months. I’ve had a bit of government, a bit of private sector experience and then the CLHIA — you sort of feel like you’re straddling both worlds in that respect. So it’s been helpful to have both of those experiences in this role for sure.

Q What are your interests outside of work?

A With young kids, you try to fit in things for yourself whenever you can. I play in a men’s volleyball league throughout most of the year. Otherwise, a lot of time is spent with the kids and family and skiing in the winter. In the summer, we do a lot of bike riding and hiking and things like that. That’s sort of the stage I’m at right now in life and it’s great. I’m thoroughly enjoying it. It’s a lot of fun.

Q What is your favourite employee benefit?

A The one we certainly use the most and appreciate the most is our pharmaceutical benefits, prescription drugs. It’s the one I would certainly not want to ever put at risk and the one we use most regularly in our family.

Q What workplace benefit will emerge in the future?

A I think the greater awareness around mental health in the last decade has been very helpful for society and I think we need to continue on that path. So for me, I think if benefits plans could provide better and more robust supports on the mental-health side in the future, I think that would be something I would really value and would be beneficial for a whole range of society and different reasons.

The future of pharmacare

With Canada’s latest discussion about national pharmacare capturing the industry’s attention in 2018, Frank says the Canadian system is complex and needs improvement. Currently, it’s comprised of provincial programs, such as B.C. PharmaCare, and private drug coverage, such as employer-provided benefits plans.

“It’s quite a complex one with different provincial programs layering on top of private sector programs,” he says. “It can be pretty daunting for patients to navigate their way through that. Some degree of standardization makes some sense.”

Frank says the CLHIA expects and hopes to see reform that improves the system for those who are struggling to access medication, rather than jeopardizing what’s already working.

Read: Pharmacare reform should guarantee viability of workplace benefits plans: CLHIA

“We do believe that the system isn’t working as well as it should and could. And so there are some smart changes that can be made that would improve things for all stakeholders, whether it’s a plan sponsor, public payer like the provinces or other provider groups, patients, prescribers. You don’t tend to hear anyone defending the status quo, but we all want to see some change.”

According to Frank, there are two main areas to address. The first is access to medications, an area where he feels Canada has room to improve because there’s evidence some Canadians are struggling with the affordability of prescription drugs. The second piece is around systemic costs.

“Some of that goes to the prices we’re paying for medications in Canada, which we think are among the highest in the world, and we can do something to reduce that without necessarily jeopardizing our access to innovative medicine,” says Frank.

An advisory council on national pharmacare, which was established by the federal government in the 2018 budget, is assessing models within Canada and abroad, consulting with Canadians and working with leaders across the country with the aim to deliver final recommendations on the subject in the spring of 2019.

While all Canadians can share their views on pharmacare through written submissions to the advisory council, Frank advises plan sponsors to engage in the discussion as well. “Collectively, we pay at least half of the costs in the system, so we want to make sure any reforms work for us as well as they work for any other stakeholder in the system. There are ways they can do that through the advisory council and I would hope they’re taking advantage of those.”

Read: Generic drug deal hailed for price cuts of up to 40% for public, private plans

As well, when it comes to drug pricing, the CLHIA believes provincial and federal governments should be working collaboratively with the private sector to leverage the purchasing power of the Canadian market, notes Frank.

“We should be able to get slightly better pricing that way but, importantly, we’ll get equal pricing for everyone. Why would an employer pay a higher price than their provincial government when reimbursing a drug? That doesn’t make any sense to us. It would be something that would simplify the system. It would be a direct benefit to employers we think makes a lot of sense.”

In Frank’s opinion, employers want public drug plans to be fully integrated, which he says is easier in certain regions with well-integrated programs, but more difficult in other areas. Employers would benefit from a system with common critera for accessing high-cost medications and working with government plans, he adds.

Digging deeper on drug benefits

Since Stephen Frank’s favourite benefit is prescription drug coverage, here’s a look at some facts on drug plans in Canada:

85% of benefits plan members used their drug plan in the last year.

33% of plan sponsors cited drug plan sustainability as their biggest concern.

People who submitted drug claims submitted an average of 9.4 claims during the year.

Plan members estimated their drug plan paid $1,757 for their prescription drugs last year and $2,009 for their family.

Source: 2018 Sanofi Canada health-care survey

“There are some smart changes that would have immediately positive impacts for employers. I think we would expect they’d be quite supportive of some of those types of initiatives if that’s where the advisory council goes.”

Technology, education

Regardless of where Canada’s new pharmacare reform lands, Frank stresses it’s important to ensure the latest technological innovations rolling out in private health care carry over to the public side.

“There’s incredible benefit and value that comes from having that innovation and choice and competition,” says Frank. “Smart reform is going to protect all that and make sure we don’t lose it and we build off of that for the future.”

Read: Lessons for Canada from pharmacare systems around the world

Canadian insurers are investing heavily in technologies that help to enhance the health of employer’s workforces, as well as the interaction between the insurer and the plan member. As examples, Frank cites wearable technologies like Fitbits, virtual doctor visits and online claims submissions. “It’s a very competitive space,” he says, adding he expects to see these innovations continue.

Frank also sees benefits fraud growing as a central issue, noting the CLHIA will continue to focus on it over the next few years, with the ultimate goal of reducing the occurrences of fraud through better awareness and education.

“When we poll people or look at incidents we’ve found, there are some people who just don’t understand that what they’re doing is a crime . . . they believe the punishment or the ramifications are pretty minor, like maybe they have to pay back the $100 massage therapy or maybe they have to apologize or something like that,” he says.

Read: A free purse with a benefits claim? How incentives can land providers, employees in trouble

Regardless of the topic, Frank sees the pension and benefits industry facing rapidly changing expectations from both plan sponsors and their members, including how products are sold and distributed. “You’re just going to start to hear much more of that. I think that’s a very positive thing. But it will be a change for everybody and so it will be, at times, difficult.”

He remains hopeful that national pharmacare will be positive as well, as long as it’s done in a responsible and fiscally feasible way. “Change is coming but I think it’ll be very positive as long as we’re very thoughtful and we do it in a smart way.”

Ryan Murphy is an associate editor at Benefits Canada.

Copyright © 2019 Transcontinental Media G.P. This article first appeared in Benefits Canada.

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See all comments Recent Comments

Dave Patriarche:

I agree 100% with Stephen when he says “It’s an effort to incent greater transparency in the market and it’s something the industry is really committed to…It’s a good example of the kind of change that you’ll start to see.””. I am really looking forward to more changes around transparency from the insurers (through the CLHIA) in areas such as pooling costs and claims, as well as LTD payment statistics that brokers, consultants and employers have asked for for years.

I also agree whole heartedly with disclosure and personally meet or exceed every standard that our regulators require. That said, I am at a loss as to why the CLHIA (NOT a regulator) doesn’t think the regulators (such as FSCO in Ontario) are doing well enough with consumer protection that they need to be involved. Where is FSCO failing?

Lastly, if CLHIA were really interested in moving ahead, they should start by ensuring that the G19 info is distributed to every advisor that is contracted to sell group retirement and benefit products. To date, CLHIA have refused to have their member share this info with advisors which makes one wonder why the lack of transparency?

We are watching how the insurers (our partners/suppliers?) proceed with this initiative and hope they are really dedicated to improving the industry, and not just putting our clients employers) at risk by driving advisors and the advice they give out of the marketplace.

Friday, December 28 at 10:25 am | Reply

Chas:

The CLHIA, in the spirit of prudent risk management, should ensure that the after tax value of employer/sponsor benefits costs remains at a high level.

The insurance value of health and dental benefits has, arguably, decreased over the years, in that plan members are shouldering a higher proportion of the costs incurred from low frequency/extreme cost illness and injury incidents that are not otherwise covered by other insurance regimes such as workers compensation. LTD, which is as conventional an insurance product as there is, is already paid for with after tax employee dollars in most cases, need we be reminded.

Yet, even LTD is being de-risked by insurers; witness the questionable legality of OTIP’s reduction last year of LTD benefits for current older plan members because it has conceded that it is incapable of managing the claims durations. This on top of its bungling of the ELHT conversion when teachers’ new collective agreement came into force a couple of years ago .

All it would take in this environment, where insurance seems to have lost its meaning, is for a keen federal or provincial finance policy analyst to conclude that the huge government tax assistance being rendered to employers for benefits plans just isn’t worth it anymore, and that the political risks of “taking security away” that no longer exists, are negligible.

So “stick to the knitting” might be the CLHIA’s best rallying cry these days, since it is now an existential industry challenge.

Friday, December 28 at 12:15 pm | Reply

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