Friday, September 28, 2012
In Canada in 2010, more than 1,900 members of fully insured private plans had drug claims totalling more than $25,000 each, and for the second consecutive year, a single claim has been in excess of $1 million*.
It’s easy to see the financial burden claims like this would place on group insurance plans, especially for small- and medium-sized companies.
To deal with this situation, 24 Canadian insurers, representing 100% of the country's private group drug insurance plans, signed a national pooling agreement for high-cost drug claims. This industry-wide solution will take effect January 1, 2013 and will apply to all fully insured drug plans in Canada.
According to Nathalie Laporte, Vice-President of Group and Business Insurance Product Development and Marketing at DFS, the timing couldn’t be better for sponsors of fully insured drug plans, as they are torn between the financial health of their plan and the physical health of their employees.
“Drug claims of $25,000 and up per year are on the rise and we have to be proactive to be sure the plans can remain financially viable,” she says. “This nationwide agreement will let us establish an industry-wide pooling framework and make sure our drug plans remain sustainable.”
The new pooling agreement
There are two parts to the pooling agreement established by the national agreement: an
internal pool and an
Each insurer will start by creating their own internal pool, also called an Extended Healthcare Policy Protection Plan (EP3). This is the first step in the pooling framework:
- The insurer pools all high-cost drug claims from all of their fully insured drug insurance plans.
- This pool must comply with
minimum standards set by the industry and enable the insurer to offer clients different types of pooling, based on their plans.
- The insurer will not include any pooled high-cost drug claims when setting premiums.
- Provided they are complying with the agreement, the insurer can adapt and personalize other aspects of their
pooling agreement (e.g. drug list, pooling threshold, pooling fees, etc.).
- When a fully insured plan comes up for renewal, the insurer will provide the plan sponsor with a statement confirming that their plan is eligible for the industry-wide agreement, called an
inter-company EP3 statement.
“This nationwide agreement will let us establish an industry-wide pooling framework and make sure our drug plans remain sustainable.”
- Nathalie Laporte
Participating insurers will also establish an industry pool that will be used to share the risks associated with recurring high-cost drug claims. A not-for-profit corporation will be established to administer the pool.
A two-part solution
Internal pool (ep3)
- The insurer will pool claims for high-cost drugs for eligible plans.
- The pooling threshold for these claims cannot exceed $25,000 per year.
- An EP3 statement, confirming the plan’s eligibility, will be sent to the sponsors of fully insured plans at renewal.
- The industry pool will share the risks related to recurring high-cost drug claims among participating insurers.
- This pool will not have a direct impact on any specific plan.
In Quebec, the pooling framework will operate in conjunction with the coverage offered under the Quebec Drug Insurance Pooling Corporation (QDIPC), which will remain unchanged.
A win-win solution
This agreement couldn’t come at a better time. Plan sponsors are looking for ways to rein in health insurance costs while continuing to offer comprehensive and competitive insurance to their employees, and plan members want access to the best possible treatments, even if those treatments involve high-cost drugs.
This solution achieves both of these goals. The pooling agreement protects plans from the financial repercussions of high-cost drug claims and since it involves the entire industry, plan sponsors will continue to benefit from a dynamic and competitive market for their plans. As for plan members, they will be able to rely on coverage that is both comprehensive and affordable, for themselves and for their families.
Finally, the group insurance industry comes out ahead as well, according to Nathalie Laporte, “As insurers, we are concerned with plan costs; high-cost drugs are a major challenge. Our clients want to offer their employees affordable and competitive coverage. When we help them do this, everyone wins.”
5 high-cost drugs
Here are five high-cost drugs, what they are used for, and how much they cost:
Crohn’s disease, arthritis, psoriatic arthritis
Arthritis, psoriatic arthritis
Arthritis, polyarthritis, Crohn’s disease, psoriasis
* Source: Canadian Life and Health Insurance Association Inc. (CLHIA)