GroupNews – January 2021
Eckler’s GroupNews monthly newsletter provides commentary on the issues affecting Canadian group benefit plans.
In this edition:
- Provincial premium and retail sales tax
- PEI expands Insulin Pump Program
- Quebec releases RAMQ rate changes effective January 1, 2021
- BC physicians create online directory to ease access to practitioners
- Health Canada delays drug pricing reforms until July
- Quebec introduces several regulations related to pharmacists
- Report analyzes private drug claim cost drivers
- Providing benefits after age 65
Provincial premium and retail sales tax
Effective January 1, 2021, the insurance premium tax rate in the Yukon increased from 2% to 4%. The announcement, part of the territory’s latest budget bill released in March 2020, applies to all types of insurance coverage.
While member participation in employer/association plans in the Yukon is generally minimal, below is a revised table of premium tax on insurance premiums by province/territory, followed by a table outlining retail sales tax by province:
(based on plan member’s residency)
|Individual and group insurance premium||3%||2%||2%||2%||5%||3%||2%||3.75%||3.48% *||3% **||4%|
|ASO plans, HCSAs||5%||2%||3.48% *|
|* Scheduled to be reduced April 2022|
|** 2% for policies in force prior to April 1, 2000|
|PROVINCIAL SALES TAX||
|Group insurance premiums||
9% QC tax on
|Claims for ASO plans, HCSAs||8% RST (except taxable ASO disability income claims)||9% QTIP|
|Fees on ASO plans with pooling||8% RST||9% QTIP|
|Fees on ASO plans without pooling||8% RST||9.975% QST|
|EAPs and other fee-for-service products||9.975% QST|
Impact: Plan sponsors should ensure their employee benefit programs are compliant with the premium and sales tax regulations in the jurisdictions where they have members.
PEI expands Insulin Pump Program
On January 1, 2021, Prince Edward Island expanded coverage under the Insulin Pump Program (Program) to include people under the age of 25. The Program assists with the costs of insulin pumps and supplies for individuals with type 1 diabetes. The following supplies are eligible for coverage under the Program:
- Insulin pump (one pump every 5 years)
- Infusion sets (140 sets per year)
- Reservoirs (140 per year)
- Site inserts (one replacement device per year)
- Skin adhesive wipes (150 per year)
- Sterile transparent dressings (200 per year)
Impact: While coverage under the Program is based on several factors including household income and private medical insurance, employer plans with members and dependents in Prince Edward Island who become eligible under the expanded Program should experience savings.
Quebec releases RAMQ rate changes effective January 1, 2021
Every year, on July 1, the Régie de l’assurance maladie du Québec (RAMQ) sets the rates for the Public Prescription Drug Insurance Plan for the plan year. As discussed in the July 2020 issue of GroupNews, due to the financial pressures caused by the COVID-19 pandemic, the rates set were valid until December 31, 2021. RAMQ recently announced the new rates for the period from January 1 to June 30, 2021.
The table below summarizes the old rates (effective July 1 to December 31, 2020) and new rates effective January 1 to June 30, 2021. Any changes made are in bold.
|Co-insurance||Maximum Monthly Contribution||
|Under age 18||
|Eligible full-time students ages
18 to 251
|Ages 18 to 64||
|Age 65 and older:|
|– Not receiving GIS||
|– Receiving 1% to 93% of maximum GIS||
|– Receiving 94% to 100% of maximum GIS||
|– Holders of claim slips2||
1 Without spouses and living with parents
2 Issued by the Ministère de l’Emploi et de la Solidarité social
Impact: While both the maximum annual premium and monthly deductible have increased, the decrease in the co-insurance rate from 37% to 35% will help to offset the impact on plan sponsors.
Changes to the RAMQ rates generally do not materially affect private plan costs as active members of private drug plans are not eligible for coverage under RAMQ before they reach age 65. Residents over age 65 who are eligible for drug coverage under a private plan generally use RAMQ as first payor and their private plans as second payor.
BC physicians create online directory to ease access to practitioners
In an effort to ensure British Columbians continue to receive health care during the COVID-19 pandemic, the Doctors of BC (DBC) professional group has announced the creation of an online directory to provide easier access to physicians and nurse practitioners. The DBC noted an “alarming drop” in the number of people visiting hospitals, seeing doctors, or attending specialist referrals, raising concerns that chronic conditions are going untreated and could result in worsening health for patients.
The new Pathways Medical Care Directory (Directory) includes a search function so patients can find their current doctor or a new doctor by location as well as by capacity to provide access to COVID-19 testing and flu shots. The system also lists new virtual care clinics for people without family doctors. The Directory is a non-profit organization supported by the British Columbia Ministry of Health as well as the DBC.
Impact: The online Directory should offer improved access to physicans for BC patients, especially seniors, persons with disabilities and others at high-risk due to the pandemic. The increased access could ensure any number of ailments are dealt with in a timelier manner, potentially resulting in less time off work and fewer recurring health issues.
Health Canada delays drug pricing reforms until July
Given the delays caused by the COVID-19 pandemic, Health Canada has announced it will postpone the implementation of changes to Canada’s drug-pricing regime until July 1, 2021. Amendments to the regulations were scheduled to come into force on January 1, 2021. Health Canada notes the postponement is intended to provide pharmaceutical manufacturers with additional time to make changes required by the new reporting requirements.The regulations govern the steps taken by the Patented Medicine Prices Review Board (PMPRB) when assessing whether a patented medicine appears to be priced excessively in the Canadian market, and the required information patent-holding companies in Canada must provide to the PMPRB in order to assess pricing. The regulations are the result of consultations with interested stakeholders that began in November 2019, with draft guidelines released in July 2020.
Impact: The regulations are intended to protect Canadian consumers and plan sponsors from excessive drug prices. Lower drug costs will help workplace benefit plans remain sustainable in the face of more specialized, potentially high-cost drugs. The delay may prove costly for plan sponsors, especially if discussions between the government and interested stakeholders results in further changes and delays past July 2021.
Quebec introduces several regulations related to pharmacists
The Quebec government has published several regulations related to the regulation of pharmacists in the province, as well as changes to the Regulation respecting the basic prescription drug insurance plan:
- Regulation 1400-2020, governing certain professional activities that may be engaged in by a pharmacist, will allow pharmacists to prescribe medication for patients who have received prior treatment for several ailments, including minor acne, mouth ulcers, allergic conjunctivitis, urinary infections (subject to certain conditions), and certain antiviral treatments.
- Regulation 1401-2020, governing the initiation and modification of medication therapy, administration of a medication and prescription of tests by a pharmacist, will allow pharmacists to prescribe treatment for smoking cessation, prevention of nausea and vomiting, antibiotics and antivirals for the prevention or treatment of Lyme disease, malaria and influenza, and emergency oral contraception. The regulation also permits a pharmacist to adjust or cease a patient’s medication therapy under certain conditions.
- Regulation 1300-2020, a regulation to amend the Regulation respecting the basic prescription drug insurance plan, changes the rules by which the government fixes the rate of adjustment of the maximum amount of the annual premium, and the rates of adjustment of the deductible amount of the coinsurance and of the maximum annual contribution under the basic prescription drug insurance plan.
Impact: Permitting pharmacists to prescribe additional medication for ailments could result in a reduction in doctor and hospital visits and potentially reduce sick days for ailments that can be treated in a timelier manner. Allowing a pharmacist to adjust or cease a patient’s medication could also reduce wait times and appointments or result in more timely preventative action if patients are not required to get medication adjustments from their doctor.
Report analyzes private drug claim cost drivers
A new report released by Innovative Medicines Canada examines the drivers of cost growth for private drug plan claims made between 2016 and 2019 using data from the IQVIA private drug plan claims database, which represents 82% of pay-direct private drug claims in Canada. High-level findings as follows:
- Private drug claim costs rose 5.3% annually between 2016 and 2019, significantly less than increases projected by insurance companies. Utilization had a significant impact on growth, with more than half of total growth attributable to growth in the number of claimants and number of claims per claimant.
- Chronic disease remains the primary driver of drug plan costs, accounting for 68% of costs and 79% of cost growth from 2016 to 2019. Data shows 68% of claimants required chronic disease drugs, making up 62% of claims in 2019.
- The report finds higher-cost specialty drugs may not be the biggest cost concern for private drug plans. Non-specialty drugs (drugs costing less than $10,000 annually) are the biggest driver of private drug plan costs, representing 71% of private drug costs and 41% of growth between 2016 and 2019.
- Biologics for auto-immune diseases (rheumatoid arthritis, psoriasis, inflammatory bowel disease, and age-related macular degeneration), diabetes drugs (including diabetes glucose meters and test strips), cancer drugs, and respiratory drugs (including drugs for allergies, asthma, chronic obstructive pulmonary disease and cystic fibrosis) represent the top growing therapeutic categories from 2016 to 2019.
Impact: The report found the major cost increases to private health benefit plans in Canada are a result of increased drug utilization due to the growth in chronic diseases, such as diabetes, rheumatoid arthritis and multiple sclerosis, that require access to more medications. Developing a better understanding of the factors driving drug plan cost growth allows private plan sponsors to focus their efforts and resources more effectively on managing benefit plan costs.
Providing benefits after age 65
Group benefit plans have traditionally included age limitations, whereby certain benefits either end or are reduced at age 65.
This was historically driven by the Employment Standards Act definition of an employee as someone aged 18 to 65, as well as mandatory retirement at age 65, mortality expectations, the expectation that most pension benefits start at age 65, and the perception that costs of providing benefits at these ages were always higher or were not needed as government coverage was available. Things started changing when mandatory retirement was abolished in Canada in 2009. But even before then, over the last two decades, there has been a lot of discussion around the validity of the age 65 limitation in group benefit plans. With the changing demographics in the workplace, changing working patterns (such as entering the workforce at later ages and the introduction of phased retirement) and increased longevity, there is a greater need and desire by both plan sponsors and members for individuals to continue working past the age of 65. There has also been an increasing number of legal cases and human rights challenges alleging age discrimination in plans where benefits end or change at age 65.
At the Canadian Institute of Actuaries 2020 annual conference, Eckler presented the results of its actuarial study on the “Termination Age of Group Benefits.” Our actuarial analysis focused on whether it is cost-prohibitive to extend benefit coverage beyond age 65. The study concluded the following is not cost-prohibitive:
- Health and dental benefits – to continue the same benefits after age 65
- Life insurance benefits – to provide a reduced benefit after age 65 (i.e., 25-50% of the pre-65 benefit)
- Long-term disability benefits – to provide a reduced benefit after age 65 (i.e., 50% of the pre-65 benefit) and/or define a maximum benefit period for those disabled after age 65
Our study highlighted that continuing disability benefits is more challenging than continuing health, dental or life insurance benefits. The benefit cost for disability benefits is not only dependent on the incidence of disability and the benefit amount, but also the duration on claim. Without a natural termination of benefits, it’s difficult to determine when an older disabled plan member would have otherwise retired and terminated benefits without a forced termination age or date. As such, it’s possible that an older disabled employee could collect disability benefits for life. However, there are other benefits such as pension plans that are designed to provide lifetime income coverage. This needs to be factored into the discussion on termination of disability coverage.
Impact: With this changing landscape, it will ultimately be important for plan sponsors to review all documentation related to their group benefit plans to identify areas of risk and obtain legal advice on any areas of age discrimination. Plan sponsors may have to consider adjusting benefits. Any changes, however, should be supported by actuarial data, in order to balance total plan costs and ensure coverage is still meaningful to the majority of plan members. Most importantly, the end goal for plan sponsors should always be to ensure benefit plans apply the principles of dignity, self-respect and inclusion.
This publication has been prepared by the GroupNews editorial board for general information and does not constitute professional advice. The information contained herein is based on currently available sources and analysis. The data used may be from third-party sources that Eckler has not independently verified, validated, or audited. They make no representations or warranties with respect to the accuracy of the information, nor whether it is suitable for the purposes to which it is put by users. The information is not intended to be taken as advice with respect to any individual situation and cannot be relied upon as such.