GroupNews – March 2021
Eckler’s GroupNews monthly newsletter provides commentary on the issues affecting Canadian group benefit plans.
In this edition:
Report on 2021 health and dental trend factors
GroupNews surveys several insurance carriers each year to assess the health and dental trend factors (the anticipated increases in claims costs) they expect to use in group insurance renewal ratings for the coming year.
Trend factors are broadly influenced by changes in the cost of medical and dental goods and services, utilization by eligible plan members, and the impact of newer, more expensive drugs and procedures. In light of the impact the COVID-19 pandemic has had on some of these factors, specifically on the cost of goods and plan utilization, 2020 is a challenging period in some respects if used as a gauge for future trends.
The insurers surveyed cited annual trend factors ranging from 11.2% to 13.0%. Given that various types of health claims are subject to differing trend assumptions, these are average factors. Examples typically include:
- Vision care: As coverage is usually limited to a maximum benefit every 12 or 24 months, and the cost of eyewear is typically higher than available plan maximums, the trend is typically limited to increased utilization each year.
- Drugs: Annual drug cost increases represent the highest portion of health claims, largely due to new biologic drugs coming onto the market or a greater number of indications for which existing biologics are prescribed.
- Paramedical benefits: Next to drugs, paramedical claims are the highest claiming category. Although there was a decline in claims during the lockdown phases of 2020, annual limits on these services may have been triggered when services resumed.
Insurers expect a 3% to 7% utilization trend plus a fee guide adjustment of up to 5% depending on the province. The fee guide adjustment in the province of Ontario is particularly high in 2021 at 4.6%, relative to prior years. Similarly, the fee guide adjustment in many other provinces exceeded 4% this year for the first time in many years.
Dental fees are regulated by provincial dental fee guides set by the dental associations. Some of the higher fees published in 2021 may be as a result of the higher cost associated with the safety measures required to carry out dental services in a highly transmittable environment for providers and patients alike.
Impact: The vast majority of plans experienced a significant reduction in claim costs during the March through June 2020 period, resulting from the lockdown at the start of the pandemic. By the third quarter of 2020, claims levels started to creep back up and even exceed those in the same period in 2019. This may have been as a result of “catching up” on certain services when they became more widely available and/or due to increased claim costs stemming from annual trending. While it is unclear whether additional COVID-19 waves will occur in 2021 and what additional lockdown measures might occur for the remainder of the year, insurers that are maintaining the 2020 trend assumptions in 2021 are taking the approach that, at a minimum, claims will return to some level of normalcy.
Canada Revenue Agency revises position on unused credits in health care spending accounts
The Canada Revenue Agency (CRA) has released a new CRA Interpretation Bulletin updating its position on the use of unused credits in health care spending accounts (HCSAs).
In a release dated May 2020, the CRA recognized that individuals with HCSAs might not be able to use their HCSA credits due to the closure of health service providers during the COVID-19 pandemic. To accommodate individuals with potentially expiring HCSA credits, the CRA issued a Technical Interpretation with respect to unused credits that were due to expire between March 15, 2020, and December 31, 2020.
While HCSAs normally must involve a reasonable element of risk to qualify as a private health services plan (PHSP) pursuant to the Income Tax Act, the CRA took the position that an HCSA is entitled to permit a one-time carry-forward of unused credits in this very specific circumstance for a “reasonable period” without compromising it’s preferred tax status.
Subject to the terms of the HCSA, the CRA stated that three to six months constitutes a “reasonable period” for carry-forward of unused credits. Recently, the CRA also responded to enquiries regarding whether the administrative relief provided in May 2020 should be revised to allow an HCSA with unused credits expiring between March 15, 2020, and March 16, 2021, to take advantage of the relief.
The CRA noted that the second wave of the COVID-19 pandemic has resulted in significantly lower usage of HCSA credits by employees, and as a result has determined that unused credits expiring between March 15, 2020, and March 16, 2021, will be entitled to a one-time carry forward of up to 12 months. The CRA has determined that a period of up to 12 months would generally be considered reasonable and would not disqualify an HCSA from being considered a private health services plan.
Impact: While the CRA has expressed the opinion that an extended carry-forward period due to COVID-19 will not disqualify an HCSA, insurance carriers/claims payers may be required to make changes in their programming in a very short amount of time to reflect the second extension for HCSA credits. Plan sponsors should ensure that their insurance carrier/claims payer is willing and able to make changes to accommodate further temporary extensions prior to communicating with plan members.
Alberta regulations amend requirements for acupuncturists in the province
The province of Alberta has introduced regulations to transition the regulation and governance of acupuncturists to the Health Professions Act (Act.) Alberta Regulation 255/20, Acupuncturists Profession Regulation, will see acupuncturists in the province join other regulated health professions under the authority of the Act, which requires all health professional colleges to follow common rules to set educational and practice standards for registered members. The changes will provide a more regulated governance structure for acupuncturists including requirements regarding transparency and accountability to patients.
The Regulation will also provide more definitive guidelines with respect to the governance of the College of Acupuncturists of Alberta, common processes to register acupuncturists, investigate and resolve complaints, and discipline practitioners.
Impact: The move to governance for acupuncturists will allow the province to set and hold professionals to more uniform standards of conduct and competence. It will also provide the public with a reasonable expectation regarding the services and competence received from acupuncturists throughout the province.
Cancer surgery in Canada
New data on cancer surgeries in Canada provides insights on the surgical treatment for cancer in the country. The study released by Statistics Canada links data from the Canada Cancer Registry to several national sources, including the 2016 Census of Population, the Longitudinal Immigration Database, the Canadian Vital Statistics – Death Database and the Annual Income Estimates for Census Families and Individuals. This linkage is used to compare the proportion of patients in different socioeconomic groups who received surgical treatment after being diagnosed with cancer.
The study found the proportion who received most timely surgical treatment consistently increases with income for all cancer types. Lung cancer saw the largest difference between the highest and lowest income groups in the proportion of patients who underwent surgery within six months of their cancer diagnosis. Between 2012 and 2015, close to two thirds (65.8%) of patients in the highest income group received surgical treatment within six months following their diagnosis, while the proportion was half (49.5%) for those in the lowest income group. Smaller differences in surgical treatment were also seen between the highest and lowest income groups for breast cancer (87.8% vs. 81.4%) and colorectal (85.7% vs. 81.2%) cancer.
Impact: While cancer outcomes are dependent on several factors including cancer type, stage at diagnosis and treatment, they may also vary in part due to treatment options and longer surgical treatment times, which put lower socioeconomic groups at a greater risk of poor outcomes.
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.