April 2, 2018 marks another Employee Benefits Day. It has been almost a decade since the International Foundation of Employee Benefit Plans (IFEBP) first introduced this special day for industry professionals. As per the IFEBP, it is a day to recognize trustees, administrators, benefits practitioners and professional advisors for their dedication to providing quality benefits and the important role they play in their colleagues' well-being.
The Theme of Behavioural Economics
This year, Employee Benefits Day brings attention to the topic of behavioural economics and driving better employee decision-making. Specific to benefits and financial wellness, understanding how social and emotional biases influence employees is a key learning tool for benefits and retirement planning practitioners.
In essence, the more that is known about behavioural economics and decision-making bias, the better positioned plan sponsors will be to develop and enhance plan designs that help employees improve their finance and health outcomes.
Addressing Irrational Decision-making
Although we'd like to believe that we all make sound and rational decisions, the reverse is often true. Yet, many benefits and retirement services practitioners craft communications as if those reading their messages have a keen interest as well as at least moderate to high knowledge of the subject. Experience, statistics and behaviour patterns show us that we have a greater tendency of making decisions like Homer Simpson rather than Albert Einstein.
If we want better results, it's time to take a closer look at how behavioural economics can help us. While it remains a relatively new science that marries psychology and economics, people's behaviour and inherent decision-making patterns have been fairly easy to predict over time. Yet we continue to make assumptions about employee actions that aren't correct. Although we might not like to believe it, it's more common than not for people to make decisions without considering if its actually in their best interest.
Unconscious Decision-making Bias
Over the years, I've written a great deal about saving for retirement, debt-management and the value of financial planning. As we unpack key elements of behavioural science, its important to examine the effects of unconscious decision-making bias. To help positively sway plan participant actions, here are some decision-making biases to pay attention to:
1) Choice Overload: if there are too many choices, it can stop one's decision-making ability and cause the employee to choose the default option.
2) Illusions of Control: People overestimate that their choice will generate a specific result. Example - if I buy a lottery ticket, I'm going to win. For savings and investment products, the plan member believes they will make better investment decisions on their own rather than with the help of an investment manager.
3) Inertia or Status Quo: People don't like change. The brain thinks of change as pain and seeks to avoid it. When it can't predict the outcome, the brain prefers the status quo as no change is a "reward" not a threat. For savings and investment products, this effect may show up as the decision to remain in the plan's default option.
4) Loss Aversion: People fear loss more than the potential for gain and may consider contributing to a pension plan with contributions taken from their pay seen as a takeaway rather than considering the upside of gaining employer contribution matching.
5) Unrealistic Optimism: This effect plays out when people believe that bad things happen to other people. They don't happen to them. Similar to the illusion of control bias, people believe that if they choose their investments, it will yield stronger outcomes because they are in control of making the investment choice.
Employee communication continues to be a barrier for positive plan results. Why not give consideration to the theories of behavioural decision-making and see if changes the actions employees take have a more favourable conclusion. So on my Resource Page, I've made available the following articles:
1) Stanford Center on Longevity: A toolkit series brief - 10 things you should know about psychological science and behavioural economics to improve financial and health outcomes with employees and customers and;
2) Stanford Center on Longevity: A toolkit series brief - The MORE Design.
3) Benefits Magazine: Designing and Communicating Retirement Plans for "Humans".
Beyond these applicable resources, we invite you to contact us to discuss ways we can apply behavioural economics to strengthen your benefit and retirement program goals. As always, we're here to help so that you can focus on what you do best.
Every year it seems like technology is taking us in new directions and changing how we communicate and do business.
We've experienced the novelty of car phones, cell phones and now, smartphones as well as Google Home, Siri commands, and superfoods delivered to your door. Technological advancements seem to afford us endless possibilities and the potential for a future that is beyond limits. This notion got me thinking about how technology changed the way products and services are delivered and how it affects group benefits as a whole.
Last year, the Society of Human Resource Management (SHRM) reported on benefit industry changes over the course of the last 20 years. Their survey captured a comparative analysis of benefit plan offerings in 1996 and then again in 2016. This report captured marked differences including "what's in" and "what's out." While these examples reflect the sentiments of US respondents, they are not out of line with the trends reported by Canadian employers.
Telecommuting. In 1996 only 20% of companies offered employees the ability to work remotely. Technology and views of employers shifted significantly in 20 years. In 2016, 60% of companies provide flexibility in terms of promoting work-life balance.
Professional development. In 1996, the emphasis on recruiting and employee retention was not as much of a focus as it is today. In 2017, 86% of companies cover additional training and education for their employees. Costs for memberships to professional organizations and trade unions are up 88% as compared to 65% in 1996.
Focus on Wellness. In 1996, 54% of employer offered health and wellness programs. Comparatively, in 2016, 72% of employers offer wellness programs including discounts on insurance premiums or Health Savings Accounts. Given the increased number of chronic disease conditions related to diabetes, obesity and heart disease seen in the workplace, this increased focus is well placed.
Employee stock purchase plans. Back in 1996, 28% of companies offered employee stock purchase plans compared to 9% in 2016.
Credit union memberships. The buzz around credit union membership has seen its heyday. Today only 23% of companies offer credit union memberships compared to 70% in 1996.
In 2017, we see more examples of providers implementing service experiences using artificial intelligence. Members can find out if their massage claim was processed using Google Home. It begs the question, what is next? Time will tell -- and we can help. Our extensive resources ensure we stay ahead of the curve so that we're at the ready when you are. We invite you to contact us to discuss employee benefit trends and ways to ensure you're staying current with recruitment, retention and benefit plan arrangements to meet your specific requirements now and in the future. As always, we're here to help so that you can focus on what you do best.
January is here and with it comes the making and breaking of new year's resolutions, new starts, clean slates and ... changes to provincial and federal legislation.
Although I've written about changes to OHIP and the new Ontario drug coverage plan that provides free access to 4,400 prescription drugs for those 24 and under, I thought it might be an important time for a refresher. Related to this provincial change is the development of OHIP+, a mobile-friendly tool to help you find out what is covered at no cost for children and youth aged 24 and under.
This is such an exciting change and the first of its kind in Canada. Free for those with a Ontario health care or health card number are: diabetes test strips, oral contraceptives, medications to treat some childhood cancers, asthma inhalers, drugs to treat depression, anxiety, epilepsy, ADHD, antibiotics, EpiPens, and other conditions.
Ontario Drug Benefit (ODB) Eligibility requirements
If you are looking to provide an update or a reminder to employees or for your own purposes, remember that to be ODB eligible, you need:
- to be a child or youth, age 24 or younger,
- age 65 or older;
- living in a long-term care home or a home for special care;
- receiving professional home and community care services;
- enrolled in the Trillium Drug Program, Ontario Works or Ontario Disability Support Program. More info about eligible can be found here.
Have your Ontario health card or health card number handy.
More great news -- enrolment is automatic with no co-payment or annual deductible and eligible prescriptions will be filled at no charge at any Ontario pharmacy. Just be sure to show an Ontario health card or health card number.
Changes to parental and maternity leave in Canada.
Back in April 2017, I wrote about the pending changes to the parental and maternity leave in Canada. At that time, nothing had been cast in stone. With the updated rules recently communicated, parents have more choices. They can opt for either 12 months or 18 months of combined maternity and parental leave. This legislative change was effective Dec. 3, 2017 and applies to any expectant Canadian parent outside of Quebec -- which has its own parental and maternity benefits.
December 3 is a key date.
If you started receiving parental or maternity benefits before December 3, the government doesn't offer you the option to switch to the 18-month system. This means that you can't choose to claim extend parental benefits if your child was born or placed with you for the purpose of adoption before December 3, 2017.
The 18-month system has locked in job security for workers in federally regulated workplaces such as transport companies, public service, telecoms and banks. The Canada Labour Code has been updated for this change in legislation already.
Those in provincially regulated jobs (the majority of working Canadians) can choose the 18-month system as of December 3, but may not have the same peace of mind for job security as their federal counterparts quite yet as changes to individual labour codes related to job protection have yet to be amended.
Standard versus Extended Parental benefits - what is the difference?
Standard parental benefits can be paid for a maximum of 35 weeks and must be claimed within a 52 week or 12 month period after the week the child was born or placed for the purpose of adoption. The weekly benefit rate is 55% of the claimant's average weekly insurable earnings up to a maximum amount. The two parents can share 35 weeks of standard benefits.
Extended parental benefits can be paid for a maximum of 61 weeks and must be claimed within a 78-week period or 18 months after the week the child was born or placed for the purpose of adoption. The benefit rate is 33% of the claimant's average weekly insurable earnings up to a maximum amount. The two parents can share 61 weeks of extended parental benefits.
Other legislative updates
For some employers, January may be a busier time as changes to existing policies and collective agreements are updated and/or communicated.
Canada Pension Plan Contribution Rates, Maximums and Exemptions. Each year, the government communicates the information specific to payroll deductions, employer and employee contribution rates.
Specific to the Canada Pension Plan (CPP), the 2018 yearly maximum pensionable earnings is $55,900 and the employee and employer contribution rate is 4.95%
Information related to registered plans such as money purchase, defined benefit, RRSPs, deferred profit sharing plans, and tax-free savings accounts limits as well as the year's maximum pensionable earnings (YMPE) is available here.
Employment Insurance (EI) premium rates and maximums -- Federal EI premium rates and maximums for 2018 are: $51,700 is the maximum annual insurable earnings for 2018. The maximum annual employee premium is $858.22 and the maximum annual employer premium is $1,201.51 with a rate of 1.66%
Especially at this time of year, employers are faced with knowing about legislative changes affecting their workplace and sometimes keeping track of all the changes may seem like a bit of a moving target. A knowledgeable third party perspective can foster the confidence that you've applied changes correctly to your specific work arrangements.
We invite you to contact us.
With over 3 decades of industry experience, we have the skills, experience and resources to help you implement policy and plan changes to meet legislative requirements as well as your program needs. As always, we're here to help so that you can focus on what you do best.
With December almost behind us, it will soon be time to step into the new year. January offers a fresh start and the opportunity to revisit your current group benefit plan design.
With over 30 years industry experience, I've seen a myriad of benefit plans in my day. This knowledge gives me the insight to ask key questions and because I keep a close eye on industry trends, legislative changes and different service provider/insurer product offerings, I'm able to ensure my clients have a plan design that optimizes their specific requirements.
Through the years, I've had a number of different requests related to benefit plan design, but the most common themes shared with me include --
- "It needs to be valued by our employees";
- "It needs to compare favourably to the competition";
- "It needs to provide just the right amount of coverage so that employees aren't over or under-covered".
- "It needs to help attract and retain talent."
Making sure that the benefit plan remains relevant and valued requires regular attention. Plan design models that were in vogue in the 1980s might not have the same impact for today's workforce. Advancements in technology, immigration and globalization have altered how we do business and how employees look at their benefits package.
Questions to have answered.
As you begin your benefit plan design review, consider these comprehensive questions:
- What is your benefits philosophy?
- Can you easily identify and communicate your top short and longer-term goals for the benefit plan?
- Do these benefit goals align and support the larger corporate objectives?
- Do you have a plan and method in place for analyzing your workforce demographics? Knowing the percentage make-up of your workplace cohorts as well as their current and future needs will provide insights important to the benefit plan analysis.
- Is your existing plan design compliant with current provincial and/or federal legislation?
- What pending legislative changes do you need to consider?
- What do you know about your competition's benefit plan?
- How does your plan stack up against others in your industry?
- What are the results of the plan funding arrangement review?
- Has your organization significantly changed in size?
- Is the current funding arrangement still the right one for you?
- Do you have a traditional insured arrangement and wonder if your company is a good candidate for a self insured or a more flexible solution?
- What does your claims experience reveal?
- Are claims being over or under-utilized?
- What are the cost patterns and how does it compare to other employers in your industry?
- What cost containment strategies should you consider as a result?
Look to a trusted adviser.
Working with a trusted and experienced adviser can help you stretch your benefit dollar, maximize your plan's effectiveness and highlight applicable tax advantages. At Gallagher Benefit Services Inc., we can help you identify pockets that your current plan doesn't include or where your plan might be improved. Please contact us. Together we'll discuss your goals and navigate your next benefit plan design review. As always, we're here to help so that you can focus on what you do best.
Along with ushering in fall and a new school year, September is an ideal month to revisit your company's benefits philosophy. Better yet, if you don't already have one, it is the perfect time to prepare a benefits philosophy.
What is a benefits philosophy?
It is your company's approach to how you make decisions about specific details related to benefits coverage. It outlines how a business chooses and provides benefits to employees.
So much is changing in the workforce and with greater speed than ever before. It has become increasingly challenging to keep up with the latest benefit trends, workforce demands, and recruiting efforts to attract and keep top talent. Ensuring that you are able to offer a competitive benefits package that meets your organization's goals is more important than ever.
Many employers have a documented vision and mission statement and some have taken further steps to identify a purpose statement. These statements guide the organization's goals, beliefs and desired behaviours. Employees are reminded of these statements as a way of fostering the company's sought after culture and conduct traits. It helps them understand why the company exists and the direction they're headed.
A benefits philosophy should align with the vision and mission statement. More specifically, it should ladder up to the company's compensation philosophy. A benefits philosophy is a formalized way of creating a vision and mission statement about benefits coverage.
Do you offer pet insurance? How much is too much coverage? Are you going to continue with or grandfather retiree benefits? What is your company's position on fertility drugs or the request to offer a group RRSP? All these questions and more should be easier to answer when a benefits philosophy is in place.
Why should you have a benefits philosophy?
No matter the size of your business, having the guiding principles outlined in a documented benefits philosophy helps with the myriad of decisions you may think you'll never need to consider. It also makes it easier to address plan design and cost considerations. When a benefits philosophy is firmly in place, it helps a company avoid reactive decisions that might seem self serving and generate negative employee perception and/or public opinion.
10 Questions to Consider
This list of questions is by no means complete, but should provide a basis for many of the questions a benefits philosophy may wish to address.
1) Who pays for coverage? Do employees pay for a portion or all of specific types of coverage?
2) Is our coverage out of step with key competitors?
3) Does our coverage meet the needs and wants of our employee population?
4) Should we offer the same coverage for all or create separate classes based on differentiation that matters to our workforce?
5) Do we offer benefits to care for the well-being of the employee and his/her eligible dependents? Does this include Long-term disability or critical illness benefits?
6) What is is our position on retiree benefits?
7) Do we offer a wellness program? EAP? Fitness subsidy? Employee discount program?
8) Are we concerned about the employee's financial health? Do we offer a company savings program?
9) How much should the benefits program influence productivity and employee engagement?
10) Does our benefits plan help to keep costs down? Do we offer a health care spending account or some form of employee cost-sharing?
Your benefits philosophy should help you answer key questions related to your benefits strategy and it needs to support your company's goals and values. Knowing the benefits coverage that makes your employee happier and keeps them productive and engaged can be influenced by what an employer chooses to offer. This offering should be guided by your benefits philosophy.
There are many questions to consider that really depend on your goals. With three decades of industry experience, our team is well positioned to help you create or revisit a benefits philosophy that is exactly right for you. We invite you to contact us because no matter the size of your company or type of industry you are in, we're here to help so that you can focus on what you do best.
In the world of benefits, certain issues tend to receive more attention than others. The big ticket items like prescription drugs and paramedical service expenditures tend to hog the cost management discussion limelight. Hiding in the background is a growing problem for both employees and employers -- eldercare. Statistics Canada predicts that our population will continue to age quickly until 2031 and this means that eldercare issues are likely to becomes a much greater concern. Unlike childcare, eldercare becomes more complex and the level of support required tends to increase over time.
What is eldercare?
It is unpaid assistance provided to a person 65 years of age or older because of a long-term health condition or physical limitation. For an employee who provides eldercare to an aging parent or loved one there are many issues facing them.
The issue for employees.
According to a report by CIBC Capital Markets, 30 per cent of workers with parents over age 65 lose 450 hours per year of time off to support eldercare needs. At present, more than 8 million Canadians are caregivers.
Eldercare support is provided in all kinds of ways.
Notably, more care is needed for those between the ages of 75 and 85. The predominant conditions caregivers face include:
Employees who provide eldercare may experience stress, anxiety and exhaustion. According to a Met Life study, 16% of respondents said they had to quit their jobs in order to meet the needs of elderly parents. Others said they passed up job promotions, training or career advancing opportunities. They used sick or vacation time to attend to eldercare issue. In so doing, less time or no time remained for self care or attending to their own needs.
The issue for employers.
According to a report by CIBC Capital Markets, 30 per cent of workers with parents over age 65 lose 450 hours per year of time off to support eldercare needs.
Employees providing eldercare experience more partial absenteeism. To accommodate the eldercare demands, they arrive late, take longer lunches, leave early and use time at work to talk on the phone with eldercare service providers and loved ones.
Eldercare costs employers. They face various challenges including
Small measures can make a huge difference.
To reduce and avoid the negative effects of eldercare issues in the workplace and to support employees who are tasked with providing eldercare, employers benefits from considering:
Eldercare and other issues affect worker well-being, productivity and potential benefit plan costs. There are importance preventative considerations for employers that we're well positioned to support. We invite you to contact us to learn more. We're here to help so that you can focus on what you do best.
Paramedical benefits have seen their fair share of usage in the last few decades. It is a bundle of benefits under regular scrutiny. Why? Because plan sponsors continue to experience increased costs associated with benefits like chiropractic, massage therapy, orthotics, orthopaedic shoes, nutritionists, dieticians, naturopaths, acupuncturists and more. According to Great-West Life, in 2013, paramedical services represented 19.3% per cent of healthcare claims.
Why the increase?
In the paramedical category, orthotics are prone to widespread fraud. There seems to be a constant, if not growing, interest in this benefit category. More plan members submit paramedical claims for orthotics than ever before. Is it a need, a sense of entitlement (use it or lose it) or something else? This is a question plan sponsors regularly explore.
Paramedical services, while designed to help treat issues, often times, also act in a preventative capacity. When plan members use these services, they may prevent a more serious illness or injury from occurring. So it helpful to keep usage in perspective, while still managing costs and protecting against fraud, waste and abuse.
Why the focus on orthotics?
Orthotics are a device that can be inserted into the shoe to support, align, prevent or correct foot deformities and improve foot function. The orthotic should be made for the person and fabricated from a 3D model or cast of the foot, which captures the foot alignment and shape.
What's the deal with custom-made?
In recent years, insurers and service providers changed their claim processing for orthotics and orthopaedic shoes. In an effort to ensure that benefits are accurately and appropriately paid, many providers ask for confirmation that the orthotic has been custom made and that the orthopaedic shoes are specially constructed for the patient. They stopped paying for brand name orthopaedic shoes that haven't been custom-fitted and for over-the-counter orthotic shoe inserts.
Contractually, the issue comes down to ensuring that claims utilization adheres to contract provisions rather than expansion upon services that don't fall within the intent of coverage.
Plan sponsors hope to avoid the sense of entitlement that comes from offering benefits such as paramedical services. They hope plan members recognize that submitting a paramedical claim whenever they want a new pair of shoes isn't appropriate.
- Plan members should seek a gait analysis or a biomechanical assessment after a recommendation or referral from a medical doctor has been made.
- Once the orthotics or orthopaedic shoes are custom made, a detailed lab invoice should be included.
- Any claim should include a detailed paid-in-full receipt with a breakdown of charges.
- Additionally, it is a good practice to review adjudication procedures on a regular basis particularly related to assignment of benefits for compression stockings, orthotics and orthopaedic shoes.
Plan sponsors should establish maximums per visit and per practitioner and review their experience at least annually, if not more regularly. Plan sponsor communications to plan members should ensure that they know the prevalence of fraud and how they might unknowingly be at risk. This includes ways to protect their personal information including checking online claims to ensure they are aware of what has been submitted and paid. They should know who to contact and when to reach out if they are suspicious of any activity or any request that may constitute fraud.
Our goal is to maximize the value and efficiency of plan sponsor coverage for their members. In our efforts to help manage increasing costs, we monitor trends and keep our clients informed so their plans provide valuable coverage at the right time for those who need them. Have questions about this or other benefit-related topics? Contact us. We're here to help so that you can focus on what you do best.
It should be no surprise to anyone in the workforce that we are experiencing the impact of an aging workforce. For Generation Y or Millennials (born between 1980-2000), they've been waiting in the wings for their more senior colleagues to exit stage left for some time now. What may be complicating the opportunities for talent turnover involves the influence of employers needing to accommodate older workers with chronic disabilities.
Older workers = increase in prevalence of disability.
With a growing demand for younger, more technologically savvy workers, employers may find themselves less available to create opportunities for new talent given the need to accommodate age-related disability issues. Not only are employers struggling for ways to attract new hires, they also face the "brain drain" when experienced workers become disabled. As employees age, the risk of disability increases.
Aside from the impact of an aging workforce, there are other changes occurring in disability management landscape. The following list represents some of the more recently noted themes.
1) Increasing cost and number of days absent.
Statistics Canada reported that in the year 2000, the average absence per worker was 8.0 and in 2010, it jumped to 9.1 days. This increase in days absent correlates to a mounting cost burden for employers as disability from all sources (sick leave, salary continuance, short and long term disability) already represents between 2% to 3% of Canadian payroll costs. As per the Conference Board of Canada's 2012 report, the direct cost of absenteeism in businesses was estimated at $16.6 billion and the impact of the greying workforce will only continue to add pressure as a result of increases in disability related absences.
2) Greater emphasis on prevention
With the popularity of workplace wellness programs, promoting healthy lifestyles and illness prevention has picked up momentum. A growing emphasis on prevention and intervention means that employers and their service providers are taking a closer look at workplace policies, support for recovery and work environmental factors, accommodation, customized case management and supervisor training. Employers are dealing with the idea of whether they take should also assume the role of workplace health educators to create a culture where health and well-being is a priority.
3) Increased focus on claims coordination and integration
According to the 2013 Disability Management Employer Coalition and Spring Consulting Employer Leave Management Survey, 83% of employers surveyed are integrating Short-Term Disability programs with other employee leave programs. (up from 46% in 2011). Additionally, 77% of employers are integrating their LTD programs with other leave programs (up from 50% in 2011).
4) Mental health related disabilities continue to rise
According to CAMH, approximately one in five Canadians or 20% to 25% of a company's workforce may be dealing with mental health issues. Employers are challenged to face this reality head on given it is becoming the fastest growing disability type in Canada with an increasing number of cases reported for depression and anxiety. As per a Morneau Shepell survey, 66% of employees who took time off work didn't report it as a mental health issue. The associated cost to our economy from workplace losses represents more than $20 billion annually. (Mental Health Commission).
As employers continue to grapple with the pressures related to talent retention and disability accommodation in the workplace, there remain valuable ways to identify and implement areas for improvement. One of our specialities involves an evaluation of your current benefits program along with opportunities to better provide benefits information through training, mobile and in-person strategies. We invite you to contact us to learn more. We're here to help so that you can focus on what you do best.
Plan sponsors face a new and growing dilemma. While they have addressed the challenges of mitigating the costs associated with prescription drugs for years, the influx of orphan drugs creates a new and complex situation.
Imagine a scenario where a 10 year employee learns that his 4 year old son has been diagnosed with a rare and life-threatening disease. The father, a hard-working, well-liked, loyal employee, seeks help from his employer to pay for the cost of a drug that can potentially save his son's life. The dilemma? The drug's price tag is more than $700,000 for a round of treatment. It isn't covered under the group benefits plan. What does the employer do?
Before we address the scenario further, let's take a step back and look more closely at the definition of orphan drugs, the developing demand for them, and why private payers are increasingly faced with making these kind of difficult decisions.
Orphan drugs defined.
Orphan drugs are a pharmaceutical agent that has been developed specifically to treat a rare medical condition, the condition itself being referred to as an orphan disease. A rare condition is a life-threatening, seriously debilitating or serious and chronic condition affecting a small number of people.
As per Cadth.ca, it is estimated that there are between 6,000 and 8,000 distinct rare diseases in the world and according to the Canadian Organization for Rare Diseases (CORD), rare diseases affect one in 12 Canadians. Given we are a nation of approximately 37 million people, 2.8 million with rare diseases seems like a significant portion. Additionally, as patents on bestselling drugs like Lipitor and Viagra expire, drug makers are looking to other markets for growth opportunities. Orphan drugs are increasingly entering the market as technological advances continue.
While 2.8 million Canadians or 350 million people worldwide are diagnosed with a rare disease, the ratio remains too small for drug makers to develop orphan drugs using the market conditions applied to other more mainstream medications. Since research and development costs are high for orphan drugs, the cost to purchase these drugs are as well. Affordability remains a significant issue.
Who's on first?
Health Canada continues to develop a regulatory framework for orphan drugs and to increase the availability of these products on the Canadian market. Government payers want to avoid paying for expensive orphan drugs that haven't been proven effective so, at present, private plans are considered first payer with provincial health plans coming in second. A complicating factor challenging the payment model involves the fact that not all provinces have drug formularies to address rare diseases and their reimbursement under specific conditions. Throw in the lack of consistency in both the private and public sector with regard to what rare drugs warrant being covered and you have a perfect storm for the orphan drug payment dilemma.
What's your Benefits Philosophy?
Coming back to the scenario with the father seeking help to cover the cost of an orphan drug for his son's life-threatening condition, the issue remains an onerous one for the plan sponsor thrust at the forefront of the payment model. Employers who develop a benefits philosophy that aligns with the organization's vision, mission, and values have a clearer line of sight to making tough decisions such as whether to cover the cost of orphan drugs or not. Taking a preventative approach before being forced to address such a difficult decision is key. We invite you to contact us. We will work with you to create a benefits philosophy that aligns with your total rewards strategy and your company values. As ever, we are here to help so that you can focus on what you do best.
Imagine that you were traveling from one desert town to another and needed to carry water with you along the way, but the bucket you used to transport the water had holes in it. Since water was such a precious resource, you'd likely ensure that you plugged the holes in the bucket immediately or replaced it with a new bucket. You wouldn't want to risk the unnecessary loss of water by not addressing the leaks.
There's a hole in my benefits bucket.
Now picture a scenario where the bucket is your group benefits plan and the holes in the bucket are fraud and abuse that needlessly drain dollars from your healthcare spend. According to the Canadian Health Care Anti-fraud Association, the cost of healthcare in Canada rose to $215 billion in 2014 and approximately $2 billion was lost to fraud and abuse. That is one leaky bucket! Plan sponsors continually to try to manage the mounting costs of prescription drugs and other factors that influence claims expenses, but the question remains -- are they doing enough to plug the holes caused by healthcare fraud and abuse? Even the most creative benefit plan cost containment measures are challenged by the effects of fraud and abuse. The good news is there are several ways to plug the holes in the bucket and prevent leakage.
Fraud and Abuse defined.
Fraud in healthcare is defined as deliberate deception for financial gain at the expense of a group benefits plan where abuse could be considered the unnecessary use of plan dollars driven by a sense of entitlement. Where fraud is illegal, abuse doesn't usually dictate criminal intent. Rather it is often motivated without awareness of it being highly unethical or possibly criminal. An example of abuse occurs when plan members and/or their eligible dependents use their benefits to the annual maximum even though the services they receive are deemed not medically necessary. Fraud, on the other hand, involves a plan member or a healthcare provider or both, knowingly falsifying a claim or lying about services provided or received.
Plan Sponsors put pressure on service providers.
Rapidly changing technological advancements create ease of service, but also growing opportunities for healthcare fraud. As financial institutions, like the major banks, dial up their fraud prevention measures, those who look to commit fraud are instead turning their attention to the healthcare industry. As a result, plan sponsors are putting more pressure on their service providers to help them plug holes in their group benefits bucket created by more sophisticated healthcare fraud techniques.
What are service providers doing to prevent healthcare fraud?
While technology has been used to create fraud, it can also be used to prevent it. Service providers place greater emphasis on healthcare fraud prevention measures. From pre-payment to post-payment verification, random checking of submitted claims, hospital claim audits and delisting of service providers, big data is used to analyze claim patterns and feature anomalies commonly associated with fraud and abuse.
Plan Sponsors play a key role in prevention.
As service providers continue to investigate new ways to protect their plan sponsors from fraud and abuse, there are steps employers can take to fortify the walls of their benefits bucket. Plan design is an important consideration when addressing fraud prevention. Introducing features such as a Health Spending Account, deductibles and copays as well as reasonable coverage limits are some, but not all, of the steps that can be taken to limit the potential for fraud and abuse-related plan leakage.
Educate to prevent.
Plan members may unwittingly drive up claims costs through acts of healthcare abuse and waste. They also may not realize that some healthcare providers commit fraud and that their own actions unknowingly enabled a fraudulent activity. The more plan members are informed and educated about the negative consequences of healthcare fraud and abuse, the more likely they will be to do their part to help prevent it.
Additionally, plan members and their dependents should be educated about the different ways to report fraud. It should be easy for them to access a phone number, email address or website in order to reach an anti-fraud resource either internal to their organization, via their service provider or an industry contact such as the Canadian Health Care Anti-fraud Association at www.chcaa.org.
Through a combination of tactics and efforts by various parties including the plan member, plan sponsor and service provider, the effects of fraud and abuse can be minimized. With decades of experience in the benefits industry, we bring our knowledge of fraud prevention and plan design best practices to work for you. Together, we can address the risk of healthcare fraud and abuse and make sure your bucket avoids developing preventable leaks. Please contact us. We're here to help so that you can focus on what you do best.
Dave Dickinson, B.Comm, CFP, CLU, CHFC
Experienced Benefits Specialist ready to optimize your group benefits and pension plans.