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The Future of Canadian Employee Benefits

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Policyholder. Employee. Shareholder. Life Company Priorities. 1980's. Shareholder. Policyholder. Employee. Life Company Priorities. 1990's. Shareholder. Canadian ... – PowerPoint PPT presentation

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Title: The Future of Canadian Employee Benefits


1
The Future of Canadian Employee Benefits
  • Positioning for Success

2
DONT FORGET TO ASK QUESTIONS
3
Life Company Priorities1970s
Policyholder Employee Shareholder
4
Life Company Priorities1980s
Shareholder Policyholder Employee
5
Life Company Priorities1990s
Shareholder Canadian acquisitions Independent
Advisors
6
Life Company Priorities2000s
Shareholder International Acquisitions
7
Current Group Insurance Landscape
Great West Life 6,448.0 Sun Life 6,267.4 Manu
life 6,022.3 Desjardins Financial 1,753.7 Gre
en Shield Canada 1,144.7 SSQ
Life 1,089.0 Pacific Blue Cross
963.7 Medavie Blue Cross 835.6 Industrial
Alliance 807.6 Standard Life 609.0 Industry
Total 29,730.7
Source Benefits Canada April 2009
8
World View
9
Whats going on and what does it all mean?
  • Financial meltdown
  • Globalization
  • Environmental degradation
  • Technology changes

10
The Global Evolution
  • We are in a global market. What happens in Asia
    impacts us and vice versa.
  • Markets are now very correlated
  • Global trade has made us all co-dependent
  • Current culture of fear of the future

11
Environmental Impact
  • Levels of pollution will impact mortality and
    morbidity
  • Climate change
  • Impacts of new diseases (e.g. West Nile, Swine
    Flu)
  • Spread of pandemic easier

12
Emerging Market Technology
  • Technology very advanced
  • 0.10 solution
  • Robot doctors (Fast Company)
  • Cell phones have global reach
  • Uses are changing
  • Stores value (money)
  • Medical assistance

13
Emerging Market Technology

14
Canadian Group market
  • Consolidation
  • Year Premium Top 3 Profit
  • 1996 12 billion 33 0.1 billion
  • 2007 27 billion 66 1.1 billion
  • (Source DGA
    estimate profit Fraser Group for market size)
  • With financial meltdown Canadian insurers have to
    increase earnings
  • Employers are squeezed and will want cost
    reductions

15
Canadian market
  • Expect new entrants and new methods
  • Payroll firms
  • Banks (Perhaps BMO?)
  • Other
  • Enrollment and administration process can be
    changed to simplify
  • Outsourced
  • Automated

16
Canadian Market
  • In the long run
  • Expense levels will decrease
  • Service requirements will increase
  • Distribution methods will change
  • Can you compete?

17
Is the Current Benefits Model Sustainable?
18
Crisis What Crisis?
19
The Health Care Landscape
20
Future SHOCK
21
Public System
  • Current healthcare spending split is roughly 70
    government and 30 private
  • CLHIA report states demands for healthcare system
    expected to rise exponentially
  • Current healthcare spending is approximately 10
    of GDP
  • If current trends continue, provincial government
    spending on healthcare will exceed 50 of total
    revenue in 6 out of 10 provinces by 2020.
  • Ontario 70 of revenue by 2022
  • BC 71 of revenue by 2017
  • Frank Swerdlove (CLHIA President) Canadas
    current healthcare system is not sustainable at
    its current rate of spending

22
Canadian Drug Trends Total Public and Private
Plan Spending on Prescribed Drugs
( increase from prior year)
( 000,000)
Source Canadian Institute for Health Information
(CIHI) National Health Expenditure Trends 1975
2008
23
Canadian Drug Trends Per Capita Public and
Private Plan Spending on Prescribed Drugs
( increase from prior year)
( per capita)
Source Canadian Institute for Health Information
(CIHI) National Health Expenditure Trends 1975
2008
24
Rising Drug Costs
25
  • What is the public system to do?

26
(No Transcript)
27
Public Sector Drug Cost Management
  • The Transparent Drug System for Patients Act 2006
    (also known as Bill 102)
  • Introduced significant drug cost saving
    initiatives for the Ontario Drug Benefit (ODB)
    plan
  • Decreased payments to pharmacists. Lower mark-up
    from 10 to 8 and reduced rebates from drug
    manufacturers.
  • Decreased Generic drug price to 50 of brand
    price.
  • Decreased brand drug price through rebates paid
    to ODB details unknown
  • Pharmacy / drug manufacturers are attempting to
    recover income lost by the governments cost
    saving measures by increasing costs to private
    plans

28
Public Sector Drug Cost Management
  • The Transparent Drug System for Patients Act 2006
  • Impact on employer sponsored drug plans in
    Ontario
  • Different drug prices for ODB than for private
    payers
  • Much higher dispensing fee in some pharmacies
  • Higher mark-up details not known
  • Higher generic drug ingredient price pharmacy
    has developed two generic drug pricing schedules,
    a lower price for the province and a higher price
    for the private sector
  • Higher brand ingredient price group plans on
    their own

29
Private Sector Drug Cost Management
  • Standard approaches for private plans
  • (generally lower savings)
  • COB Positive enrolment
  • Generic Substitution
  • High dispensing fee cap (i.e. 8)
  • Pre-authorization of certain drugs
  • Small Coinsurance / Deductible
  • Combine with out-of-pocket maximum

30
Private Sector Drug Cost Management
  • More aggressive approaches for private plans
  • (generally higher savings)
  • Mandatory generic drugs or LCA wording
  • Expanded prior authorization/exception drug
    status
  • Low dispensing fee cap (i.e. 3)
  • Dispensing fee deductible
  • Maximum allowable cost (MAC) in therapeutic
    category
  • High co-insurance / deductible
  • Managed formulary restricted drug list
  • Tiered formulary higher reimbursement for
    cost-effective drugs
  • Defined Contribution

31
Positioning for Success
32
The Good News?
33
Benefits In Demand
  • Despite economic challenges, most employers are
    not cutting benefits
  • Long term shortage of skilled workers in Canada
  • Employees place high value on benefits plans
  • 2009 Sanofi Aventis Survey asked employees what
    would you rather have benefits or show me the
    money
  • How 10,000? 56 chose benefits!
  • Maybe 15,000? 52 chose benefits!
  • Last offer 20,000? 45 would still chose
    benefits.

34
The Bad News?
35
Theres Competition
36
(No Transcript)
37
Supplier Landscape
  • Full line insurers (e.g. GWL, Manu, Sun,
    Desjardins Financial, etc.)
  • Niche insurers (e.g. RBC Insurance, Green Shield,
    Blues)
  • The Quebec companies are coming!
  • TPAs (e.g. BBD, Encon)
  • TPAAC Member?
  • Others? (e.g. Benefits Trust, Benecaid)

38
Whats an advisor to do?
39
Partner Strategically
40
How Else Can You Differentiate Yourself?
41
Swim In Blue Oceans
42
Standing Out From the Crowd
  • Defined Contribution vs. Defined Benefit
  • Wellness
  • Employee Assistance Programs
  • Health Assessments (usually 50 employees)
  • Critical Illness
  • Funding models
  • Insured
  • ASO
  • Refund or Retention Accounting
  • Executive benefits (GSI, private health, etc)
  • Cost of compensation analysis

43
(No Transcript)
44
There are Four models for funding cash flow
benefits
Fully Insured
ASO
Health Care Spending Accounts
Retention Accounting
45
Traditional Group Insurance Contract
Under a traditional insurance plan, the Cash Flow
Benefits (like Drugs, Dental and Vision), are
comprised of
46
Administrative Services Only
Whats been eliminated/reduced?
Under an ASO contract the Cash Flow Benefits are
comprised of
47
Stop Loss Contract
Individual Catastrophic Protection
How Does Stop Loss protect the employer from
individual catastrophic claimers?
The Insurer Pays claims above 10,000 per year
per family
The Employer Pays claims under the 10,000 Stop
Loss Limit per year per family
48
  • Retention Accounting is identical to Fully
    Insured in the way the premium rates are
    developed, but there is a financial accounting
    completed at the end of the policy year
  • The employer has the call on any surpluses
  • Insurer agrees to pay for the cost of the actual
    claims plus their reserves and admin fees
  • Employer pays a set premium for a period of 12
    months to ensure rate predictability for 12
    months

Retention Accounting
49
Health Care Spending Accounts
  • A Health Care Spending Account (HCSA) is a
    pre-determined dollar amount established by an
    employer for his or her employees to be used on
    health and dental items not covered by a group
    plan and considered eligible by the Canada
    Revenue Agency
  • Amounts can be established by class of employees
    or by single/couple/family status

50
HCSA Tax Advantages
  • Deposits to a Health Care Spending Account are
    tax free for employees (except those in Quebec)
  • Contributions to a Health Spending Account are an
    eligible business expense for employers

51
Top-up Health Spending Account to Traditional
Health and Dental
  • Options that help to reduce costs and control
    future costs
  • Implement a high deductible under Health ie.
    500 single / 1,000 family
  • Remove or reduce paramedical practitioners
  • Remove vision care
  • Reduce co-insurance
  • Add top-up Health Spending Account to help cover
    these changes
  • Here are some of the benefits
  • Reduce inflation under both Health and Dental
  • Reduce expenses
  • Help to control utilization
  • Increase flexibility

52
Mirror, Mirror on the Wall Am I the Most Valued
of Them All?
Author Leo J. Pusateri
The Value Ladder
53
The Value Ladder
7. Why should I do business with you? 6. What
makes you different? 5. Who have you done it
for? 4. How do you do what you do? 3. Why do you
do what you do? 2. What do you do? 1. Who are
you?
Real Value Differentiation Client
Successes Process Business Beliefs Unique Value
Proposition Background
54
QUESTIONS
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