If the cost of prescription drugs keeps increasing at its current rate, many employers will start reducing coverage or backing out of health plans completely, warns a veteran benefits consultant.
“I already see it now – companies are cutting back on benefits they provide because they have to keep their costs in line,” said Bill McElroy, of William Douglas Group Inc.
Plan sponsors are getting hammered by the price of drugs that can cost hundreds of thousands of dollars per year… for an individual battling disease.
“Even if you’re running at the target-loss ratio that’s expected by the insurance company you’re still going to get these inflationary increases of 10-12 per cent,” said McElroy. “I just don’t know how much longer employers are going to be able to accept them because they’re cutting into their bottom line.”
Canada is the only OECD country with a universal health care plan that doesn’t include prescription drug coverage. McElroy is seeing employers downloading costs on to employees by capping drugs, putting in higher coinsurance and having workers start to pay for Long Term Disability premiums – if they’re not already.
Just one person on a rheumatoid arthritis drug like Remicade can even derail benefit plans with groups of 100 people or more. “A $10,000 claim can throw the plan right off,” said McElroy. “I know there’s pooling over 10,000 but you start getting a few of these on one plan, even in a larger group, and it really just knocks the wheels off the plan.”
In Ontario, a solution could be integration with government’s Trillium Drug Program.
“There should be provincial paid reinsurance for these outrageous drug claims,” said McElroy. “Small business owners and insurers just can’t absorb these costs. I’d say in the next five years you’re going to see some definite changes because it’s just not sustainable.”
Published on the Wealth Professional website
by Nicolas Heffernan | 25 Nov 2014