New program could mean modest savings for some Ontario employers, but bigger savings for those with retiree benefit plans: Experts
Less than one year after unveiling its children and youth pharmacare strategy, the Ontario government has committed to expanding the provincial health-care plan to seniors by offering free prescription drugs to citizens over the age of 65.
The change faces a June election test, as it would come into effect as of August 2019.
The expansion will eliminate the deductible and co-payment fees seniors currently pay for the 4,400 prescription drugs under the Ontario Drug Benefit (ODB) program — including medications for cholesterol, hypertension, thyroid conditions, diabetes and asthma.
The expansion of the Ontario Health Insurance Plan (OHIP+) will add up to modest savings for Ontario employers, according to Henry Toby, Ontario president of Gallagher, a benefit and HR consulting firm.
“This isn’t necessarily one that we see as being a boon to employers,” he said. “When you look at the fact that we’re just talking co-pays and deductibles for active employees over 65 — which is becoming a bigger and bigger piece of the workforce, no question — and retiree programs… for the most part, we’re not talking significant cost alleviation for employers from this.”
Currently, OHIP+ provides free prescription drugs to citizens 24 years old and under — costs previously borne by employers, said Toby. As a result of the program’s expansion, large organizations with ongoing retiree benefits will see more substantial savings, because a greater group will have deductibles and co-pays off-loaded to the government.
“Even so, we’re talking about just the co-pays and deductibles, not the actual cost of the meds, which was already being borne by the government,” he said.
Savings on deductibles, co-pays
Through the ODB program, benefit plans position the government as first payer for eligible drugs prescribed to seniors over 65. The remainder of costs are then submitted for payment through an employee benefits plan framework.
Those with an annual income of $19,300 or more pay a $100 deductible and a co-payment of up to $6.11 for every subsequent prescription, while seniors below that income threshold are exempted from the deductible and pay $2 for every ODB prescription — though many pharmacies waive that fee.
The government expects seniors will save $240 per year as a result of the expanded OHIP+ program.
“In Ontario, we already have the most generous senior coverage in the country,” said Mike Sullivan, CEO of Cubic Health, a drug plan analytics firm in Toronto.
“Even the highest income-earning senior only pays a $100 deductible every Aug. 1 on all ODB-eligible drugs. They pay the first $100 out-of-pocket and then, after that, high-income seniors only pay a $6.11 co-pay for prescription,” he said.
“Every other province, with almost no exception, has an income-based deductible for their program and/or has substantially more out-of-pocket per prescription. Ontario’s always been the most generous — by far — for seniors.”
The government’s policy is generally slated towards seniors outside of the workforce, said Susan Seller, partner at Bennett Jones in Toronto.
“Unless you meet one of the income tests or you have private coverage through your employer, when you retire, you can lose coverage that you’ve had for most of your working life and that’s a significant change for many individuals, because we all underestimate the cost of what we’re getting from our drug plans,” she said.
“They’re a significant component of employer benefit costs — drugs.”
“People are working past 65 and we can’t discount that group because that’s becoming increasingly common, and they may be higher users of drugs as well, even though they remain in employment.”
Effect on retirement plans
Organizations that do offer retiree benefits may cover the $100 deductible and subsequent co-pays, according to Sullivan.
“Any retiree program that’s got a lot of retirees or people over 65 on their plan in Ontario, I expect the net savings will be somewhere around $250 per person,” he said. “That’s not immaterial, but it’s not like it’s going to be an enormous windfall. It doesn’t mean that all of the drugs seniors are taking are going to now just disappear off the plan.”
However, many employer plans do not offer retirement benefits, muting the impact the program’s expansion could have on organizations, said Stephen Frank, president and CEO of the Canadian Life and Health Insurance Association in Toronto.
Employers will need to mull over continued coverage of a formulary more extensive than the ODB, he said.
“As with OHIP+, if an employer has a formulary that’s broader than the ODB — which most do — then of course they’ll have a decision to make on whether they continue to offer that broader list of drugs or not,” said Frank. “That’ll be a case-by-case decision for each plan sponsor.”
Advice for HR
The expansion of OHIP+ programming will be an easy switch for HR practitioners, according to Natasha Monkman, pension and benefits lawyer at Hicks Morley in Toronto.
“It’ll probably fit in seamlessly with what’s in place,” she said. “Most plans are basically saying, ‘Whatever doesn’t get covered by the government, then we might provide coverage for that.’ So that will mean that a little bit more is being covered by the government than already is the case.”
However, with a national pharmacare strategy in the works, HR would be wise to prepare for further changes down the road, said Sellers.
A review of post-retirement plans could be in order to ensure employer offerings only cover claims in excess of any government-paid benefits — including prescription drug coverage, she said.
“(HR) should continue to monitor this whole issue and any developments,” said Sellers. “It is a big deal to change or discontinue post-retirement benefits… but they should just ensure that they have the power to amend their post-retirement plans and to terminate or reduce benefits without restriction.”
While it is difficult to alter frameworks provided to current retirees, it is worthwhile to plan ahead with appropriate amendment and termination language to address the specific action of reducing benefits to take account of government plans, she said.
Universal dental benefits?
Ontario’s Liberals aren’t the only party promising major changes to provincial health care.
If elected in June, the province’s New Democratic Party would offer universal dental care for students, seniors and employees who are not offered dental benefits — which adds up to about 4.5 million people.
“In Ontario, one in three working people don’t have a workplace benefits plan — including those working in the gig economy,” said party leader Andrea Horwath.
Under her “Ontario Benefits” plan, a minimum standard for dental plans would be created, serving as a threshold all employers would need to meet through participation in a publicly administered plan or comparable workplace benefits plan.
Seventy-five per cent of Ontario Benefits would be funded by employers, while workers would contribute 25 per cent of the cost.
But basic dental care is not a major issue for employers, according to Mike Sullivan, CEO of Cubic Health, a drug plan analytics firm in Toronto.
“It’s not a massive pain point. The cost of dental benefits is very easy to predict from year to year,” he said.
“It’s not immaterial, but it’s predictable and it’s budgetable, so most plans know what they’re dealing with.”
The volatility of drug benefits and issues with fraudulent health claims are much bigger concerns, said Sullivan.