January 2014

Trends to Keep an eye on regarding benefit issues for small group plans in 2014

1. Biologics and specialty drugs

It is thought that biologics or specialty drugs will be an issue in 2014, as they were last year. With the increasing risk from ‘catastrophic drugs,’ employers will have to address some pressing philosophical issues, such as how far do an employer’s financial obligations extend for the costs of employee health care?” As an example: “Injectable biologics (like Remicade) are now the number-one category on most insurers’ drug list from a paid standpoint. Therefore, assuming these drugs become a larger portion of claims, having an insurer or adjudicator with an effective, specialty-drug management policy is key. Also key is appropriate coordination with government coverage, such as the Assistive Devices Program, Trillium Drug Program and Ontario Drug Benefit Program in Ontario, and the Pharmacare Special Authority in British Columbia. There is a need to
learn more about coordinating such government programs with small group benefits coverage.

2. Increased interest in HCSAs, flexible benefits and defined contribution plans

Health care spending accounts (HCSAs) provide supplementary coverage over and above a defined benefit plan, and have been around for years. Basically, HCSAs are a kind of hybrid plan—a balance between a traditional defined benefit plan and a defined contribution plan, in which an employer contributes supplementary coverage. Having a combination of multiple generations in the workplace and employers’ desire for a greater degree of cost control could see an increase of interest in these programs. Hybrid plans provide employees with a combination of choice from insured benefits (life, disability critical illness, and so on) and non-insured benefits like an HCSA. These plans provide employers with more control over costs.

3. Increased rates

It is believed there will be a variety of “soft issues” around rates and risks in the coming year. The fourth quarter of 2013 was marked by insurers offering discounts for new clients. Clients and advisors who take advantage of these discounts could see costs increase at renewal time in 15 months or so. The question will be “How will clients budget and pay for these increases?” It will be very important for to be clear communication and planning ahead.

4. Increased risks

The costs of health benefits have also decreased because drugs are coming off patents and governments are intervening to control medication costs. As these reductions occur, clients and advisors will still need to focus on managing small group benefits plan risks. Risk management will become more important in 2014. Risk can refer to everything from simple issues (like purchasing a rider for a liability policy to cover administrative errors) to more complex issues (such as the length of time an employer can extend coverage for an employee who’s absent from work)—and all of them are important. In short, remain focused on long-term risks, costs and goals.

5. Increased attention on mental health and wellness

There are many challenges that employees are facing today around mental health and work–life balance. There are now good studies and information available that show the business case for employers to invest in the mental health of their employees. Across the country, provinces are devoting time to beefing up rules and legislation around mental health obligations and support services.

6. An increase in claims related to workplace bullying and harassment

In November this year, British Columbia created a law to address workplace bullying, joining Manitoba, Ontario, Quebec and other provinces in tackling this form of workplace harassment. The BC law is called the Workers Compensation Amendment Act (www.worksafebc.com). This could potentially become a top health benefit issue for 2014. The new bullying wording has come into effect through Worksafe BC. You can assume this for other provinces as well. These claims affect both the benefits carriers. These sorts of claims relate to mental health issues diagnosed by psychologists and caused by bullying or workplace harassment.

7. Increasing awareness of critical illness and long-term care coverage

More insurance companies are adding critical illness (CI) insurance to their coverage—a crucial option for people who run or own small businesses. Typically, CI covers serious illnesses that we used to die from—heart attack, stroke, cancer and coronary-artery bypass. Those ailments account for about 85% of critical illnesses. We all think that the government will pay for costs associated with those, but it can’t.

A premium might be $35 to $50 a month for a 30-something, non-smoker who’s in good health, but, in a dire emergency, the benefits from that are huge. If that person gets cancer or has a stroke, then he or she would get a lump sum of $100,000, $250,000 or whatever was set up with the advisor. In these cases higher earning income families don’t need critical insurance, and lower income families can’t afford it, but small business owners and managers can afford it and will get the coverage for individuals who are integral to the business.

8. Increases related to stop-loss thresholds

Lastly, there is an interesting trend around monitoring Stop-loss thresholds which are currently about $10,000; a stop-loss policy kicks in when a certain amount, or threshold, has been paid in claims and People believe that they’re protected from large claims by this cap. But if the per-capita cost of drugs is about $1,000, what happens as pharmaceutical research pipelines mature and the drugs that came off patent are replaced by the next generation of drugs? Potentially there’s a lot of room for significant overall cost increases within the $10,000 limit.

excerpts provided by: smallbizadvisor December 2013 Alex Gillis, Pamela Glendinning, Tim Landry, Zoltan Barzso & Mike McClenahan

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