slide1 n.
Skip this Video
Loading SlideShow in 5 Seconds..
Canadian Drug Insurance Pooling Corporation PowerPoint Presentation
Download Presentation
Canadian Drug Insurance Pooling Corporation

Loading in 2 Seconds...

play fullscreen
1 / 33

Canadian Drug Insurance Pooling Corporation - PowerPoint PPT Presentation

  • Uploaded on

Canadian Drug Insurance Pooling Corporation. Scott Heard Vice-President, Sales and Marketing Group Insurance. A partner you can trust. Toronto: November 21, 2012. Our ambition is to ‘ be recognized by our clients as the best service provider of group benefits ’. Agenda.

I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
Download Presentation

PowerPoint Slideshow about 'Canadian Drug Insurance Pooling Corporation' - brit

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.

- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript

Canadian Drug Insurance Pooling Corporation

Scott HeardVice-President, Sales and MarketingGroup Insurance

A partner you can trust.

Toronto: November 21, 2012

our ambition is to be recognized by our clients as the best service provider of group benefits

Our ambition is to ‘be recognized by our clients as the best service provider of group benefits’.


Rationale for the program

Benefits for plan sponsors, plan members, and advisors

How does it work?

Protection from adverse selection

Governance and administration

Impact on advisors, next steps, and timelines

rationale for the program
Rationale for the program
  • Growing concerns over sustainability
    • ESC 2011 Drug Trend Report
      • Biologic drug claims growing by 12 per cent per year
      • Expected to account for 33% of drug spending in 2014
    • CLHIA data
      • 20% annual growth of claims over $25,000 since 2008
  • Increased duration of recurring, high cost claims
    • Recurring high cost drug claims for relatively young people
  • Increased incidence of high cost claims
    • High cost medications increasingly prescribed to treat cancer, auto-immune conditions and other rare diseases
    • Highly effective and very costly treatment
rationale for the program1
Rationale for the program
  • CLHIA poll
    • 1/3 of small-medium employers would consider making changes to their drug plans if premiums were to increase by 25%
  • The industry pooling program ultimately helps ensure that millions of Canadians can continue to access the prescription drugs they need, regardless of whether they or their colleagues require a high cost, recurring drug.

Sun Life

Union Life

Western Life

Twenty four insurers, who collectively account for 100% of supplemental group health business in Canada are participating as Founding Members

benefits for plan sponsors
Benefits for Plan Sponsors
  • Availability
    • All fully insured groups will continue to be able to purchase group extended healthcare coverage
  • Affordability
    • At a reasonable price even after the incidence of a large recurring drug claim(s)
  • Transferability
    • Able to select the participating insurer of their choice
  • Competition
    • The solution will continue to encourage active and vigorous market competition
benefits for plan members
Benefits for Plan Members
  • Sustainability of coverage
    • Able to continue to receive coverage through their employer even in the face of a high cost drug claim
  • Job mobility
    • Change of employers won’t jeopardize coverage
  • Protection from financially catastrophic occurence
    • 1,900 individuals covered by fully insured plans in Canada had annual drug claims exceeding $25,000 in 2010
benefits for advisors
Benefits for Advisors
  • Continued market access for group healthcare benefits for fully insured groups
  • Catastrophic claims will not affect price
    • Even after the incidence of a large recurring drug claim
  • Competitive market conditions restored
  • Limited changes to advisors’ operations
how does it work
How does it work?
  • The agreement covers only “fully insured plans"
  • Fully insured plans do not include
    • Administrative Services Only (ASO)
    • Refund accounting (includes any element of premium refund to client)
    • Stop loss plans
how does it work1
How does it work?
  • Insurers must place all large drug claims (fully-insured only) in a self-administered pool
    • Extended healthcare Policy Protection Plan: EP3
  • Insurers cannot renewal rate based on the experience of a specific group
    • The number or value of pooled drug claims for a particular plan sponsor cannot be considered in setting renewal rates for that group
    • Favorable and unfavorable experience of a particular plan sponsor will be ignored in setting rates
  • Insurers cannot experience rate and price for new business based on a particular plan sponsor’s pooled drug claims
how does it work2
How does it work?
  • Individual insurers can set premiums based on
    • The experience of its entire EP3 pool
    • Any other experience criteria that is not client specific
  • Drug and non-drug health benefits can be pooled together
    • EP3 rules apply to drug portion only of pooled benefits
    • Insurers are required to have processes that can demonstrate that they are following the rules of EP3 for the drug portion
how does it work3
How does it work?
  • Elements of the EP3 pools can be customized by each insurer include:
    • Pricing
    • Pooling threshold (subject to a cap of $25,000)
    • Pooling at individual level or certificate level
      • Industry pool managed at certificate level
    • Application of co-payments or deductibles
      • Subject to a cap of $1,000 for deductibles
    • Formulary design
    • etc.
  • Insurers can establish multiple EP3 solutions for different market segments
how does it work4
How does it work?
    • Industry pooling is managed at a certificate level
    • Thresholds that must be satisfied to qualify for the industry pool
    • Drug claims must exceed $50,000 for at least two consecutive years
    • In year two and in each subsequent year where the drug claims exceed $25,000, the industry pool will cover 85% of the amount over $25,000 to a maximum of $400,000 per year
    • The largest drug claim that could be fully pooled for a given cap is $400,000 / 0.85 + $25,000 = $496,558
    • If a certificate falls below $25,000 for 2 consecutive years, it is no longer eligible and would need to re-qualify
    • Amounts beyond the cap will be 100% borne by the primary insurer.
  • $50,000 threshold is the "Initial Threshold"
  • $25,000 threshold is the "Ongoing Threshold"
how does it work5
How does it work?
  • For first three years of the pooling, the thresholds are
    • 2012: $25,000 and $50,000
    • 2013: $25,000 and $50,000 (1st year of pooling)
    • 2014: $27,500 and $55,000
    • 2015: $30,000 and $60,000
  • The CDIPC board will adjust the thresholds to maintain an appropriate balance
    • Ensure that the pool stays a relatively constant size
    • Do not jeopardize the principle of transferability in the market
how does it work6
How does it work?
  • For first three years of the pooling, the industry cap is
    • 2012: $400,000
    • 2013: $400,000 (1st year of pooling)
    • 2014: $400,000
    • 2015: $500,000
  • The CDIPC board is responsible for adjusting the cap as appropriate on a go forward basis
how does it work7
How does it work?
  • Pool 1 – Residents of
    • Alberta
    • Ontario
    • Nova Scotia / New Brunswick / Newfoundland and Labrador / P.E.I.
    • Yukon
    • North West Territories
    • Nunavut
  • Pool 2 – Residents of Quebec
    • For costs not covered under the Quebec Drug Insurance Pooling Corporation
  • Pool 3 – Residents of pharmacare provinces
    • British Columbia
    • Manitoba
    • Saskatchewan
how does it work8
How does it work?
  • Participating insurers will share total pooled drug claims
    • Based on each participating insurer’s market share of total paid drug claims for all insured business in the applicable provinces for that pool
    • Any group drug plan that, by design, could never submit a claim to the pool is excluded from the market share calculation for the purposes of sharing pooling costs
how does it work9
How does it work?
  • The types of claims that are eligible to be pooled will vary depending on the pool
protection from adverse selection
Protection from Adverse Selection
  • Pre-existing exclusions apply to existing claims of "new" eligible groups (e.g. an ASO group becomes a fully insured group, or a sponsor initiating drug coverage for the first time).
  • Pre-existing exclusions do not apply to existing drug claims of groups with Founding Members that were fully insured group plans as of June 7, 2011
governance and administration
Governance and Administration
  • A not-for-profit corporation has been established
    • Canadian Drug Insurance Pooling Corporation (CDIPC)
    • Board comprised of 12 members plus 1 Ex Officio (CLHIA)
    • Permanent Executive Director will be hired to manage corporation
  • CDIPC compliant with Industry Canada standards
    • By-laws and powers have been reviewed and customized by the working group
  • Aspects of the program that will be overseen and managed by a Board of Directors
    • Eligibility
    • Termination
    • Member rights
    • Board of Directors
    • Administration
governance and administration1
Governance and Administration

Industry Pool


Insurer C

Insurer D

Insurer B

Insurer A

  • Governance & Admin
  • Administers industry pool and ensures insurers comply with EP3 and Industry Pool standards
  • Helps insurers sustain the costs of providing EP3 protection by pooling large recurring drug claims
  • Industry Pool
  • Mandates internal pooling for all fully-insured plans
  • Cannot experience rate clients based on pooled drug claims
  • If bidding on new business, cannot experience rate prospective new clients (already with another insurer) based on pooled drug claims
  • All other aspects of design of EP3 are customizable and a source of competition (price, pooling threshold, formulary design etc.)
  • EP3

Impact on Advisors,

  • Next Steps, and Timelines
impact on advisors next steps and timelines
Impact on Advisors, Next Steps, and Timelines
  • Advisors should be aware that
    • Insurers will be asking for more information than in the past on prospective new business
      • Copies of plan sponsors’ existing EP3 certificate
      • Copies of experience reports – including what is included or excluded from the experience
    • Information provided by insurers:
      • Every eligible group plan will receive each year an inter-company EP3 certificate outlining the broad terms of their Policy Protection Plan (EP3) and any excluded pre-existing claims, respecting privacy requirements
impact on advisors next steps and timelines1
Impact on Advisors, Next Steps, and Timelines
  • Insurers bidding on new business cannot consider the particular plan sponsor’s pooled drug experience
  • The new insurer
    • Must pool its new clients’ high cost claims in its EP3 pool
    • Can exclude any drug claims that would normally be pooled by its EP3 pool if the drug claim was not covered by the pool of the previous insurer
    • Can exclude from its EP3 plan any pooled drug claim covered under the EP3 of the previous insurer that does not fit within the design parameters of the new plan
impact on advisors next steps and timelines2
Impact on Advisors, Next Steps, and Timelines
  • At Industrial Alliance, current pools will stay the same
    • Standard $15,000 individual threshold for in Canada medical (drugs and non drugs)
    • Other thresholds possible
    • The Industry pool works like a reinsurance coverage for the insurer
  • Move to a per Certificate basis?
  • Three regions:
    • Pharmacare provinces
    • Quebec
    • Others  largest cost
impact on advisors next steps and timelines3
Impact on Advisors, Next Steps, and Timelines
  • Canadian Drug Insurance Pooling Corporation established
    • Board is established
    • Searching for Executive Director
  • Insurers currently developing their EP3 offer and communicating with sponsors and advisors
  • Eligible group policies must be covered by an EP3 as of their first renewal date on or after January 1, 2013
  • Eligible drug claim payments to be pooled in the industry pool effective January 1, 2013


The elephant, symbol of our 100 years of strength and longevity.