Employers cautious about budget health initiatives

(February 24, 2003) Pension plan sponsors are welcoming healthcare provisions laid out in last week’s federal budget. But although they are pleased that issues such as primary care, home care and catastrophic drug coverage have been addressed in the $16 billion five-year Health Reform Fund, they caution that the success of the budget initiatives will depend on their implementation by provincial governments.

“There is some potential good news here in the home care and the catastrophic drug areas in that governments may be picking up more at some point in the future,” says Tim Clarke, a consultant in the health management practice of Hewitt Associates in Toronto. “And all the indications are that this will be something that will save plan sponsors money. But they’re just reluctant to get excited about something that is a couple of years away and so uncertain.”

While the provisions in the budget may be able to reduce the costs employers have to pay for home care and drugs, the good news is conditional on how they are carried out. Critics add the budget is short on details, leaving questions about how these plans and programs will be structured.

“Of most interest to us is the catastrophic drug coverage,” says Mark Daniels, president of the Canadian Life and Health Insurance Association (CLHIA). He says that CLHIA commented extensively on the issue to both the Kirby and Romanow healthcare commissions. Daniels says that it is too early to tell how this provision will work. “It would appear as though the federal authorities have no fixed model — especially on the catastrophic drug side.”

Two other items in the budget — a compassionate care benefit for individuals who need a temporary leave of absence to care for a sick or dying family member and a pharmaceuticals management plan — could spell trouble for pension plan sponsors.

With the compassionate leave proposal, there are no details on whether plan sponsors would have to provide benefits during the six-week leave time. If required to, this could mean higher benefits plan costs down the road.

The pharmaceuticals management plan involves getting new drugs approved more quickly — and allowing Canadians to obtain them at a faster pace. But as Clarke point out, the provision has two different outcomes for plan sponsors. “There are two sides of this coin. One is that their employees will likely get access to some of the newer medications more quickly, which could be a positive thing in getting people back to work more quickly.

“The flip side is that the new medications approved more quickly are those that are often more expensive than existing therapies. So, depending on the ways plans are set up, that could costs plans more money.”

To prepare for implementation of such a plan, Clarke suggests pension plan sponsors continue to evaluate the definition of what they’re covering under their drug plans. He says that they should develop a policy in which the needs of their employees are balanced with their own need to manage costs.

• • •

Click here to read Advisor.ca’s extensive coverage of the federal budget.

• • •

Anna Sharratt is associate editor at Benefits Canada, a sister publication of Advisor.ca.

(02/24/03)