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Benefit Plans
It is almost a no-brainer that large corporations have greater fiscal capacity to absorb some of the rising costs associated with providing health plans for their employees. Make no mistake health costs are escalating and provincial government plans have been de-listing services over the last four years.
A forecast indicates the cost of medical plans will rise by 13.7% in Canada on average with the prescription drug component increasing by 15.1 per cent. Ontario has de-listed certain services related to chiropractic care, physiotherapy and optometry services. More are most likely to be de-listed soon.
»Canada And New Generation Platforms
There is mounting evidence that Canada may be the proving ground for what benefits consultants call consumer-driven health care. A survey in the August 2005 reported that 52 per cent of Canadian employers plan to offer some form of flexible benefit plans by 2007. While some large Canadian companies, such as Procter and Gamble Canada, have moved to install flex plans, it is not unreasonable to expect that larger companies will be slower to make the transition away from the classic defined benefit health plans to the new generation platform of defined contribution plans.
Our own experience suggests that small and medium-sized companies will be the most eager to make the transition. We say "transition" advisedly because the emerging trend since 2002 has been to combine both forms of plans. Just as employers have been frustrated by rising costs, consumers have been equally anxious to have greater flexibility in choice and greater say in where health dollars are spent. The trend to consumer-driven health care has been spurred by the fact that employees are focusing more attention on this part of their compensation and are tired of the limitations of having strictly prescribed benefits that they do not need or will not necessarily use on an annual basis.
»The Mechanics of Transition
What is very much in vogue in the smaller case market is a transitional approach. This involves the plan sponsor working with their advisor to develop a stacking or combo approach - combining a defined benefit plan with a defined contribution plan. A novel plan would have a traditional health insurance component with a reduced level of fixed and prescribed core services to meet basic, standard, time-proven needs. It's now popular to add to the insured dimension items such as coverage for catastrophic care for non-predictable and medically necessary expenses, including out-of-country medical care, in-home nursing and even prescription drugs.
Typically, with respect to the drug coverage, there is a significant deductible before the drug costs can be covered under the catastrophic part of the plan. For example, the employee may have to pay the first $1,000 of drug expenses out of pocket. However, where a flex plan in the form of a health spending account (HSA) is in place (the defined contribution side), the employee may bridge this divide by drawing against the account to satisfy the deductible.
One thing constant in all of this is change and companies big or small will be paying greater attention to benefit plan design along with obviously the cost. For more information or a company benefit plan quote contact Wise Financial Group Inc. toll free 1-877-779-4731 or email info@companybenefits.ca.