A look at the past, present and future of benefits plans

Read: 37% of U.S. employers increasing quality of workplace benefits to attract, retain employees: survey

Traditionally, employers were reluctant to add more costs to their benefits plans, but these costs have increased exponentially since the early 90s, notes Jean-Guy Gauthier, an expert in risk and benefits management at CQFD Actuariat. Benefits plans are often more expensive to administer than employer-sponsored pension plans, he says, adding they’ve taken on more prominence in the eyes of employers and consultants and are recognized as a vital tool for attraction and retention.

Fueling innovation with drug plans

“Drug plans are a great example of the potential of adapting to new realities and making an offering relevant in the context of the . . . changing world,” says Gauthier. “You don’t have to look too far back to remember when cancer drugs were only administered within the hospital environment. The drug plan was really an innovation.”

However, as provincial governments offload these drug costs to private plans, employers’ costs are on the rise. Indeed, the year-over-year spend for traditional drugs per plan member increased by 3.7 per cent in 2021, according to Express Scripts Canada’s latest drug trends report. For specialty drugs, the year-over-year spend per plan member was up 6.8 per cent.

“Drug costs are astronomical compared to years past,” says Michael Mazzuca, a partner and employment lawyer at Koskie Minsky LLP. “Some of these specialty drugs can run tens of thousands of dollars and plan [sponsors] have to somehow plan for that.”

Read: High-cost drugs remain primary cost driver for Canadian public, private drug plans: PMPRB

One innovation is the implementation of biosimilar switching policies to increase the uptake of these drugs. In the public sector, British Columbia, Alberta and Quebec have all introduced one of these policies in recent years. The Régie de l’assurance maladie du Québec’s policy makes exceptions for pregnant women, paediatric patients and those with chronic illnesses who’ve experienced two or more therapeutic failures and are being treated with a biologic drug for that condition.

Citigroup Inc. encourages its plan members to consult their physicians on the efficacy of the biosimilars available for them to use. In cases where plan members’ physicians believe the brand name offers more efficacy, better results or if a member can’t tolerate the biosimilar, the plan will still cover the brand-name drug, says Stella Yu, senior vice-president of total rewards. “At the end of the day, it’s not about cost-cutting, it’s really about consumerism.”

Some in the industry believe relief is on its way. After multiple delays, the Patented Medicine Prices Review Board’s new regulations took effect July 1, 2022. The regulations create two new drug categories — high or low priority — based on their anticipated impact on Canadian consumers, with the high priority drugs subjected to a more comprehensive price review. As well, the regulations include a new basket of comparator countries and reduced reporting requirements for medicines at lowest risk of excessive pricing.

A national pharmacare program

Various levels of government have discussed a national pharmacare program for several decades — indeed, Canada has attempted to bring in a national system nine times over the last 76 years.

In 2018, the federal government’s parliamentary budget office pegged the total cost of pharmacare at about $20 billion. And in March 2022, the Liberal Party announced a partnership with the New Democratic Party to deliver a national pharmacare program to Canadians.

Read: Liberals, NDP to move forward on dental-care program, national pharmacare

“I see pharmacare playing a more essential role in terms of drug plans in the future,” says Pryce.

From a plan sponsor perspective, Yu says a national pharmacare program would offer cost and risk-sharing benefits. While Citi’s drug plan doesn’t impose maximums, it has a pooling arrangement through its insurer that pools claims over $50,000 and, subsequently, mitigates risk. While employers are waiting to see the finer details of a national system, Yu believes it could help employers share the risk with a much bigger pool.

However, stakeholders must consider which drugs might be available on a pharmacare program’s formulary, cautions Gauthier, noting any assumption that a national system will be clear cut is premature.

The rise of health-care spending and wellness accounts

Choice and flexibility are the new architects of the current benefits plan design, says Pryce, noting employers are increasingly turning to health-care spending or wellness accounts to help members use their plans in a way that best suits their and their families’ needs.

The federal Income Tax Act governs which benefits are eligible under these accounts. Traditionally, HCSAs were the domain of an insurance company, but more technology providers have entered the space in the last 10 years, he adds.

Wellness accounts have become a function of the culture of an organization, helping employers brand themselves and stand out among their competitors, says Gauthier. To attract and retain staff in the post-pandemic labour market, many companies have expanded their wellness accounts in ground-breaking ways, from covering childcare, meal deliveries, Indigenous medicines, home office setups and work-from-anywhere costs. He doesn’t see employers back-peddling from this trend anytime soon.

Read: How employers are maximizing health-care spending and wellness accounts

“The theme of flexibility has taken different forms, but it’s been there all along,” he says, noting coverage continues to widen as benefits plan design adapts to people’s personal preferences and constraints.

In the future, employers may shift health-care dollars to employees, allowing them to manage routine expenses through an HCSA with catastrophic coverage going through a program managed by a provider of their choosing, says Pryce.

Expanding the benefits plan reach

During a recent roundtable with young female employees, Diana Godfrey, senior vice-president of human resources at Fidelity Canada, learned they were interested in coverage for harvesting and freezing their eggs.

At the time, the organization hadn’t considered how families were changing and that women were starting their families at older ages, she adds. But once it was on the organization’s radar, Fidelity Canada adjusted its benefits program to include coverage for fertility treatments.

Citi’s workforce is comprised of new graduates, those nearing retirement and everyone in between, says Yu, highlighting the importance of ensuring the organization’s benefits plans meet the needs of all generations, sexualities, families and cultures.

Indeed, when it comes to the evolution of benefits plans, Yu suggests plan sponsors strive to understand the makeup of their plan members, where they are in their life stages and the benefits they need to support them through their life journeys.

Over the last two years, employers are increasingly viewing their plans through a diversity, equity and inclusion lens — and Citi is no exception. The bank covers fertility treatments, providing all employees with $7,500 in prescription drug coverage and up to $24,000 in medical services outside of the various public health-care systems. In January 2023, it will add gender affirmation coverage to its benefits plan, covering up to $24,000 annually for lifetime, outside of the provincial government’s provisions.

Read: Fertility benefits on the rise as employers look at needs of diverse employee base

In May 2020, Citi increased its paid maternity leave for birth parents or primary caregivers globally. In Canada, Citi had previously provided a maternity leave top-up to 75 per cent of pay for 17 weeks, with 75 per cent top-up for eight weeks for adoption leave and no top-up for parental leave. Now, in Canada, the bank provides 16 weeks of paid leave at 100 per cent top-up for birth mothers and six weeks of paid leave at 100 per cent top-up for other parents.

When Godfrey started in the benefits industry, domestic relationships weren’t recognized unless legislated in a particular province, much less same-sex benefits. “We’ve only just cracked the surface. The idea of using pronouns a few years ago was foreign to everyone and now it’s embraced by many employers.”

Employee well-being taking centre stage

In the past, HR professionals had to demonstrate a return on investment when they wanted to introduce wellness initiatives, but now they’re an essential element of the employment brand, says Yu.

Historically, Citi’s mental-health supports were included under its paramedicals bucket, which offered three tiers for plan members — a free basic level, $1,000 for the comprehensive coverage and $1,400 for the premium option. In January 2019, the organization separated mental-health support from the other paramedical services, allotting each plan member $1,000 for basic coverage, $2,000 for comprehensive and $2,500 for the premium option.

Earlier this year, Citi nearly doubled its annual coverage to $2,000 for basic, $3,500 for comprehensive and $4,000 for the premium option. It also expanded the practitioners covered under the plan to include psychologists, clinical counselors, marriage and family therapists, psychoanalysts, psychotherapists and social workers.

“Every year, we monitor how many people actually reach the maximum, whether it’s our employees or their dependants. Then we determine whether we need to invest more into it.”

Read: Mental-health supports, training on the rise as a fifth of benefits plan members report poor mental health: survey

Citi isn’t alone: the 2022 Benefits Canada Healthcare Survey found 24 per cent of plan sponsors recently increased their maximum level of coverage for mental-health counselling, up from 19 per cent in 2021 and 18 per cent in 2020. The average annual maximum for mental-health counselling was $2,006, up from $1,294 in 2021.

Employers have realized that mental, physical and financial wellness are all aligned, says Godfrey, noting they’re also focused on the bigger picture — how people conduct their lives and what they need to thrive and be healthy and productive at work and at home.

The emergence of virtual care

Although coronavirus pandemic-fuelled closures of physician’s offices and backlogs in the public health-care system quickly made virtual health care a benefits staple, Yu says employers are still waiting to see whether the government will fully integrate it into the public system.

Indeed, employers may not want to continue paying for a benefit that’s available for free on the public system, notes Gauthier. Another deciding factor will be the price of virtual care — if it rises and employees are asked to pay a premium, he’s not sure the benefit will continue to appeal to them.

Read: One year later: How the pandemic sped up the shift to virtual mental-health care

While telehealth’s rapid integration into employer-sponsored benefits plans was a temporary solution during the pandemic, these changes have made everyone’s lives easier, says Godfrey, noting employee feedback has been phenomenal and she expects employers will keep providing these benefits. “The reality is having access to physicians and health care online gives employees back their day. It’s also beneficial for employers because staff don’t have to take time off to see a doctor. The gift of time is appreciated by everyone.”

Adapting to the mobile workplace of the future

As the workforce continues to evolve, benefits plans will also have to adapt, says Mazzuca, noting he expects multi-employer plans will become more prevalent because they’ll allow benefits plans to adapt to the mobile workforces of the future.

He works with many multi-employer plans that are either fully or partially sponsored by a union. These plans help employees in highly transient industries, such as construction, take their benefits plans with them when they move companies, he adds, noting these plans are being touted as a model for portability.

In December 2021, Ontario’s advisory committee on the future of work released a report recommending the province introduce a new portable benefits program for gig and precarious workers. One of the committees’ recommendations was for the province to support workers who fall outside the purview of traditional benefits programs, noting there’s an opportunity for Ontario to design and deliver a new type of portable benefits strategy tied to employees rather than employers.

Read: Ontario mulling implementing new ‘portable benefits’ for precarious workers

With the price of employer-sponsored benefits continuing to skyrocket, Pryce says plans could eventually shift to a format similar to the U.S.’ health exchange, in which plan sponsors can allot a certain number of dollars for employees to use to purchase the health-care programs they need and value most. In a digital society, this becomes much easier for employers to administer and for employees to use, he adds.

Going forward, the benefits plan model will need to be accessible but also interconnected, he says. “The shift to digital creates a lot of opportunities to expand the benefits industry and who knows where that will go.”

Lauren Bailey is an associate editor at Benefits Canada.