Health spend, and particularly drug spend, has long been an issue for both insurance companies and plan sponsors. In 1967, health spending was approximately 7% of GDP. Forty-plus years later, health spending was forecast to reach 11.9% of GDP in 2009. Similarly, drug spend represented less than 8.8% of health spending in 1967, but was estimated to almost double that of health spending in 2009, at 16.4%.
Last year, while plan sponsors focused on maintaining costs, they turned to their insurance companies asking for the most for the least. Plan sponsors, in other words, were looking for a deal. And some insurance carriers complied.
For a plan sponsor to change insurers, there would generally have to be a “reasonable price advantage,” says Steve Pong, senior vice-president, group products, with The Empire Life Insurance Company (No. 12 on the Top 20 list). But over 2009, insurers saw plan sponsors moving for less. “To go through the effort to move from one carrier to the other, there needs to be a price break—say 10% to 12%,” he says. “We saw some cases moving [for] as low as 7%.”
Insurers, too, had to watch how they spent their dollars. “Because of the recent economic challenges, employers have been driven to finding a better financial deal,” explains Judy Grant, vice-president, group benefits, with The Co-operators. “As carriers, we have to be very selective about where we’re spending our money. It’s got to provide solid value to our clients, or they’re not going to pay for it.” And while not all insurers could negotiate a price break, they did offer options to help plan sponsors contain costs.
An ounce of prevention
One strategy to keep drug spend and disability leaves at a minimum is prevention. Jean Guay, senior vice-president, group insurance, with Standard Life (No. 10), says that for 2010, the focus has shifted to health management. “We believe that health management is the right long-term sustainable solution to control costs and improve productivity,” Guay explains, adding that employers are more conscious now of the importance of prevention. “We believe this is the only sustainable solution. It will have an impact not only on absences but [also] on drug consumption and all paramedical consumption.”
While London Drugs’ dental and drug experience has remained “reasonably flat,” this is not the case for its disability management. “Our disability experience is always something that’s in the forefront of our minds,” says Dorothy Steele, manager, compensation and benefits, with London Drugs in Vancouver. She says the company is trying to improve the health of its employees by offering wellness programs, especially with regard to mental/nervous conditions such as depression and anxiety. “In some of our areas, 30% or 40% of claims are attributable to mental health,” she adds. The company hopes to introduce an anti-stigma campaign to address mental health issues later this year.
The Numbers • Overall, the group insurance industry grew by 4.6% in 2009, compared with 6.1% in 2008. • Great-West Life Assurance Company kept its No. 1 spot on the Top 20 Group Insurance Providers list, at $6.7 billion. • RBC Insurance Company entered the Top 10 Group Life Providers in the No. 10 spot this year, with $26.0 million in insured premiums. • The Top 10 Group Health Providers remained the same, but La Capitale Assurances moved up to No. 8, moving Green Shield to No. 9. • The industry total for ASO providers increased slightly from 6.4% in 2008 to 6.5% in 2009. |
Delving into the data
Another way to manage benefits costs is monitoring claims data. Camille Coutu, a benefits consultant with Buck Consultants, says she scoured the claims data to see what was being adjudicated incorrectly or what was in the claims that shouldn’t have been. Of course, minimizing the human element can help to avoid errors in the first place—and that’s where technology can help.
The Great-West Life Assurance Company (No. 1), for example, is looking to advance its customer service and plan member experience through three areas of its e-claims: direct claims from the provider, member-submitted claims over the internet and use of debit card technology for healthcare savings accounts (HCSAs).
Similarly, Sun Life is perfecting its data recognition technology. When a claim form comes in, it is imaged and scanned to seek out characters identified as part of the information required to adjudicate the claim. It then auto-populates a claims adjudication screen, which verifies the claims and coverages and then pays the claim. “It does it in a fraction of the time than it would take otherwise by handling paper in the traditional way, where the claim would sit in queue, then be manually handled by an individual,” says Stuart Monteith, senior vice-president, group benefits, with Sun Life Financial Canada. (No. 2).
While larger insurers and plan sponsors may use the latest technology for benefits and drug claims, technology usage has been increasing in small and mid-size companies, too. “Two years ago, it would be very uncommon to hear of a 100-life company setting up an electronic feed from its system to the insurance company system, because insurance companies weren’t really open to doing it for the smaller clients,” says Coutu. “Now we’re seeing that. [Smaller companies are] just trying to automate anything they can because they don’t need a body to do it.”
Not only can technology lessen errors, but it can also reduce workload. Next month, Desjardins Financial Security will launch TED D, a new service that links the sponsor’s pay and HR system and the insurance carrier administration systems. “It will allow the administrators of groups of 200 insureds and over to have one entry, one input for the data instead of inputting the data two or three times,” says André Simard, sales vice-president, group and business insurance, with Desjardins Financial Security (No. 4).