Shifting demographics, the growing reality of expensive biologic drugs and the increasing prevalence of many chronic disease states in the workplace are all putting strain on employer-sponsored group benefits plans. But in our post-2008 world, where financially strapped employers are focused ever more on remaining competitive by managing operating costs, most plan sponsors are treading lightly when it comes to making sweeping changes to their benefits offerings. While most do want to explore ways to keep these costs in check, they want to do so in a way that’s not intrusive to members, recognizing the value of benefits coverage in attracting and retaining talent, and in keeping that talent healthy and productive.
Group benefits providers are being tasked to find ways to balance out these needs of both plan sponsors and members. For Benefits Canada’s 2013 Group Benefits Providers Report, we gathered leaders from some of the country’s top providers and consulting firms to participate in a virtual roundtable of the key trends and challenges facing providers today.
SELECTED PANEL EXPERTS
- Jean-François Chalifoux, senior vice-president, group business insurance, Desjardins Financial Security
- Brad Fedorchuk, vice-president, group marketing, Great-West Life
- Carl Laflamme, vice-president, national sales and marketing, SSQ Financial
- Brian Lindenberg, senior partner, Mercer
- Marilee Mark, vice-president, marketing, group benefits, Manulife Financial
- Stuart Monteith, senior vice-president, group benefits, Sun Life Financial
- Chris White, vice-president, health and benefits, Aon Hewitt
Q. What kind of guidance do plan sponsors want from group benefits providers?
BF: Plan sponsors are seeking guidance on how to help control benefits plan costs in a balanced, informed way. Many are willing to look beyond traditional cost-sharing measures for individual claims and are asking what the provider is doing to help manage costs.
JFC: Plan sponsors are struggling to manage the costs of their group benefits plans, particularly the cost of prescription drugs and disabilities. They look to their providers to help them find ways to keep their costs down, to better manage and measure those costs, and to strike an optimal balance between the good health of their members and the cost of providing health benefits.
CW: They are seeking competitive premium rates and service fees. In addition, employers are increasingly looking to insurers to provide value-added services, including technology to deliver claims services via mobile devices, enhanced data analytics and plan member communication. However, the highest priority is finding ways to deliver group insurance coverage in a manner that helps contain the growth in plan cost. Emerging initiatives by insurers include more creative prescription drug plan design, price negotiations with manufacturers and high-cost claim management.
Q. What do providers need to do better to succeed in the current environment?
MM: The two best things any provider can do is manage overall plan governance to help keep those drivers of cost under control and drive understanding on the part of sponsors and members around the impact they can have in helping to manage costs. Providers need to provide more managed plan design options and explain the compelling business case to implement them. It’s often a matter of educating members on how their actions can affect the affordability of their benefits plans. Through education, we can help them not just understand but care, and take action, to do their part.
SM: Providers need to do a better job of helping employers keep their people on the job. A focus on health and wellness will promote healthy living, as well as illness prevention. The next generations of employees do not want their parents’ plan. They want health spending accounts, prevention treatments and active living.
CL: Providers need to be more proactive in finding a good match between the needs of their clients and the strengths of the carriers. The best providers will have constant communication with their clients during the year, so that no one will be surprised during renewal time.
Q. What is the most alarming trend related to your business?
SM: The increase in mental health claims. The Sun Life 2012 Canadian Health Index Report showed that 90% of young Canadians ages 18 to 24 reported excessive levels of stress, making them the most anxious age group in Canada. These claims are alarming because they relate directly to increased absenteeism and a higher cost of doing business.
JFC: The overall cost of healthcare and the advent of increasingly expensive drugs and treatments are of serious concern to our industry. This is a situation that will worsen over time if we don’t address it now. As the population ages and people live longer, more plan members will require increasingly expensive medications over longer periods of time. Medications to treat ongoing medical conditions such as high cholesterol—which plan members usually have to take for the rest of their lives—already account for more than 50% of all drugs claimed.
BL: Biologic drugs certainly have the potential to increase drug plan costs considerably. But there are steps that a plan sponsor can take to mitigate this risk. The key is that plan sponsors must understand the risk and act appropriately based on their risk tolerance. At a macro level, I think changing employee demographics will have the most profound impact on benefits plans going forward. The workforce of tomorrow will look very different than the workforce of today, which has implications on benefits plan design, benefits plan costs, and how benefits are delivered and communicated.
Q. Do group benefits providers need to lower their fees in order to adapt?
BF: Like any business, in any financial environment, group benefits providers need to demonstrate value. We are all managers of our customers’ money, and we need to do so as responsibly and as effectively as possible.
CL: Fees should be discussed between clients and providers. Indeed, there are brokers that are paid too much for the service that they are giving to their clients; however, I believe that those brokers will not survive in the years to come. On the other hand, I am always surprised when I see clients choosing their advisors based on the fees they are charging.
CW: Depending on the situation, it may be a matter of not only lowering fees but also providing value-add services. Pricing needs to make sense from both a plan sponsor and provider perspective, but providers need to be able to articulate the value they are providing to plan sponsors in order to support their fees. Although client retention rates for group insurance providers are very high, providers need to be cautious of taking long-term clients for granted.
Q. What areas are plan sponsors more willing to explore to help contain costs and/or improve their plans?
MM: We’re seeing more interest in options around plan design, making an investment in wellness and prevention programs, and introducing mandatory generics as part of a drug plan. These are seen as opportunities to manage costs that also have the necessary metrics to measure their success.
SM: I think it goes beyond what individual sponsors are doing and relates to what the government as a whole is doing. Governments are increasingly looking to be innovative and creative to help Canadians remain healthy and promote illness prevention. Through innovation and creativity, we are coming up with plan changes that do not compromise employee engagement but offer best practices that help reduce costs.
BL: It depends on the client situation. Most plan sponsors prefer less intrusive cost management approaches such as mandatory generic drug substitution rather than plan design change. And when significant cost savings are required, the focus tends to be on increasing employee cost sharing rather than hollowing out the benefits plan. Employers understand the value of their benefits program and, therefore, are reluctant to make significant plan changes if they can be avoided.
Q. How can providers help plan sponsors encourage members to be more educated and consumer-savvy around benefits?
BF: Benefits providers provide education and reporting tools to help plan members make informed decisions and choose products that best suit their needs. Engaging plan members helps them understand that they can play a significant role in protecting the benefits they value most. Typically, this has been done through traditional methods such as brochures or emails. However, the more directly providers can speak with members and the closer to the point-of-sale, the more effective we can be at positively influencing members’ behaviour.
SM: We support a number of member engagement programs with plan sponsors that promote awareness of their benefits plan. We engage members where they work and how they like to receive their information. Canadians have never been more informed and conscious of physical activity and healthy living, so this includes wellness education, promotion and prevention.
BL: Providers have done a reasonably good job of providing plan sponsors with access to generic communication materials with respect to consumerism and more broadly in the areas of fitness and health promotion. There is a lot of information available, often with no or minimal cost. If there is a problem in this space it might be that plan sponsors do not have an appreciation for the information and support available. It is not enough to post the information online and expect plan sponsors to seek it out. They need to be reminded in other ways that the material is available when and if they need it.
To read the answers from two questions not answered in the magazine, read the web extras.