The state of healthcare in Canada is in flux. As the economy forces companies to do more, bill less and accept more risk, the need to control costs has never been greater. One concept gaining popularity is to abandon traditional healthcare plans in favour of stand-alone healthcare spending accounts (HCSAs) and private health services plans (PHSPs). The alternatives include capping existing plan benefits and then helping higher-claiming members access provincial pharmacare co-ordination and catastrophic care programs. The rationale seems easy enough, but is this practice fair or even sustainable?
When designing and assessing a healthcare plan to create more of a “social contract,” employers should consider the following questions:
- What is the nature of the social contract that an employer has with its staff and extended family members?
- What should the social contract be? and
- How will the social contract change in the future?
There is no denying that today’s business climate is challenging. The cost of benefits is increasing, along with every other item competing for space in your annual (and likely limited) budget. The expectations of higher utilization rates, expensive biologic drugs and an aging population threaten to strain the sustainability of benefits plans. How does an employer survive in such a climate? Can its income statement survive one or more plan members experiencing a life-altering disease or challenge?
For many large firms, the concept of capping spending at X amount per employee is not just attractive, but vital. Some owners may be asking when it became their responsibility to ensure the health of employees who may or may not exercise the best discretion in their health, wellness and lifestyle choices.
A company may decide, on the recommendation of its advisor, to cap dental, drug and health coverage and state it can afford no more. After all, offering something is better than nothing. However, part of the process must include improved communication between plan sponsor and members. Members must become engaged and understand the pressures faced by maintaining these plans. The hope is that this will lead them to make better decisions when purchasing healthcare products and services, which ultimately helps everyone. Plan sponsors must also promote health and wellness initiatives to stress the argument that an ounce of prevention more than trumps a pound of cure.
A senior corporate HR official who spoke at the Solutions in Drug Plan Management conference held in Toronto at the end of 2011 stated that the company-wide goal for his organization was to motivate and engage as many staff associates in wellness initiatives as possible. The goal was to realize long-term savings in claims of approximately $5 for every $1 spent on these initiatives. Certainly, these considerations are an integral part of defining the social contract this company has with its people.
Another possible solution is to do away with traditional defined benefits plans altogether and install stand-alone HCSAs and PHSP-type accounts. Fledgling firms may see these vehicles as the best way to introduce benefits programs to their people and as a stepping stone to more complete and conventional programs.
This predetermined and limited funding model approach also relies on provincial governments to come to the rescue of catastrophic claimants. However, while it makes sense to take advantage of public programs, the long-term sustainability of even these programs is by no means certain. Many provincial governments are reeling from the recent federal healthcare funding initiatives announced by Finance Minister Jim Flaherty. They are now coming to grips with the fact that they will have to get their own financial houses in order and innovate their way to a solution. Ontario has been advised that some 30% of provincial budget spending will have to be cut in order to meet stated deficit and long-term debt targets. While healthcare is always held as a sacred entitlement, it will come as no surprise that provincial drug programs are being reviewed and that future applicants may not be so easily approved. Expect pushback.
So how can plan sponsors navigate the minefield?
- Question company officials to determine their definition of the social contract.
- Promote the idea that efforts to promote wellness must be considered and offered.
- Awaken the need and create the means for more open and honest disclosure about the costs of healthcare and the roles for each and every individual covered.
- Identify what is reasonable, fair and sustainable, without putting the company at financial risk.
And recognize that the only certainty in life is change.