I shared my thoughts with the audience that day; now let me share
this with you – Pal’s clients and friends.
But first, a little background:
Background on Industry Drug Pooling
For a couple of years, we heard talk of the creation of an
industry health care pooling arrangement to help mitigate the cost impact of
catastrophic drug claims on drug programs. Indeed, close to a year ago, Canadian
Life & Health Insurance Association (CLHIA) announced the first details of
such an arrangement. We reviewed that announcement in our April 2012 issue of The Advisor here.
The basis for this initiative was rooted in the belief that
the problem of rising costs due to increased use of expensive specialty drugs
was only going to get worse. CLHIA’s
member insurance companies developed a health pooling arrangement at the
industry level to help ensure the sustainability of drug programs.
Why the concern about sustainability? The following provides a little insight into
the current drug landscape; with a little imagination, consider what might
happen to future costs if left unchecked.
- The number of drug claims exceeding $25,000 per individual, per year increases every year.
- More and more, high cost medications are being prescribed for the long-term; they are no longer typically prescribed for just rare or acute treatments.
- The use of new, expensive biologic drugs is increasing. Biologics are very effective; they are also very costly due to an expensive manufacturing process.
What this means for the plan sponsor – both today and in the future:
Today
On a practical level, today, what does this mean for the
plan sponsor? The reality is that, even
though there has been positive press on this arrangement, the direct impact on
most plan sponsors will be minimal. This
is because it is a carrier’s internal pooling level that more directly affects
a plan sponsor’s annual financial renewal rating. Typically, internal pooling levels are at
$10,000 or $15,000 for small and medium sized businesses and, in most cases,
encompass other health claims (such as for hospital and costly medical
equipment) in addition to drugs. This is
the level of protection that is most important to plan sponsors.
Assuming this does not change, and in most cases it won’t, it
remains business as usual for most sponsors.
Tomorrow
As the industry pooling arrangement continues its rollout,
some carriers (not all) are re-evaluating their current internal pooling. One of the issues under the insurers’
consideration is whether or not certain circumstances preclude them from offering
any pooling coverage at all.
If this becomes a reality, some plan sponsors would be
without any risk management tool for their health benefit and this concerns me.
Carriers continue to consider their options and I anticipate
we will learn more about this topic in the coming months.
Stay tuned for my “Pooling: Part II” blog!