Nathalie Gingras, FSA, FICA, CRHA Jonathan Bohm, FSA, FICA

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1 Nathalie Gingras, FSA, FICA, CRHA Jonathan Bohm, FSA, FICA June 19, 2014

2 _ On Today s Agenda Objective for the day Context White Paper : A Solution for Private Drug Plans Catastrophic Drug Insurance Questions 2

3 3 OBJECTIVE FOR THE DAY

4 4 Move the industry forward!

5 5 CONTEXT

6 6 _ Context

7 7 _ Context

8 A SOLUTION FOR PRIVATE DRUG PLANS 8

9 9

10 1. New reality + high cost drugs + expensive Recurring 2. These drugs are reimbursed by private drug plans 3. Pooling is not a lasting and effective solution 10

11 According to Express Scripts Canada Cost of specialty drugs in private plans in Canada as a % of total drug cost (+ than $6,000/year) 11

12 According to TELUS Health Number of certificates claiming more than $10,000 per year 12

13 Most expensive drugs in the United States in 2012 Source: Medical Billing & Coding 13

14 Drugs that cost more than $100,000 approved in 2012 CAPRELSA (thyroid cancer): $696,000 KALYDECO (cystic fibrosis): $325,000 ZELBORAF (skin cancer): $141,000 KALKORI (lung cancer): $111,350 YERVOY (skin cancer): $104,000 Source: Express Scripts Canada, 2012 Drug Trend Report 14

15 Pooling Amount exceeding a threshold is removed from the experience for renewal and financial results purposes In theory, the insurer distributes the excess among its clients in exchange of a pooling premium Market regulatory framework and industry pooling In all provinces : Canadian Drug Insurance Pooling Corporation (since 2013) In Quebec only : Quebec Drug Insurance Pooling Corporation (since 1997) 15

16 What is the impact of a high cost and recurring drug claim? 16

17 1. Group of 5,000 employees Not fully pooled SOLIRIS - $500, Group of 150 employees Fully pooled REMICADE - $45,000 SOLIRIS - $500, Group of 150 employees Not fully pooled REMICADE - $45,000 SOLIRIS - $500,000 17

18 1. Group of 5,000 employees Not fully pooled SOLIRIS - $500, Group of 150 employees Fully pooled REMICADE - $45,000 SOLIRIS - $500, Group of 150 employees Not fully pooled REMICADE - $45,000 SOLIRIS - $500,000 18

19 Example 1 : Group of 5,000 employees Not fully pooled Annual health insurance premium of $7,500,000 Pooling Threshold of $25,000 Pooling premium of 3% of premiums ($225,000) No regulatory framework / no industry pooling Profit of 1% of premiums ($75,000) 19

20 SOLIRIS- $500,000 20

21 Possible actions from the insurer 1. Do nothing - Accept not being profitable when it comes to this coverage 2. Increase pooling fees 3. Raise the pooling threshold 4. Exclude recurring cases 5. Terminate the contract Translates into risk being transferred from the insurer to the sponsor and covered individuals 6. Increase other financial parameters 21

22 22 for a smaller group?

23 Pooling offered by the insurer Regulatory framework and industry pooling Canadian Drug Insurance Pooling Corporation All provinces Quebec Drug Insurance Pooling Corporation Quebec only 23

24 Canadian Drug Insurance Pooling Corporation (since 2013) Required to have internal pools with a maximum threshold of $25,000 Intended to prevent the sponsor from paying a premium based on the number or value of its high cost claims Fully pooled groups Industry pooling: 85% of the excess of $25,000, maximum of $400,000 (if the claim exceeds $50,000 for 2 years) 24

25 Quebec Drug Insurance Pooling Corporation (since 1997) Quebec only Groups with fewer than 3,000 certificates All insurers and other claims payers All types of financial arrangements Thresholds vary according to group size 25

26 1. Group of 5,000 employees Not Fully pooled SOLIRIS - $500, Group of 150 employees Fully pooled REMICADE - $45,000 SOLIRIS - $500, Group of 150 employees Not fully pooled REMICADE - $45,000 SOLIRIS - $500,000 26

27 Example 2 : Group of 150 employees - Fully pooled Annual health insurance premium of $225,000 Threshold of $25,000 (pooling offered by the insurer) Pooling premium of 5% ($11,250) Canadian Pooling applies Profit fees of 1% of premiums ($2,250) 27

28 REMICADE - $45,000 28

29 Possible actions from the insurer 1. Do nothing - Accept not being profitable 2. Increase pooling fees 3. Raise the pooling threshold 4. Exclude recurring cases 5. Terminate the contract 6. Increase other financial parameters Translates into risk being transferred from the insurer to the sponsor and covered individuals 29

30 SOLIRIS- $500,000 30

31 1. Group of 5,000 employees Not fully pooled SOLIRIS - $500, Group of 150 employees Fully pooled REMICADE - $45,000 SOLIRIS - $500, Group of 150 employees Not fully pooled REMICADE - $45,000 SOLIRIS - $500,000 31

32 Example 3 : Group of 150 employees Not fully pooled Located outside Quebec Annual health insurance premium of $225,000 Threshold of $25,000 (pooling offered by the insurer) Pooling premium of 5% ($11,250) Canadian Pooling does not apply Profits of 1% of premiums ($2,250) 32

33 REMICADE - $45,000 33

34 Possible actions from the insurer 1. Do nothing - accept not being profitable when it comes to this coverage 2. Increase pooling fees 3. Raise the pooling threshold 4. Exclude recurring cases 5. Terminate the contract Translates into risk being transferred from the insurer to the sponsor and covered individuals 6. Increase other financial parameters 34

35 SOLIRIS- $500,000 35

36 Possible actions from the insurer 1. Do nothing - accept not being profitable when it comes to this coverage 2. Increase pooling fees 3. Raise the pooling threshold 4. Exclude recurring cases 5. Terminate the contract Translates into risk being transferred from the insurer to the sponsor and covered individuals 6. Increase other financial parameters 36

37 Canadian Drug Insurance Pooling Corporation (since 2013) High and indexed thresholds Does not seem to create a consensus within the industry Pooling fees increased dramatically even for groups with a good high cost drug experience CLHIA Report on Prescription Drug Policy This initiative is a significant step forward but more can be done. 37

38 If we do nothing The proportion of high cost drugs in private plans will continue to increase Pooling thresholds will continue to increase Sponsors will take on more and more of the risk Some plans will be very expensive due to a few claims Sponsors may terminate the plan 38

39 39 _ A Solution for Private Drug Plans

40 40 Catastrophic Drug Insurance

41 Same principle that applies to long-term disability Insurer would pay the benefit as long as necessary Even if there is a change of insurer Principle of insurance 41

42 Benefits for the sponsor Easier to change insurers Better cost control More active claims management Healthier employer-employee relationship 42

43 Benefits for insured individuals Peace of mind Sustainability of their benefits plan 43

44 Benefits for insurers New product that meets a need Ensures the sustainability of the private drug insurance market 44

45 An exciting challenge for the industry! A great deal of technical, administrative and legal considerations We believe that the proposed solution is a lasting solution that deserves serious consideration In line with the basic purpose of insurance: to provide protection in case of an uncertain event that has catastrophic financial consequences 45

46 46 «SEEING BEYOND RISK» «RISK IS OPPORTUNITY.»

47 47 Questions?

48 48 Thank you!

HEALTHCARE POOLING. For Fully Insured and ASO Extended Healthcare Benefit Policies PRODUCT GUIDE

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