2009 General Meeting ● Assemblée générale 2009Ottawa, Ontario ● Ottawa (Ontario)

Canadian Institute

of Actuaries

L’Institut canadien desactuaires

Session/séance :Pooling Speaker(s)/conférencier(s) : Bryan Ferguson

3 Issues

• Metrics on high cost claimants

• Description of government programs for high drug expenses and how the dynamics can affect pooling costs

• How differences in formularies affect claims costs

High cost claimants

• 4/10,000 beneficiaries will have claims >$25K

• Fastest growing segment of the market

High Cost Claimants in Telus Book of Business

Source: Telus Health Statistical Report 2008*AMC Estimates

$10K-15K $15K-$25K $25K and over Total

2002 2,440 2,256 561 5,257 2003 3,243 2,670 681 6,594 2004 3,844 3,453 1,021 8,318 2005 4,476 4,530 1,413 10,419 2006 5,551 5,611 1,906 13,068 2007 6,020 6,870 2,702 15,592

Claims/ claimant

67.13 48.57 56.73

CAGR 20% 25% 37% 24%

Estimated share of total drug plan costs +/- 10%*Estimated number of beneficiaries (2007): 6- 7 Million*

Claims cost

Number of Claimants by Total Claims Cost

Provincial Coverage of High-Cost Claimants

10 provinces, 5 different approaches!

Universal plan model

Province is first payer with deductible based on income – typically 2-5%

Private plans cover costs under deductible and drugs not on formulary

Provinces using this model

BCSaskatchewanManitoba

“Catastrophic” model

Province is second payer – eligibility based on out-of-pocket cost with means test (typically 3-10% of income)

Private plans cover costs until beneficiary is eligible for gov’t coverage (if they apply)

Provinces using this model

Ontario (Trillium)Nova ScotiaNewfoundland

Mixed Public/Private Model

Residents belong to either a public plan or private plan. Government sets minimum standards for benefits, copays, etc.

Private plans can provide “better” than minimum. Pooling of large claims

Provinces using this model

Quebec

“Top up” Model

Province offers supplemental plan on a voluntary basis – 3 month waiting period

Government is second payer to private – this helps the beneficiary but not the plan sponsor

Provinces using this model

Alberta

No coverage

(May be some special consideration given on a case by case basis)

Group plans have no government safety net – also cover many retirees with no government plan

Provinces using this model

New BrunswickPEI

Some Provinces provide Special Programs for Take-Home Cancer Drugs and other Conditions

• BC,AB,SK all cover the full costs of cancer drugs (provided they are on the cancer formulary), whether or not the patient has group coverage

• Some provinces have programs for MS, HIV/AIDS, Rare diseases. First payer in some cases

• What your plan pays depends on where your beneficiaries live

How group and public plans deal with specific high-cost drugs affects costs as well

Case study of 4 specific high cost drugs

Inter-Insurer Variations in Drug Coverage

4 Expensive drugs (>$10k/ yr)95%+ of all group plan members included

0

0.2

0.4

0.6

0.8

1

Drug A Drug B Drug C Drug D

Probability of not beingcovered

Probability of SA review

Probability of being fullycovered

SA = Special Authorization or prior auth

Interprovincial variations in coverage

Drug A Drug B Drug C Drug DBC SA Not a

benefitFull benefit

Not a benefit

AB SA Not a benefit

Not a benefit

SA

ON SA Not a benefit

Full benefit

Not a benefit

QC SA Not a benefit

Full benefit

Not a benefit

SA = Special Authorization or prior auth.

Same 4 drugs on provincial plans

Summary

• A complex mix, both public and private • Not just about high-cost drugs, although

highest-cost claimants are probably consuming both high-cost and routine drugs

• Copayments, formularies, income levels all affect benefit eligibility

• Can pooling deal with these complexities?