There has certainly been a lot of communication about the increased prevalence of poor mental health in Canada and the impact it is having on the productivity of the Canadian workplace.  As reported in a 2007 Ipsos Reid study, the average annual cost to Canadian businesses for an employee suffering from depression and other mental issues equals $9,920.  Depression we are told is poised to be the 2^nd most common disabling condition (behind heart disease) by the year 2020.  However we are also told by the Canadian Mental Health Association that 80% of people with depression can recover if they seek and receive help. 

What can be done about this?  If the mental health issue that a person has is so severe that a psychiatrist is required, most provincial government health care plans will fund the cost of the coverage.  If the issue is less severe, the resources available to employees are short term counseling provided through the employer’s EAP/EFAP (employee/family assistance plan), visits to a counseling psychologist covered by the employers group insurance plan paramedical coverage or the individual’s own resources for counseling services. 

Recently we were introduced to a new service offered by an EAP/EFAP provider.  The program is based on cognitive behavioral therapy (CBT) and offers 8-30 minute telephone counseling sessions lead by a Master’s level counselor.  The program includes a workbook that has exercises to complete in between sessions to reinforce what has been discussed in each session. Although the program would pose an additional cost for the employer, the hope is that there will be a decrease in presence and severity of depression, decrease in absenteeism, and reduced costs for employers in the long term.

By: Tina Coon

Short term disability (STD) benefits. What are they? Do you need them? If your benefit plan is not governed by a unionized agreement, these questions may be a bit harder to answer. As employers, you know that employees have the option of applying for Employment Insurance (EI) Sickness Benefits if they are temporarily unable to work due to illness or injury. The maximum someone will receive on EI is $485 per week. Which isn’t very much when some STD plans can pay up to $1,000 per week. If your company is considering adding this benefit or already has a STD program, there are a few important areas to consider.

The first is plan design. Plan design dictates cost. Design features include: the percentage of weekly earnings that will be paid out (benefit schedule); the number of days an employee has to be off work before they qualify (elimination period); and how long they can collect benefits for (benefit period). For example, a shorter elimination period will cost more than a longer one, and a longer benefit period will cost more than a shorter one. Plans can also be customized to distinguish between an emergency where someone has to be hospitalized immediately (0 day elimination period) or when someone is away due to injury or illness (7 day elimination period). The other major consideration is who will pay the premiums. If premiums are employer paid the benefit is taxable, but if premiums are employee paid the benefit is tax-free. An alternative option to a STD plan is the introduction of a Supplemental Unemployment Benefit Program (SUB). But that’s another blog.

Employers always wrestle with how they can get higher levels of productivity from employees without burning them out. Employees, on the other hand, are faced with how they can complete their work but still enjoy a work life balance. A recent study indicated that 76% of employers agree that taking care of employees make them work harder for the company (1). While every employer’s definition of “taking care of employees” differs, there is no dispute that a positive work environment in which an employee enjoys spending time in is important. In fact, this past decade has been marked with plenty of focus on workplace cultures which has manifested into recognition of “Top Employers”  (2). Creating a positive work environment is an involved process; it is not as simple as placing plants in every corner of the office or having a staff appreciation day.

Employee wellness programs can be quite comprehensive and they play an important role in creating a healthy environment. They can include offering healthy food alternatives in the lunch room or can be as elaborate as hiring a company for medical testing and/or designing fitness programs. An Employee and Family Assistance Program (EFAP) would be a good starting point to foster a healthy and productive workplace.

A resource to consider is that many insurance companies are already helping employers through the health and wellness section of their employee websites. There are health risk assessments for employees and spouses to complete to determine how healthy they are. The insurance industry understands that an effective wellness program will not only improve productivity, it will help lower disability and extended health claims.

We can help you develop an effective wellness strategy that will contribute positively to your bottom line. Ask us how!

[1] Manulife Financial, “Manulife Financial Small Business Research Report”, page 9.

[2] http://www.canadastop100.com/

A Health Care Spending Account (HCSA) is generally used to enhance a traditionally designed group insurance plan. As the name implies, it is a flexible spending account established by the plan sponsor where credits or a specified dollar amount is deposited at the beginning of each year. The amounts can vary, however, they are typically funded  with deposits of $300 to $500.  The amount deposited can be used to pay for medical and dental expenses incurred by the member or the member’s dependents that are not reimbursed by the provincial health insurance or the private group insurance plan. Every time the account is used to claim eligible expenses, your HCSA balance is reduced accordingly.

If established properly, a Health Care Spending Account is a non-taxable benefit for employees.

What expenses are eligible under an HCSA?

To be eligible for reimbursement, expenses must meet the eligibility requirements of the Canada Customs and Revenue Agency and must not be fully covered by a private or government plan. Also, most of the services and care must have been prescribed by a healthcare professional.

HCSA credits can be used to claim:

• Deductibles and co-insurance amounts not paid by your plan
• Any amount greater than the maximums set by your plan
• The portion of the expenses incurred that are not reimbursed by your plan
• Care not covered by the basic group insurance plan, but that qualifies as a medical expense in the Income Tax Act.

Some of the more common types of expenses that are eligible include:

• Prescription Drugs
• Diabetic Supplies
• Vision care services such as glasses, contact lenses and laser surgery
• Medical supplies, tests, treatments, devices and equipment
• Paramedical practitioners, i.e.(chiropractors, massage
• therapists, physiotherapists, acupuncturists etc.)
• Dental expenses i.e.(bridge work, orthodontics, root canals, crowns)
• Cosmetic procedures: only those required for medical or restorative purposes are eligible.

For a complete list of eligible services please click here to visit the Canada Customs and Revenue Agency website at www.cra-arc.gc.ca for further guidelines and specific details.

A Health Care Spending Account is a very good way to allow employees some flexibility in how they spend their health care dollars while giving employers a level of cost control.

By Greg Pallone

Canadians are genuinely worried about their financial security as they face potential age-related health issues combined with the prospect of retirement at possibly the worst time in history.

Continued health benefits for retirees and healthy generous pensions are from another era. The retiree of today faces an uncertain future. This is what the second half of life looks like, folks. Generation X should pay attention.

As aging boomers approach retirement after a financial crisis that was one of the worst since the Great Depression, some of the paradigms to which they have become accustomed are now frayed at the edges.

Historically, employer-sponsored benefit plans were considered the corner-stone of a person’s financial security. Much like having a good satisfying job, we felt lucky to have a benefit plan, and luckier still if we also had access to an employer-funded retirement savings plan.

The employee benefits industry has been quick to adapt to new conditions. What we’ve seen during the past four decades, has been a series of adaptations to counter a number of pervasive forces like aging workforce, increased longevity, uncertain financial markets, low interest rates, low economic growth, and high government deficits.

In a sense, the benefits industry has adapted to ensure sustainability against a tide of economic realities and medical advances that almost guarantee – to borrow from Mr. Spock – you will “live long” but there is no guarantee you will “prosper.”

For benefit plans, the resulting cost shift from government programs to the private sector has been steady and often times hidden, but employers and their employees are feeling the pinch. Employee health and pension plans have evolved from ‘fringe’ add-ons to key elements of an employee’s compensation and the company’s human resource strategy. The benefit plan is also taking a growing proportion of employees’ pay, as employees are asked to contribute more to retain existing benefit levels.

The evolution from fringe to required benefits in the workplace, fuelled product development and plan design options; critical illness insurance, long-term care insurance, health care spending accounts, health and wellness accounts, employee and family assistance programs, pay-direct drug plans and customized drug formularies.

Provincial and customized drug formularies along with higher co-pay and coinsurance are now considered mandatory plan design considerations in contemporary corporate benefit plans.

Group RRSP plans and defined contribution pension plans have essentially replaced defined benefit plans in the private sector, shifting investment risk and responsibility to plan members. Much of this change is an effort to not only keep benefit plans relevant but also sustainable. In the end, it means we will all be paying more for our health care and retirement security.

Many of the new benefits are examples of product development to help fill the gaps left by retreating provincial health plans and the growing needs of aging boomers. But filling the gaps comes with increased cost. Prescription drugs were, for the most part, almost completely covered by provincial programs 30 years ago. But now, employer-sponsored benefit plans probably cover up to 90 per cent of your personal medications each year. The cost of providing relevant benefits for all of your medical needs may be approaching unsustainable levels.

Pension reform, which is on the front lines of the federal and provincial government’s initiatives since the financial crisis of 2008, is also focused on realities of today’s boomer experience. There is a perception that Canadians, especially those earning between $30,000 and $100,000, are not saving enough for retirement. In an environment that has caused many of the defined pension plans of the past to either wind up completely or close to new enrolments, this may be true.

Unfortunately, cash-strapped Canadians are simply not in a strong position to save more. Servicing rising personal debt is taking a larger piece of a shrinking pie so it is going to take some serious intervention to prepare people for a life without work; a life that could last another 20 or 25 years on average.

A number of proposals designed to fix a pension system that is arguably among the best in the industrialized world were discussed and reviewed during the public consultation process in 2010. These proposals included increasing CPP benefits and contributions, and the creation of a super fund much like the current CPP/QPP program. For a number of really good reasons, especially the risk of recession, CPP reform was taken off the table – for now.

The Pooled Registered Pension Plan (PRPP) that came out of that process will be launched within participating provinces in 2013 or 2014. Although the PRPP falls quite short of what many stakeholders had hoped for during the consultation process, it could address some of the perceived short-comings of the current system – especially for small business and the self-employed.

What we hoped for was legislative reforms, which would permit new types of pension plans, and a more simplified regulatory environment for registered pension plans. What we have is a voluntary plan much like the under-utilized RRSP.

Without mandatory enrolment, employer participation and automatic escalation of contributions, we just don’t believe this will help the target population.

What has been proven to work in other markets is capital accumulation plans (CAP) with automatic enrolment and automatic escalation of contributions.

In this regard, if designed right, the PRPP could address some of the criticism. However, without a harmonized approach across the country there will be administrative challenges for national and trans-provincial employers.

PRPPs do have the potential to correct some of the weakness in the Canadian retirement system but they aren’t going to maximize retirement savings rates for those who will need it. At the end of the day, maximizing retirement savings will ultimately come down to each of us using the current system more effectively.

What is the best approach or plan design for managing short term disability absences?  That depends. Not a very helpful answer, but the answer does encompass what is at the heart of any short term disability benefits strategy.  It truly does “depend” on a number of factors and should tie into the overall human resource philosophy of the employer.  The question of how to compensate, or protect employees financially, who do experience a short term leave is complex with a myriad of options and solutions.

Short term wage loss replacement plans can fall within a wide spectrum of arrangements from reliance on social safety nets such as Employment Insurance (EI) salary continuance plans, Worker’s Compensation benefits, insured disability programs, and self-insured salary continuance.  Programs may pay a percentage of an employee’s salary for a specified period of time, or even full salary during short term absences due to illness or injury.  Coverage may start anywhere from one to 14 days after your employee suffers a condition that prevents them working.  Some programs might also incorporate the use of “sick days” or have a salary continuance option for a specified number of days before the short term disability plan takes over.

The questions start to pile up when looking at all of the design options and the impact those options might have on the employee and on the company’s bottom line.  What is the best course for the employee and their family?  Do they apply for EI benefits? Does the employer have an EI SUB Plan, which would allow the company to top up EI benefits?  Is there duplication or is the company and plan member taking advantage of statutory benefit programs?  Finding a place to start can require as much thought as seeking a solution.  As a place to start, a short simplified scenario offers some insight into the complexities of choosing a fully insured program or relying on EI.

To capitalize on the benefit of the EI reduction, the maximum amount payable to the employee is $485 weekly, taxable and with a two week waiting period.  This may be the most cost effective route for the employer, but there is the question of whether the amount of income replaced offers an acceptable replacement ratio of pre-disability earnings.  Just as important, is the less tangible factor of how the company will be perceived in how it chooses to assist disabled employees during these short term absences. Will the company feel the need to top up the salary?  Since the company is already currently contributing into EI, it may cost no more to register for an EI SUB Plan and top up benefits which achieves the objective of providing the appropriate level of income replacement while remaining cost effective.

If the company uses an insurer for short term disability benefits, this a potential direct cost, but the employer gains a valuable resource in having the insurer adjudicate claims, maintain confidentiality, and the employer can strive for a more comprehensive wage replacement ratio.  Or, if the contract is arranged so that the employer insures only up to the EI maximum and then tops up the insured STD benefits, it would reduce the other costs associated with the self-insured portion, qualify for the EI premium reduction and still retain the insurer’s adjudication services as a resource.

This is a very short and simplified scenario, but does speak to the complexity of issues at play when looking at EI and insured disability programs.  Adopting the right governance structure and using the best processes to manage these cases to influence productivity, employee morale, and program effectiveness affects costs in both hard and soft costs.

Employers should recognize that while they can outsource case management, it is they who retain accountability and responsibility for the overall program.

From the team of Queenie & Brent

Biological drugs (biologics) are drugs created from a living organism or its products, and can be composed of sugars, proteins or nucleic acid,  complex combinations of these substances or  living entities such as cells and tissues(1). Biologics are extremely costly because they are difficult  to create and once developed, they cannot be massed produced. Biologics are one of those medical creations that have changed the lives of many  and are a great example of what can be accomplished with advances in technology and increased scientific knowledge. 

They are both amazing and frightening at the same time. Amazing because they are a new class of drugs that offer medical solutions to conditions that never existed before such as cancer, Crohn’s disease and rheumatoid arthritis. They help people manage their illnesses and allow them to live a longer and healthier lifestyle that was once unimaginable. Frightening because of the price tags. A single drug can cost more than $500,000.

The idea of an injectable or oral drug as a cure for anyone living with a debilitating disease is phenomenal but the highly unaffordable price tags are of great concern for both employees suffering from these illnesses and employers who offer a drug plan through their employee benefits.

Sun Life reports that Canadian companies are spending $200 million per week or an estimated $10.2 billion on drugs in the year 2010. Great West Life reports that biologics make up 13.3% of private drug plan costs in 2009 and with the number of drugs in the pipeline in the latter stages of development, this cost is expected to increase by 2.5-3 fold by 2019 and possibly within the next 3 to 4 years.

The emergence of this new class of drug has brought drug management to the forefront of the group benefits industry.  Biologics are not only a problem for insurance companies, they should also be a concern for employers as they need to ensure that they have adequate protection (i.e. stop loss) to limit their financial exposure.  And when you consider that insurance companies all have different contractual provisions for stop loss, drug management becomes very complicated…  However, that is a topic for another day.

(1)    FDA US Food and Drug Administration – What are “biologics” – questions and answers

TRG December Health Point is now available for viewing:

According to Statistics Canada, Canadians are busy. We work an average of 7 hours and 46 minutes a day. We devote three hours and 11 minutes to housework and childcare and spend eight hours and 17 minutes sleeping. This doesn’t include commuting or the frantic hours spent leading up to the holidays shopping, baking, wrapping, entertaining, and the list goes on. There’s not much time left for the recommended 30 minutes of daily exercise.

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According to the BCDA, 62 % of Canadians were covered by dental plans in 2010. These plans are a valuable financial resource to plan members, but who actually controls the costs.
The policyholder (employer or plan sponsor) will set all of the various provisions of the plan which outline what is covered and in to what degree those services are covered. The plan provisions will detail elements such as deductibles, coinsurance, maximum benefit levels and limitations. Depending on how the plan sponsor designs the plan, plan members may still be required to pay for a portion of the cost of dental care and often wonder if they are being charged appropriately for services that the plan doesn’t cover.
The insurance company insuring the dental coverage on behalf of the employer, will adjudicate claims based on the provisions of the coverage selected by the employer and pay claims up to the ‘reasonable and customary’ amount for a recommended procedure and most often according the Provincial Dental Fee Guide established each year by the Dental Associations in each province.
Your dentist is a highly trained professional and responsible for delivering the most appropriate level of care for your dental health. They won’t make recommendations based on the terms of your employer’s dental plan so you should always ask for an estimate and have your dentist seek preapproval from the insurance company. Any portion of the cost not covered by the plan will be known in advance and you will have an opportunity to discuss your dental care more directly with your dentist before any procedures are started.