Sep 03, 2014

It has been over a year since the Canadian Life & Health Insurance Association (CLHIA) introduced a drug pooling arrangement called the Extended Drug Policy Protection Plan (EP3) but there continues to be some mystery surrounding this initiative. Plan sponsors are confused but getting clarity can be easy with the right questions directed to your service provider.


 Is our health plan eligible for EP3?


EP3 is only applicable to fully insured plans so if your health plan is under an administrative services only agreement (ASO) or refund accounting arrangement, you are not eligible for EP3. 

 If you belong to an association plan, you should not assume your plan is fully insured. While they may look fully insured to you, they may have a different financial arrangement with the insurer.


 What does it mean if our health plan is not eligible for EP3? Does it mean we do not have extended health care stop loss (also known as large amount pooling) coverage?


EP3 is a joint industry pool for drug claims and is separate from traditional stop loss. Therefore, you can be excluded from participating in EP3 but be eligible for large amount pooling with your current insurance carrier. The large amount pooling amount varies between insurance carriers so check your policy to ensure it is set at appropriate levels for the current drug landscape.


The joint industry pool is only for very large, recurrent prescription drug claims and the intent is to offer financial protection to plan sponsors with high drug claims on their plan and spread the cost of very large claims among all of the participating insurers.


 Our health plan is not EP3 eligible; what does that mean?


Your large drug claims will not be in the joint industry pool. If you have a very large drug claim in your plan and you wish to change insurance carriers in the future, the insurers may decline to bid on your plan.


 Does this mean I should not move to an ASO or refund accounting arrangement?


It depends. Depending on the size of your plan, risk tolerance and other factors, a non-insured financial arrangement of health care such as ASO or refund accounting may still be appropriate. Seek professional advice from a qualified benefits consultant.


 A proposition to insure or self insure has become less clear for plan sponsors. It is now even more important to understand the implications of this decision.

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