Thank you, Mr. Chair and members of the committee. I'm Brent Mizzen, assistant vice-president of underwriting and policy at the Canadian Life and Health Insurance Association, or CLHIA. Thank you for the opportunity to come here today and speak with you as you work toward concluding your work on the upcoming federal budget.
CLHIA is a voluntary association with members accounting for 99% of the life and health insurance business in Canada. The life and health insurance industry is a significant player in terms of its economic and social contribution in Canada. It protects almost 29 million Canadians and makes more $92 billion a year in benefit payments to residents in Canada. Of that, 90% goes to living policyholders in the form of annuity, disability, supplementary health or other benefits. The remaining 10% goes to beneficiaries as death claims. In addition, the industry has $860 billion invested in Canada's economy. In total, 101 life and health insurance providers are licensed to operate in Canada.
In our submission, which committee members will have, we touch on a number of issues. Today in my remarks, I will stick to two of those issues in particular. The first one is pharmacare and supporting a healthy workforce. The second one is enhancing retirement income security.
Let me begin with pharmacare. Canada's life and health insurers believe that all Canadians should be able to access affordable prescription drugs. Today, life and health insurers provide 25 million Canadians with access to a wide variety of prescription drugs and other health supports—vision care, dental, and mental health support among others. That's done through extended health care plans. These benefits are highly valued by Canadians and by employers, and the market is working well.
We are supportive of the work being done through the federal government's advisory council on the implementation of pharmacare. The work of the advisory council is important to improve the current system so that it works better for all Canadians. As a key player in the system, the industry also recognizes that there are real problems and that the time has come to take meaningful steps to make improvements for the benefit of Canadians. We had the opportunity to meet with the advisory council last week. Our views were submitted to the advisory council on how reform can be undertaken to improve access to and affordability of prescription drugs in Canada. I would also note that our submission is publicly available on our website, should you wish to view it in greater detail.
I'll highlight the key elements of our submission to the advisory council. The industry believes there must be three key elements that any reform of the prescription drug system must embody.
First, protecting health and enhancing existing benefit plans to provide more coverage and choice for Canadians, compared with public coverage, is important. We know that over 90% of Canadians support helping those who need it but don't want their private plans negatively impacted.
The second is providing drug coverage for everyone so that all Canadians can access and afford the prescriptions they need. To achieve this, we believe government should establish a list of the medicines that everyone will be covered for. Whether they have a workplace plan or are covered by a government program, the list of drugs would be based on scientific evidence and include expensive drugs and drugs for rare disorders.
Third, ensuring affordability for consumers and taxpayers is critical. Any reform should spend scarce government resources carefully and avoid creating any large tax impacts for Canadians. This is all the more important given the challenging tax competitiveness environment faced in Canada today. Building off the current mix, a private-public pharmacare model would minimize the overall fiscal impact to government and address the issues, which is what I believe we are all trying to achieve. Regardless of the approach, it is important that governments work collaboratively with private insurers to meet the objectives of ensuring that everyone has access to needed medications and to address the relatively high costs faced by Canadians.
With respect to drug prices, I'd like to make two key points. First, we are fully supportive of the changes the federal government has proposed to the Patented Medicine Prices Review Board, or PMPRB. Canada clearly has amongst the highest prices for medicines in the developed world. We believe there is room to bring these down.
The reforms to the PMPRB would reduce list prices in Canada, which would result in immediate savings to the vast majority of employers across Canada.
We also want to work with governments to leverage the full buying power of the Canadian market to negotiate lower drug prices. To do this, we recommend that private insurers be included in the pan-Canadian pharmaceutical alliance, otherwise known as the pCPA, so that we can negotiate even better prices for Canadians, and, importantly, so that all Canadians pay the same price for the new medications.
I now turn to the second issue, enhancing retirement income security. Secure, adequate income for life is becoming less common for Canadian retirees. Old age security and the expanding Canada and Quebec pension plans provide some income security, but there has been a shift from defined benefit plans to defined contribution plans—RRSPs, RRIFs, PRPPs, TFSAs—all of which place greater onus on individuals to make sure they have sustainable retirement income. This is particularly in the context of uncertainty about how long each individual should expect to live.
As a society, Canadians are getting older. In 2016, seniors aged 85 and older made up 2.2% of the population. By 2031, this is expected to reach 4%. Further, by 2051, this will increase to 5.7%. This rapid increase in the number of seniors aged 85 and older and the uncertainty of life expectancy put Canadians at risk of outliving their savings. Seniors' frequent response to this has been to reduce expenditures, which impacts quality of life. New measures are needed, in our view, to help Canadians attain guaranteed retirement income security and preserve their quality of life throughout retirement.
By pooling the risks associated with uncertain life expectancy, longevity insurance can play a valuable role in ensuring that Canadians have long-term retirement income security. More needs to be done to ensure a robust market for these solutions in the Canadian market. For example, we'd highlight a few things, in particular allocating a portion of private savings within registered plans to provide life annuities starting at advanced ages, 85 and over. This would allow Canadians to better manage their assets and provide a guaranteed income for life.
As well, with the recognition that many Canadians intend to use TFSAs to supplement retirement income, the liquidity requirement that prevents the holding of life annuities within TFSAs should be waived, at least for Canadians aged 60 and over. Finally, allowing the periodic purchase of life annuities by registered plans in the years before retirement, and allowing the income from those annuities to be deferred until after retirement, would allow individuals to mitigate investment risk.
At the individual level, longevity insurance removes the worry about outliving one's retirement savings. At the macroeconomic level, it ensures that the growing number of Canadian seniors can continue to support economic growth, stimulating efficient investment and employment.
In closing, I want to thank the committee members for their time today and for the opportunity to be here to share our views. I'd be pleased to answer any questions you may have.