Evidence of meeting #10 for Health in the 42nd Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was system.
A recording is available from Parliament.
President and Chief Executive Officer, Canadian Life and Health Insurance Association
I'm not sure of your statistics and I'm not sure where they're coming from in terms of the calculations.
I haven't seen stats that say that a third of full-time workers don't have coverage. Our stats suggest that 27 million Canadians have health coverage through our members, so it doesn't match up with your numbers
NDP
Don Davies NDP Vancouver Kingsway, BC
It's from the Health Charities Coalition. I'll send you the information afterward. That's where the data comes from.
President and Chief Executive Officer, Canadian Life and Health Insurance Association
I'd appreciate that.
There's no question that there are gaps. We as a society should try to find ways to fill those gaps. We're certainly willing to work with provincial and federal governments to find ways of doing that.
The vast majority of Canadians can go into a drug store and get at least a very large proportion of their drug costs paid. They're paid by their employer, for the most part, or through union contracts.
Where there are gaps, we need to work to find solutions.
NDP
Don Davies NDP Vancouver Kingsway, BC
Yes, and I'm asking you, how would you fill that gap for that minority that can't?
President and Chief Executive Officer, Canadian Life and Health Insurance Association
The provinces and the private sector could sit down and work together to identify those gaps, because it's not 100% clear where those gaps are, frankly. Generally, people at the very lowest income level or who don't have jobs get covered by the provinces. Seniors generally get covered by the provinces.
First of all, let's identify those gaps and let's try to deal with them.
NDP
Don Davies NDP Vancouver Kingsway, BC
You stated, as Dr. Carrie said, that private plans provide greater access than public plans and greater access to new drugs. I would put it to you, Mr. Swedlove, that this is not inevitably the case. We could certainly construct a national plan that has a wide formulary and finds a way to get new drugs onto that formulary in an effective way.
That's not impossible, is it?
President and Chief Executive Officer, Canadian Life and Health Insurance Association
It's not impossible. Provinces choose to reduce access relative to the access our members have in order to reduce costs. I don't know whether a similar kind of pressure would exist with respect to a universal public pharmacare plan.
Liberal
Michael Levitt Liberal York Centre, ON
Thank you very much, and thank you for your testimony here today.
Mr. Swedlove, my understanding is that when a private firm contracts with an insurer, there is an administrative fee for drug management that covers checking the status of the claimant, processing the claim, and issuing payment.
What is the average administration fee as a percentage for private sector plans, and can you tell us a little bit about how those fees are determined?
Vice-President, Policy Development and Health, Canadian Life and Health Insurance Association
The average fee would be in the very low single digits. It would be determined based on the costs of the services you just identified. I'm not sure what else I could say on that.
Liberal
Michael Levitt Liberal York Centre, ON
Can you tell us about the process you or your members use to negotiate formularies, without going into necessarily deep specifics? How do the range of products come together?
Vice-President, Policy Development and Health, Canadian Life and Health Insurance Association
When you say negotiate formularies, do you mean establish formularies, choices, or options?
Vice-President, Policy Development and Health, Canadian Life and Health Insurance Association
An insurer would have a myriad of options they would offer an employer. Every insurer in Canada today has a fully managed, closed formulary they can offer to an employer, which means we assess every new drug that comes to market and we decide whether or not it is on the formulary. That could be offered as a solution to an employer.
We offer managed formularies as another option for employers, so you would say to an employer, “We'll give your plan members access to every drug on the market, but we'll tier those drugs”, so drugs that are, in our view, clinically more beneficial will be in tier 1 and you'll pay a lower co-pay for those. It they're in tier 2, you'll pay a higher co-pay, and then in tier 3, you'll pay even higher. We would call that a managed formulary.
A lot of employers like that because it gives their employees choice and the ability to work with their physician for the types of therapies they should have. As well, there is any sort of combination in between, so we can design everything. Generally we would meet with an employer, and for the larger ones in particular there are highly customized solutions. We would work with them or their union and ask what kinds of benefits they would like and we would design those for them.
For smaller and medium-sized employers, we tend to pitch a sort of package deal to them.
Something I'll highlight that is really important is that we don't really sell drug benefits to employers; we sell benefits. Even within the design of a drug plan, you're going to position that within how you are managing your dental coverage and your vision coverage, how you are managing your disability benefits, what you are doing on your pension side, and whether you have a DC—defined contribution—or a defined benefit plan, a DB. That's the discussion you have with an employer. You don't go in and sell them their drug plan.
When employers look at how they want to structure things, they do that in the context of everything they're doing to try to bring in their employees.
That is, at a high level, the kind of discussion you would have when you're pitching a program.
Liberal
Michael Levitt Liberal York Centre, ON
Thank you.
Just as a quick follow-up on that, how do you adapt to the need for rare drugs? What pricing mechanism do you use to account for those needs in particular?
Vice-President, Policy Development and Health, Canadian Life and Health Insurance Association
It's the same thing. Mr. Swedlove mentioned the Canadian Drug Insurance Pooling Corporation, which we created in 2013. That gives us an opportunity to spread the cost of recurring high-cost drugs for all fully insured plans, so that's something we've done.
We have started to do our own negotiations around pricing. The insurers that have sufficient scale have started to negotiate their own listing agreements on some of those high-cost drugs. It's another thing we do to help bring those costs down.
For things like case management, which Mr. Swedlove touched on in his speech, we use provider networks to try to reduce pharmacy costs. There is a whole suite of things that carriers do to manage costs and access, particularly for really high-cost drugs.
Liberal
Michael Levitt Liberal York Centre, ON
Are you aware of the September 2014 analysis published in the Canadian Medical Association Journal by Michael Law, Jillian Kratzer, and Irfan Dhalla, which looked at the efficiency of private health insurers in Canada?
Vice-President, Policy Development and Health, Canadian Life and Health Insurance Association
I am.
Liberal
Michael Levitt Liberal York Centre, ON
This study showed that the medical loss ratio of group health benefit plans offered by private insurers in Canada fell from 94% in 1991 to 74% in 2011. Can you explain what the medical loss ratio is?
Vice-President, Policy Development and Health, Canadian Life and Health Insurance Association
What I would say about that paper is that the methodology was incorrect and the data used was incorrect. They used numbers that included the disability business and a bunch of other things that are not related to supplemental health. We've communicated that to the authors, and they're well aware of that.
I would say that the difference shown there was predominantly due to falling interest rates and their implications for the disability side of the business. It really had nothing to do with the supplemental benefits.
Liberal
The Chair Liberal Bill Casey
That completes our first round.
Just before we go to our second round, I'd like to ask a question.
We've heard several witnesses now over 10 meetings, and it sounds to me as though the pricing of pharmaceuticals is chaotic. I might be wrong.
I think you said you represent 30 insurance companies. Did I get that right?