Biologics weigh on group plans

Green Shield Canada (GSC)’s technology solutions division, HBM+, says in its 2022: Drug trends & strategic insights report that the total annual amount of drug claims it processed increased from approximately $1.4 billion (B) in 2017 to $2 B in 2021. During that same period, the number of claimants increased from 1.9 million to 2.1 million. HBM+ also observed a 6.2 per cent increase in total drug costs claimed between 2020 and 2021. The report says HBM+ processed more than 30 million claims in 2021.

Chantal Faucher-Francoeur, HBM+’s pharmacy strategy manager for Quebec, says that the growth in costs attributable to specialty drugs (which had an average annual cost per claimant of $10,000 or more) is a concerning trend. “But our report highlights another worrying trend: there are more common conditions, formerly treated with traditional products (costing less than $10,000 per claimant), that will now be treated with much more expensive biologics,” says Faucher-Francoeur.

This means plans are faced with large groups of patients suddenly being treated with a more expensive drug, she says. These biologic drugs for common diseases will cost less than those for rare (orphan) diseases. However, a drug that costs $5,000 and treats a pool of 300,000 patients (total costs of $1.5 billion) will have a greater impact than a $100,000 drug that treats 20 patients (cost of $2 million), she says.

Diabetes treatment is a prime example of this trend, she says. The HBM+ report found that diabetes had the second-largest share of drug costs in the top 5% claimant group in 2021, and the 10th largest share in the top 1% group. “This was due to the high prevalence of the disease, paired with an escalating cost of treatment per patient driven by utilization of newer antidiabetic agents,” it states.

The top 5% of high-cost claimants also includes patients with common conditions such as asthma, anxiety, depression, attention deficit hyperactivity disorder (ADHD) and pain. The HBM+ report says that three classes of drugs are experiencing significant growth in claimant numbers and costs: diabetes, obesity and cystic fibrosis drugs.

Expensive renewals  

High drug costs are a big issue for both private plans and the public health care system," says Alexandre Timothy, director of business development at AGA Group Insurance. “It's a good thing because these are often treatments that didn't exist before, but they are also very expensive. We're seeing the proportion of drug costs moving toward 50% of a plan's total costs,” he says. TELUS Health's 2022 Drug Data Trends & National Benchmarks report predicts that this threshold will be reached in 2026.

Timothy says that health care accounts for an average of 60% of the group insurance premium, and drug claims account for three-quarters of that portion of the premium allocated to health care. “There are more and more large claimants,” he adds. AGA distinguishes two categories of large claimants: those claiming $10,000 or more; and others who may be claiming $50,000 or even $60,000 or more. “There are fewer of them, but they are very apparent,” he says. 

A few weeks ago, Timothy had to present clients with group insurance premium increases of 55 per cent in one case and 100 per cent in another, “because there are new large $50,000 claimants in those groups.” He attributes these increases to new drugs, the aging population and increased drug use. “Employers understand that the premium has to be adjusted.” 

At renewal, Timothy provides his clients with their plan experience – a claims history. This history breaks down, for example, the amount of claims by certificate of insurance (the insured's name is confidential) and by type of drug. “If you notice a $50,000 claim that the plan didn't have two years ago, that can explain the big premium increase,” he says.

No choice but to keep the plan  

Alexandre Timothy says that companies are caught between a rock and a hard place during the renewal process. Labour shortages are forcing them to offer competitive benefits, while the economic environment demands sound finances.

Lise Trahan, vice president, business development at AFL Solutions collectives, a group insurance firm affiliated with Synex Solutions collectives, serves a client base of groups ranging in size from 2 to 700 employees. She says that employers will be inclined to keep their plans, despite the impact of the pandemic on group insurance premiums.

She says the pandemic’s impact on group insurance pricing comes not only from the health benefit, but also from the life insurance and long-term disability benefits. “Rates for these benefits have gone up with all insurers this year, and it's very difficult to negotiate,” she says. “Insurers are saying that more people are dying because they didn't get the right treatment, and that more people are on disability and they are off work longer,” she adds.

In terms of health benefits, Trahan says there is an increase in the use of drugs and paramedical care. She says that dental claims have increased significantly in 2022. “We're seeing increases everywhere. Before COVID-19, the increases were around 6%. Today, the average is around 13%,” she says.

“In a tough labor market, it's critical to take a much more holistic view. Employers must be reminded that group insurance is part of the offer to their employees,” says Lise Trahan. Because they often struggle to retain or attract employees, employers will accept the increase. “And not only will they take the increase, they will ask us what they can add to their plan to make it more attractive to their employees,” she says. 

Balancing control and added value  

Not a month goes by without an employer-client asking Trahan to increase their contribution to their employees' group plan. Based on her client analysis, she says that many have increased their share to 50 per cent, whereas the average employer contribution used to be around 25 per cent. “They are doing this so that their employees don't have to pay the premium increase,” says Trahan.

Trahan says she believes that a health spending account helps increase the predictability of plan costs. “It allows the employer to control costs while adding value for employees,” she says. For example, the employer could offer a $1,000 per year health spending account for each employee. This will allow them to purchase care that is not covered by their basic plan, Trahan says. “If the employer has 10 employees who use it fully, the employer knows they won't pay more than $10,000.” She says that not all employees necessarily use the amounts in their accounts. In her firm's client base, some employers choose not to carry over unused amounts into the next year's account. Others will carry it over one year only.

Help from the public system  

Mike McClenahan, vice president, partner solutions at Benefits By Design (BBD), a subsidiary of People Corporation, says he applauds the growing number of provinces opting to replace specialty drugs with biosimilar versions in public drug plans. This was initiated by British Columbia in May 2019. McClenahan adds that Alberta, New Brunswick and Quebec have followed suit. Quebec did so in April 2022.

Alexandre Timothy also says he believes that this trend will be beneficial for cost control. He says that in Quebec, the private insurer can never offer less than what the public plan of the Régie de l'assurance maladie du Québec (RAMQ) provides. When the public plan lists a drug, private plans must also cover it.

“This limits us compared to the rest of Canada in terms of what we can do to reduce costs.” However, he added that brokers can have a significant impact on drug use for chronic conditions. For example, the broker can add a clause that requires switching from a brand-name drug to a generic, which will usually be much cheaper. “But for a long time, we couldn't put that clause in for biologic drugs, which sometimes cost $50,000 or more,” he adds. He says that on average, using a biosimilar product will reduce costs by half.

Since Quebec's public plan followed suit to force the switch to biosimilars, “quite a few insurers have stuck with the RAMQ practice,” says Timothy. “Technically, we should see an impact in the next few years. The claims from large claimants should be less expensive,” he adds. 

Lowest price  

Mike McClenahan points to another avenue of cost control, but one that is not available in Quebec: preferred provider networks. “What we call preferred provider networks (PPNs) have been growing quite a bit," he says. McClenahan adds that People Corporation offers plan members a tool called People Advantage. "If the plan member shops in certain pharmacies, retail or virtual, they’ll get certain discounts on the pricing of drugs or the dispensing fee.” He says the service has gradually expanded to include vision preferred providers and non-health items sold over the counter at pharmacies.

McClenahan says the data on the supply side of these networks is still in its early days. “It will be interesting to see over time if we can see the return on investment that will be able to prove that sort of argument,” he says.