Why the cost of your health insurance will rise in 2017

Even the simplest physical job used to be painful for Brenda McAlpine.  The Mississauga, Ont., woman is among the approximately 250,000 Canadians who suffer from an inflammatory bowel disease.  

The symptoms left her with extreme fatigue, weight loss and low haemoglobin and affected her overall quality of life. But her condition radically improved after she was prescribed Remicade following her second surgery.

She described the change as “starting to feel normal again and giving me my energy back, my appetite, just being able to do things again. It was a huge difference; it was night and day for me.”

Feeling “normal” comes with a hefty price tag — about $ 40,000 a year — but she’s covered through her husband’s work insurance plan. Approximately 40 per cent of Canadians are covered by employee supplementary health benefits.

New anti-inflammatories driving up costs

Pricey new biologic anti-inflammatories, such as Remicade, Enbrel, Humira and Rituxan, are one reason why the cost of these insurance benefits are expected to go up in 2017. The medications are used to treat chronic inflammatory diseases such as rheumatoid arthritis, Crohn’s disease, ulcerative colitis and psoriasis.

The Patented Medicine Prices Review Board says sales of these drug treatments have doubled since 2010 in Canada, hitting $ 2.2 billion in 2015. (A recent review by the federal agency found Remicade costs 25 per cent less in other markets comparable to Canada.)

During that same period, commonly prescribed drugs such as the cholesterol-lowering Lipitor came off patent and cheaper generic versions hit the market, which helped insurance plans cuts costs. But those savings have now been realized, so employers that pay insurers to administer group benefits are faced with higher premiums.

Adding to the cost are various prescription-related fees. For example, pharmacists not only bill a flat dispensing fee per drug, they also usually charge a markup based on the cost of the medication. 

The claim then goes to a PBM (pharmacy benefits manager), such as Telus Health and Express Scripts, hired by insurance companies to instantly process each claim for a fee.

The insurance company adds up those costs and often also tacks on a percentage for themselves. So the pricier the drugs, and the more frequently the prescription is filled, the more fees are accrued.

Costs seen as unsustainable

The higher drug prices have been a boon for drugstores, which might explain why there’s been 20 per cent growth in the number of retail pharmacies in Canada since 2008.

But Mike Sullivan, a Toronto-based insurance consultant for employers, says the costs are unsustainable, even with a premium increase.

Mike Sullivan, Cubic Health

Mike Sullivan, a former pharmacist, now audits employers’ insurance plans for irregular spending. (CBC)

“If it doesn’t get fixed, everybody is going to lose: The insurance carriers, the claims processors, the pharmacies that are on every corner, the plan member who is relying on the benefit and the employer.”

Sullivan’s company, Cubic Health, audits employee drug plans to identify causes of skyrocketing drug claims. He says huge variations in treatment decisions by prescribing doctors are also driving costs, though patients are often oblivious.

Doctors don’t always care about cost of drugs

Sullivan, a licensed pharmacist, cites the example of a recent review, in which he discovered an employee had billed $ 220,000 for a hepatitis C treatment which normally costs approximately $ 60,000-$ 70,000.

The astronomical markup was the result of the particular combination in which the treatment was prescribed by the physician, which Sullivan said wasn’t medically necessary. That decision was a bonanza for the pharmacy involved.

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“So in actual fact, that employer paid the pharmacy $ 31,000 to hand three sets of tablets to a member over the course of six months.  And this happened and nobody asked a question,”  said Sullivan

Employers mistakenly assume physicians will prescribe cheaper alternatives, he added.

But not every drug plan is paying high prices.

Prescription drug spending in Canada

Provincial plans represent a large chunk of the market and have negotiated better rates. (Canadian Institute of Health Information)

Sullivan said public plans administered by provincial governments get the lowest prices for medications — often because of deals with drug makers.

Helen Stevenson, a former assistant deputy minister of health in the Ontario government, acknowledged that the public plan has lower costs. “We were the second largest plan in North America.  We had a lot of buying power. So we were able to secure some significant discounts.” 

Public plans have buying power

But Stevenson, who now works with employers to reduce drug costs, said private insurers don’t have the same incentive as the public system to haggle for lower prices. That means employers have already started to brace their staff for insurance premium increases.

“Basically their employees say they’re frustrated by increased premiums and no additional benefits. You’re not improving our plan — you’re making us pay a higher premium for the same plan,” she said.

The Canadian Life and Health Insurance Association, which represents most of the country’s private insurers, confirmed it’s expecting its members to increase premiums.

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CBC | Health News