In 2008, benefit costs for Canada Post’s 69,000 employees had been increasing so much every year that executives said it was time the Crown corporation think outside the box, find ways to engage employees and their families and rein in those expenses. So the post office service, facing an aging workforce and an accompanying rise in drug costs, brought in a controlled drug formulary, sending the price tag lower than even it had projected, Stefano Biscotti, director, total compensation at Canada Post told an April conference in Toronto. Now the company is taking another step forward by looking to include more generic substitutions where possible and bringing in longer fill cycles to cut costs for employees.
What Canada Post is doing is part of an overall trend among companies looking at sustaining the viability of their benefit plans, said Julie Joyal, who recently joined Canada Post as director of pension services. Controlled formularies, managed care, mail-order pharmacies and self-service administration are all part of new trends in sustaining benefits for employees and their families, she said.
The demographics of employees are such that firms, such as Canada Post, will be facing a 50-50 split between working and retired employees in just 20 years. Flex retirement programs and the introduction of health-care spending accounts, including catastrophic coverage, are just some of the ideas being discussed and implemented across various industries to deal with this, said Ms. Joyal.
Total rewards programs, aimed at encouraging healthy lifestyles, may also be part of the mix in the near future. With these plans employees can choose, to a certain extent, a mix of salary and benefits such as concierge services, taxable spending accounts and wellness benefits like personal memberships to the gym.
Looking at the issues from a plan sponsor point of view, Wesley Jones, director, group product development with Great-West Life, said all companies are facing funding and cost pressures associated with both current employees and benefits for retirees. At the same time, companies must be mindful of the attractiveness of their health and benefit plans if they hope to attract and retain top talent.
“You don’t want to hit the snooze button right now,” Mr. Jones told the Benefits and Pensions Summit, speaking about the cost challenge facing companies now and in the near future. “These are not fads. They are realities.”
Mr. Jones said he sees a number of challenges emerging in the group benefits arena. One deals with the intergenerational workforce of three distinct age groups working side by side in the same company, but with each group having its own needs and wants.
Mental health issues are also taking front and centre these days. “A psychologically safe workplace is as important as any other safety issue,” Mr. Jones said. Recent news reports have quoted the Public Health Agency of Canada as saying that 20 per cent of Canadians will experience a mental illness during their lifetime with the cost of mental illness to the economy estimated at $51 billion a year in health-care costs and lost productivity.
But as a number of speakers said at the conference, the rising cost of drugs is the major issue for both plan sponsors and plan participants. “What keeps us awake at night is the high costs of drugs, especially biologics,” Mr. Jones said. So-called “catastrophic” drug claims, which include bills for biologics, can be as high as $35,000 to $50,000 a year per person, he added. (Often, these drug costs are included in large group and health benefit plans to protect employees from undue financial hardship when gaining access to these required – but costly – medications.)
Change is ahead, he said, but only for those issues that require it. “Some things aren’t broken, but they need to be changed.” Mr. Jones was careful to point out that while some costs are high – and getting increasingly higher – plan sponsors should think before readjusting access to benefits if they intend to keep employees.
He said companies may retool their existing beliefs on what needs should be covered. He said a “dual, bottom-line approach” of prevention and managed access will help remove unnecessary costs and maintain plan member access. Increased and “purposeful” employee cost-sharing, which includes maximums and drug cards, should also be considered. As well, he suggested that sponsors offer flexibility in health benefits based on life stage.
While there are no silver bullets to a new strategy, there is room to be creative. He suggested to those at the conference that they review their company philosophy, structure and systemic cost issues and look at plan designs and cost-sharing possibilities.
He acknowledged this is easier said than done, but noted that keeping members apprised of issues and potential changes is key. “If you want them to be good stewards of your plan, they have to know what’s available.”
Canada Post’s Mr. Biscotti agreed with the need to communicate to employees – in whatever medium is best. He noted that Canada Post has a web site and encourages members to stay up-to-date via its social media site.