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Benefits and Pensions MonitorAnnual Report & Directory: Group Benefits And Retirement Recent Industry Trends And Their Impact On Plan Sponsors ◆ Post-retirement Benefits The new accounting requirements are causing many plan sponsors to reevaluate their post-retirement benefit commitments. Some have either eliminated benefits altogether, or frozen their current contributions. Itʼs estimated that less than 30 per cent of plan sponsors now provide post-retirement benefits. While several group insurers offer limited individual health and dental benefits to former group plan members who lose their coverage at retirement, perhaps we need one of the major insurers to develop a product similar to that announced by Aetna in the United States. The HR Policy Association, a consortium of 250 employers with more than 12 million U.S. employees, has entered into a letter of intent with Aetna to offer a retiree benefit program. This includes employers who do not currently offer retiree benefits. The plan would be fully insured and available to all employees at retirement, regardless of their health status. Considering that Canadaʼs three largest insurers reported a combined profit of $8 billion in 2006, surely at least one of them can afford to step up to the plate and offer such a much-needed product. ◆ Ontario Bill 102 ◆ Allowing the negotiation of preferred pricing for all drugs ◆ Limiting the mark-up charged by pharmacists ◆ Eliminating ʻvolume discountsʼ passed on to pharmacists by manufacturers ◆ Enhancing generic substitution regulations All of these would be beneficial to Ontarians purchasing drugs, and to employers who sponsor drug plans for their employees. Unfortunately (except for Ontarians over age 65), the final bill passed in June 2006 applies these proposals only to Ontario Drug Benefit (ODB) drug plan costs. This selectivity means that Ontarians, including employers who sponsor benefit plans, could now face even higher drug costs since pharmacists will want to pass on lost revenue from seniors to their drug dispensing charges for everyone else. Not only did Bill 102 not bring the hoped-for relief in drug costs to plan sponsors, a recent recommendation by Cancer Care Ontario that Ontario hospitals administer expensive, privately-purchased IV drugs is also affecting plan sponsor costs. Drug costs are increasing and the cost of adjudicating claims has also been affected, due to manual procedures to obtain plan sponsor approval and increased auditing services to ensure that claims are not overpaid. This is positive news for patients, who will see increased accessibility to the drugs, but it also means higher costs for employers that agree to pick up the costs. ◆ Wellness And eHealth Employers recognize that itʼs time to stop trying to just manage costs through plan design and cost-sharing changes. Instead, theyʼre seeking ways to improve disease management outcomes and help employees better manage their own health. Absenteeism affects every employerʼs bottom line and many are turning to health risk assessments and Internet resources to help their employees change their lifestyles. We predict that the next trend will be for providers to offer these services through their websites for a nominal fee, with potential long-term savings in benefit costs. ◆ Outsourcing Another recent trend is towards benefits and human resources outsourcing, as employers aim to focus more on their core businesses. With the recent trend of employers closing their Defined Benefit plans to new members, the UK is seeing the emergence of a new financial service where a third-party not only administers the DB plan, but actually assumes financial responsibility for it by purchasing the assets, thus eliminating the liability from the employer ʼs bottom line. While the idea of removing pension plan liability from the balance sheet may be an attractive option for a plan sponsor, it doesnʼt come cheap. Completing such a transaction means funding any existing deficit immediately, and these buy-out firms typically place a higher price on the liabilities than what may be reported on the companyʼs balance sheet. ◆ One-stop Shopping With the trend towards Capital Accumulation plans, many plan sponsors are now looking for the convenience of ʻonestop shoppingʼ for their employees for both retirement and health and welfare benefits. Several of Canadaʼs larger insurers have taken up the challenge and are developing employee self-service websites with a single point of access to obtain information on their DC investments or their benefit plans. One-stop shopping also leads to a new trend in marketing and benefit consulting as plan sponsors seek one vendor for both needs, requiring consulting firms to combine services that were traditionally offered separately. In our experience, combining similar processes for group benefits and DC plans significantly reduces the resources required by the plan sponsor and the consulting firm, resulting in a more efficient implementation and better ongoing service. The pension and benefits industry continues to face new challenges stimulated by legislative, demographic, and economic pressures. The good news is that advisors and insurers are ready, willing, and able to help create innovative solutions for plan sponsorsʼ issues as they evolve. And in Ontario at least, one regulator is poised to listen to industry concerns. Last November, Ontario established the Expert Commission on Pensions whose mandate is, in the words of Greg Sorbara, “to seek input about ways to ensure that Ontarians can rely on their pensions, and keep the provinceʼs pension system sustainable.” Mr. Sorbara – be prepared for an earful. ■
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Jan Grude is senior managing director of Buck Consultants, an ACS company.