Extended health and dental care plans

Question 1

Extended Health Care major categories are:

Answer 1

• Prescription drugs
• Hospital
• Medical services and supplies
• Emergency out-of-province
• Vision care

Question 2

What are factors producing increases in health care costs?

Answer 2

• Changing demographics: Aging population
• Govt cost shifting: Transfer of coverage to private plans
• Prescription drug costs: High pharmacy fees, greater utilization, and introduction of more expensive drugs
• Obesity

Question 3

Rising prescription drug costs being the primary driver of Extended Healthcare cost increase, identify and briefly discuss Measures employers can take to manage those costs

Answer 3

• Generic substitution: Mandated unless physician expressly prohibits
• Lowest-cost alternatives: You may only be reimbursed for the cost of the cheapest drug
• Therapeutic substitutions: Less expensive drug within the same therapeutic class but with diff active ingredients
• Lifestyle drugs: No coverage (smoking cessation)
• Formularies: List of eligible drugs
• Three-tier copayments: Amount vary between generic, brand w/ or w/o generic drugs (Employee choose his drug with the reimbursement that come with it)

Question 4

What are the possible definitions of eligible drugs?

Answer 4

• Prescription drug plan: Covers only those drugs that legally require a prescription and usually non-prescription life sustaining drugs
• Prescribed drug plan: Covers any drugs dispensed by a pharmacist and prescribed by a physician, whether or not a prescription is legally required. It thus includes over-the-counter drugs available without a dispensing fee

Question 5

Briefly discuss EHC major categories: Hospital

Answer 5

• Prov plans in Canada only pay for ward level, unless semi-private/private room is medically required
• Suppl hospital plans were designed to cover the additional cost of semi/private hospital accommodation
• Number of EHC plans that covers unlimited private room coverage is decreasing, but many still cover unlimited semi-private
• In most cases, the claimant assigns payment to hospital who submit claim directly for reimbursement
• Average length of stay decreased, but room fees increased, net cost increase

Question 6

Briefly discuss EHC major categories: Medical Services and Supplies

Answer 6

• Private duty nursing
• Ambulance services
• Paramedical practitioners
• Prosthetic appliances and durable medical equipment
• Accidental dental

Question 7

Briefly discuss EHC major categories: Emergency out-of-province

Answer 7

• EHC covers additional medical costs, up to reasonable and customary charges, not paid for by prov plan
• Usually no deductible/coinsurance, however limit on covered travel days and a fixed dollar max

Question 8

Briefly discuss EHC major categories: Vision Care

Answer 8

• Most prov plans have limited coverage for children and seniors only
• All of the prov cover medically necessary eye exams

Question 9

To deal with rising costs in extended health and dental plans, what are some of the approaches

Answer 9

• Deductibles
• Modification to drug program
• Change management
• Integrated approach to managing costs
• Drug utilization review
• Health care spending accounts
• Coordination of benefits

Question 10

Describe Income Tax on Health Plans

Answer 10

• Employee’s contributions not deductible but can be included in medical expense tax credit
• Employer’s contributions are deductible as an operating expense
• Employer’s contributions are not taxable income for the employee, except in QC
• Benefits are not taxable income
• CRA permits a private HSP to provide benefits for a same-sex couple
• If an employer pays part of the employee contributions under any prov hospital or medical plan, the payment is deemed to be taxable income in the hands of the employee
• Individuals may claim a non-refundable and non-transferable, tax credit for medical expense