Is Your Benefit Administrator “Drug-Pool” Ready?

According to the Canadian Life and Health Insurance Association (CLHIA), annual drug costs have increased at a “historical rate” of 9.4%. For some employers, that’s three times the increase in overall compensation costs. Future drug cost trending is also looking grim, to the extent that sustainability appears to be less of a threat than the extinction of drug plans as we know them.


To combat this problem, The Canadian Life and Health Insurance Industry made a recent announcement of its plan to introduce large and recurring drug claims pooling to Canada.
What we know:

  • The pool will become effective with fully insured plans issued or renewing in 2013.
  • All large claims meeting defined criteria will be pooled.
  • All Canadian drug benefit insurers are required to participate.
  • Experience rating of pooled drug claims is prohibited, as is insurer opting out.
  • There will be three separate regional pools.

What is yet unclear:

  • How Insurers will price the pooled portion of premiums?
  • Which insurers will set thresholds lower than the industry minimum?
  • Is pooling done at the individual level, or family level?
  • What drugs are covered?

While some of the details of this plan remain unclear, we know that it will raise some new complexities to plan administration. We felt it was necessary to address this issue as some Third Party Administrators may need to make some changes to their system and/or processes to effectively manage Drug-Pooling. Plan sponsors, benefits consultants and insurance brokers would be well advised to be kept informed of their insurers’ detailed implementation plans.

When more information is released, we will follow up with “Top 5 Questions to ask your TPA about Drug-Pooling.”

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One Response to “Is Your Benefit Administrator “Drug-Pool” Ready?”

  1. Darcie Brown May 4, 2012 at 11:48 pm #

    Good read, thanks for the information.

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