Poking Holes in Silos

The Conference Board of Canada has recently released some interesting numbers showing the value to society of specialty drugs – those medications with a cost of at least $10,000 per person per year. The drugs included were for the treatment of rheumatoid arthritis, Crohn’s disease, and multiple sclerosis.

The Conference Board research determined that these drugs provide a benefit to society in the range of $6,600 to $17,000, depending on the disease. The benefit to society reflects a combination of factors, including savings to employers from unused sick days and increased productivity; savings to the employers of family members resulting from a reduced need for a caregiver and savings to the public health care system due to a reduced requirement for medical treatment.

“Clear concise communication contributes to employee satisfaction with the plan and helps avoid misunderstanding about coverage.” Lizann Reitmeier, Health Practice Leader, Toronto
“I see this study as an opportunity to start a new discussion that recognizes the interconnectedness of the components of employer-sponsored benefit plans.” Lizann Reitmeier, Health Practice Leader, Toronto

(Before I continue and for what it’s worth, I will disclose the study was sponsored by Innovative Medicines Canada, Crohn’s and Colitis Canada, Amgen, Roche Pharmaceuticals, Sanofi Canada and Sun Life Financial.)

While this study gives some credibility to the pricing set for these drugs, I find it to be a great start to the breaking down of the cost silos we typically see in benefit plans. Employers are facing an alarming increase in drug claims related to new drugs in the market, an aging population and better diagnostics. However, these breakthrough medications are keeping employees with these medical conditions in the workplace in unprecedented numbers. While some employees may require short leaves to stabilize their medical condition, employees in fact continue to work longer. The study does a wonderful job of factoring in the cost of lost workplace productivity for each medical condition. It even carefully calculates the cost of caregiving in terms of sick days.

Not surprisingly, I suppose, neither plan sponsors nor insurers are heralding the high cost drugs as a tool to mitigate the cost of disability claims. We continue to measure the cost of drug and LTD plans in their separate silos, and in isolation from each other. This reflects industry standard methodology, but it is further supported by the underwriting methodology of these benefits: Typically the cost of the drug plan is driven by claims, while the cost of Long Term Disability is driven by demographics.

In a mature business the employee population is typically older, driving up the risk of LTD claims and the associated premium rate. Should improved claims experience drive down the insurer rates? It should eventually, however these drugs are still relatively new and they are not yet impacting some of the most prevalent causes of disability claims: heart disease and mental illness. Insurers will factor the effect of the new drugs into the LTD rate-setting once claims experience shows these drugs do reduce the incidence of disability.

While this means the LTD silo will continue to exist in isolation for the foreseeable future, employers should see a decrease in the frequency and duration of short-term disability claims. As I said, some employees may require a short absence from the workplace while transitioning to these treatments, however, the ability to use genetic testing and other considerations has shortened the trial-and-error period in seeking a treatment that will improve a condition. While cancer treatments were not in the scope of The Conference Board’s study, many of the new high-cost drugs are successfully treating or curing previously terminal cancers. This avoids both long term disability and death claims.

The study does not factor in the rewards to plan sponsors who “do the right thing.” Engagement is increased in a workplace with a commitment to supporting plan members through serious illness. And that impacts profitability. Engagement improves for not just the employee receiving treatment, but for his or her co-workers, as the halo effect of comprehensive coverage envelopes all plan members. This is not quantifiable in a study, but should be evidenced in a plan sponsor’s financial results and employee retention and attraction.

While The Conference Board has attributed a value to the cost of lost productivity by both the patient and the caregiving family member; the study does not assign a value to the benefit that the plan member brings society through non-work activities. Healthy individuals participate in their communities and add value through actions like raising healthy children and volunteering for social causes.

It is a wonderful new world where technology has advanced the treatment of many medical conditions. While they come at a cost, The Conference Board’s study has poked a hole in the drug cost silo to show the favourable impact these drugs have for employers and society. They position this study as support for a national drug program, but I see it as an opportunity to start a new discussion that recognizes the interconnectedness of the components of employer-sponsored benefit plans – and breaks down the silos.

Your turn: Use the comment box below to add your perspective on the issues discussed here.

One thought on “Poking Holes in Silos

  1. Ruth Hunt October 7, 2016 - Reply

    Lizann, especially in the United States, healthcare claim costs continue to be measured too independently of other factors. Our 2016 Global Wellbeing Survey underscores the global move to more holistically view impacts of investments in physical, financial and other broader aspects of well-being – not just considering claim costs. Notably, improving performance and productivity is now the number one objective across most regions. With improved measurement, data warehouse and analytical capabilities, plan sponsors will be able to better correlate the ways various interventions — such as your example of medications reducing disability and distractions to productivity– can positively impact total wellbeing.

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