Buck illuminates federal budget's impact on employee benefits

01 April 2019 Consulting.ca

The Canadian federal budget for 2019 ushered in a raft of new program spending. According to human resources consulting firm Buck, the two most central announcements related to employee benefits were the budget’s concrete moves toward a national pharmacare plan, as well as changes to protect employees in the case of an employer’s insolvency.

"While Budget 2019 provides many details regarding a range of measures, we are particularly encouraged by progress toward a national pharmacare program, covering high cost drugs and rare diseases, as there are many cases where such coverage is needed," Karen DeBortoli, director of the knowledge resource centre at Buck, said. "Although the success of the program will ultimately hinge on how it balances coverage with cost, we saw good progress in the new budget this week."

The budget outlined the creation of three national pharmacare projects: a Canada Drug Agency (CDA), a National Drug Formulary, and a National Strategy for High-Cost Drugs and Rare Diseases.

The CDA will work on assessing the effectiveness of new drugs, while serving as the single negotiator for drug prices. The newly created agency will also develop the national formulary – an evidence-based list of prescribed drugs for patients nationwide.

The budget also introduced the creation of a strategy to gather and evaluate evidence on high-cost drugs for rare diseases, while working to negotiate lower prices with drug manufacturers.

Buck illuminates federal budget's impact on employee benefits

"Canada is currently home to a patchwork of federal and provincial pharmacare programs," DeBortoli said. "The replacement of the current patchwork of prescription drug benefit programs, which provide what Budget 2019 acknowledges as 'inadequate and inconsistent coverage,' will be welcomed by most Canadians. In order for the CDA to operate effectively, all provinces and territories must participate. A single negotiating entity will have greater bargaining power, and a single formulary will be of greatest benefit to all Canadians."

Buck hopes that the evidence-based drug formulary will include certain expensive but high-benefit drugs that have a high impact on quality of life and overall healthcare cost reduction. An example is PEI’s Hepatitis C Program, which is providing drug treatment to all provincial resident despite high drug costs to eradicate the destructive liver disease by 2025.

The consulting firm would also recommend the coverage of high-cost “orphan” drugs to ensure affected Canadians don’t fall through the cracks, as well as the institution of low deductibles and no income or coverage cut-offs to maximize the national plan’s utilization rate. The scope of the formulary, coverage restrictions, and any interactions with existing employer programs for now remains unclear.

Protecting pensioners

In the wake of a number of high-profile insolvencies such as Sears Canada and Wabush Mines, the 2019 budget sought to better protect employees and pensioners in the case of an employer’s insolvency. Employees will benefit from proposed changes to the Companies’ Creditors Arrangement Act (CCAA) and the Bankruptcy and Insolvency Act (BIA). New measures will allow courts to investigate payments to executives before an insolvency, while requiring that participants in insolvency proceedings “act in good faith.”

Employees of federally incorporated business will also benefit from proposed changes to the Canada Business Corporations Act (CBCA) and the Pension Benefits Standards Act (PBSA). The changes would require publicly traded companies to disclose policies on workers, pensioners, and executive compensation, while also requiring that a wound-up pension plan “provide the same pension benefits as when it was ongoing.”

The budget outlines are, however, more of a foggy outline of good-natured intentions than concrete policy. "The vagueness of the announcements on pensioner protection raise a number of questions, such as how CCAA and BIA changes will protect member and retiree pensions, what is meant by acting 'in good faith,' and the details on forthcoming PBSA requirements on the continuity of pension payments, among others," DeBortoli said.

Buck expects the CBCA changes which require the disclosure of executive compensation policy at publicly traded firms to generate some controversy. And while the measures only apply to federally incorporated businesses, they could eventually serve as a template for broader legislation, according to Buck.


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