BUILDING SUPPLY INDUSTRY ASSOCIATION - Fall 2019 - 16

FINANCE CORNER

|

BY JOHN MCGRATH, ZLC FINANCIAL

HOW PROACTIVE ARE YOU
AROUND EMPLOYEE BENEFITS?

W

e advise employee
benefits plans sponsors
to budget for annual cost
increases of approximately 7% for the
coming year. ZLC Financial expects
that rate of annual cost increases to
continue for the foreseeable future.
An aging and less-healthy Canadian
population accessing benefits more
often drives these increases. As well,
the average cost to use benefits
continues to rise with more and more
high-cost specialty drugs.
So, what are you going to do? For
the most part, likely nothing based
on experience. We are not trying to
be argumentative but the reality is
Canadian benefits plan sponsors have
not made any significant plan changes
in over a decade; not even during the
recession around 2008-2010. That
said we believe it boils down to how
proactive you are or how proactive
you want to be. Based on that, what
types of plan design changes will you
consider and why? How extensive will
the changes be - simply evolutionary
or more revolutionary?
Here is a brief summary of potential
plan design changes to contain costs,
particularly around prescription
drug plans:
Deductibles: You could require
employees to pay an arbitrary flat
dollar amount ($25 to $200) of the
cost of the first claims each year. That
shifts costs from the benefits plan to
employees but does so in the worst
possible way. It does not involve
employees in decisions or influence
best behaviours. More importantly,
you may punish your healthiest
employees who rarely use the
plan whereas your most unhealthy
employees have no problem paying
this amount to get thousands of
dollars in claims paid.
Coinsurance: You could require
employees to pay a specific percentage
of each claim (10% to 20%). That

16

NEWS MAGAZINE | BSIA NEWS | FALL 2019

certainly shifts costs from the benefits
plan to employees, but can it influence
behaviours? Studies show that you
need employees to pay at least
20% of the bill for them to be active
consumers questioning the need of the
services provided, seeking alternatives,
shopping the service to other providers,
etc. Are you willing to reduce your
100% drug reimbursement to 80% and
face complaints from your employees?

Who makes these decisions? Are you
willing to stand behind them when it
comes to your employees?
To address future cost increases,
benefits plans must change, but it
all comes down to when and how
proactive a benefits plan sponsor
wants to be. Employee benefits plans
are part of a total rewards offering
that helps attract, retain and engage
workers. So, if you change your plan

For example, are you prepared for an
employee on a $25,000 specialty drug
to be able to pay their 20% portion
($5,000) from after-tax earnings?
Maximums: You could institute
annual or lifetime plan maximums.
Short term, you may not see any
immediate savings but your plan will
be well protected from the costs of,
for example, a couple of specialty
drugs that run $100,000 to $500,000
per year for an employee's whole
life (with more of these drugs in the
development pipeline). However, are
you willing to face your employee if
the benefits plan they rely on only
reimburses $50,000 per year and they
need a $250,000 drug, particularly if
they do not have alternative coverage
(i.e., spouse's plan)? Is this not like
buying home insurance but leaving out
fire and earthquake coverage? Aren't
catastrophic claims what insurance is
really for?
Drug Formularies: You could
adopt insurer or government-based
programs that specify which drugs
are covered. Again, there could be
significant cost savings here by
denying coverage to an employee for
a specific drug claim. However, given
that most provincial governments
will not cover a new drug for two
or three years after Health Canada
approval (when most benefits plans
currently cover them), are you ready
to face employees who may not be
able to get coverage for their health

before your competitors do, are you
putting yourself in a poor competitive
position? Should you wait for your
competitors to make changes
first and follow suit? Benefits plan
sponsors need to understand why
they offer these plans, how important
they are in the scope of the broader
rewards strategy, and how they will
manage escalating costs relative to
the broader business plan until they
make changes.
One of the benefits of belonging to
the BSIA is access to its 30-plus-year
group benefits buying consortium.
This is an industry-specific employee
benefit program that addresses
the benchmark of plan designs
for the building supply industry.
Each participating company has a
customized benefit program, but
there are certain plan standards and
designs offered to employees. More
importantly, participating companies
also know they can achieve real
savings by combining the purchasing
power of many companies.
For more information, contact
John or a member of the ZLC
Financial team. Visit www.zlc.net,
or call 604-688-7208 or
1-800-663-1499. 

condition even when it is available?

John McGrath is a Benefits Consultant with
ZLC Financial Group. He applies his 30-plus
years of experience as a Human Resource
Consultant and Employee Benefits Specialist
to maximize the value from employee benefits
plans and ensure their financial sustainability
and ongoing relevance to employees.


http://www.zlc.net

BUILDING SUPPLY INDUSTRY ASSOCIATION - Fall 2019

Table of Contents for the Digital Edition of BUILDING SUPPLY INDUSTRY ASSOCIATION - Fall 2019

Chair’s Message
Board of Directors
BSIA News and Events
Building Supply Warehouse and Distribution Program Graduation
Orion Award Winners
The Five Step Approach to Boosting Business Growth
Top Mistakes to Avoid When Selling Your Business
Finance Corner: How Proactive Are You Around Employee Benefits?
President’s Message: Last Word
Index to Advertisers
BSIA Affinity Partner Program
BUILDING SUPPLY INDUSTRY ASSOCIATION - Fall 2019 - Intro
BUILDING SUPPLY INDUSTRY ASSOCIATION - Fall 2019 - bellyband1
BUILDING SUPPLY INDUSTRY ASSOCIATION - Fall 2019 - bellyband2
BUILDING SUPPLY INDUSTRY ASSOCIATION - Fall 2019 - cover1
BUILDING SUPPLY INDUSTRY ASSOCIATION - Fall 2019 - cover2
BUILDING SUPPLY INDUSTRY ASSOCIATION - Fall 2019 - 3
BUILDING SUPPLY INDUSTRY ASSOCIATION - Fall 2019 - Chair’s Message
BUILDING SUPPLY INDUSTRY ASSOCIATION - Fall 2019 - Board of Directors
BUILDING SUPPLY INDUSTRY ASSOCIATION - Fall 2019 - BSIA News and Events
BUILDING SUPPLY INDUSTRY ASSOCIATION - Fall 2019 - 7
BUILDING SUPPLY INDUSTRY ASSOCIATION - Fall 2019 - 8
BUILDING SUPPLY INDUSTRY ASSOCIATION - Fall 2019 - Building Supply Warehouse and Distribution Program Graduation
BUILDING SUPPLY INDUSTRY ASSOCIATION - Fall 2019 - Orion Award Winners
BUILDING SUPPLY INDUSTRY ASSOCIATION - Fall 2019 - 11
BUILDING SUPPLY INDUSTRY ASSOCIATION - Fall 2019 - 12
BUILDING SUPPLY INDUSTRY ASSOCIATION - Fall 2019 - The Five Step Approach to Boosting Business Growth
BUILDING SUPPLY INDUSTRY ASSOCIATION - Fall 2019 - 14
BUILDING SUPPLY INDUSTRY ASSOCIATION - Fall 2019 - Top Mistakes to Avoid When Selling Your Business
BUILDING SUPPLY INDUSTRY ASSOCIATION - Fall 2019 - Finance Corner: How Proactive Are You Around Employee Benefits?
BUILDING SUPPLY INDUSTRY ASSOCIATION - Fall 2019 - Index to Advertisers
BUILDING SUPPLY INDUSTRY ASSOCIATION - Fall 2019 - BSIA Affinity Partner Program
BUILDING SUPPLY INDUSTRY ASSOCIATION - Fall 2019 - cover3
BUILDING SUPPLY INDUSTRY ASSOCIATION - Fall 2019 - cover4
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