Last updated December 22, 2017.
Starting January 1st, 2018, prescription drugs will be free for Ontarians aged 24 and under.
Ontario’s Youth Pharmacare, also known as OHIP+, is the first universal drug program of its kind in Canada. It represents a major step forward in providing health care savings for individuals, families, and employers alike.
Early reports suggest that for Ontario employers, the savings will be significant—up to $140 per employee per year. But what this means for group benefits costs has yet to be determined.
Here’s our take on how OHIP+ will affect group benefits, what savings employers can expect, and how to reinvest healthcare dollars for the greatest ROI.
Fewer claims = greater savings
For Ontario employers, this means that young workers and parents with children dependents will no longer be submitting drug claims. Fewer claims means greater savings for the insurance companies, which can be passed on to employers in the form of lower premiums or expanded benefits coverage.
Fewer claims means greater savings for insurance companies can be passed on to employers in the form of lower premiums or expanded benefits coverage.
The government has already promised to work with insurance companies to ensure that employers and employees see these savings.
Just how much will those savings be? The government hasn’t provided any specific estimates or numbers. But, based on industry standards, the numbers seem to add up in favour of employers of all sizes.
Breaking down the numbers
Prescription drug claims typically account for 25-40% of the cost of a benefits plan, and youth under 25 years old account for about 10% of that. If we consider that the average annual cost of group benefits in Canada ranges from $2,000-$3,500 per employee (not including government-sponsored or retirement benefits), we can estimate that drug claims will drop by anywhere from $25 to $140 per employee per year.
Prescription drug costs could drop by anywhere from $25 to $140 per employee per year.
These savings may seem nominal, but for small and medium businesses, they can add up to significant dollar amounts year over year. Businesses with younger workers or children dependents are the most likely to see savings up front.
The best part? Employers can re-invest these savings into low-cost health care perks that offer high-impact ROIs.
What to do with your OHIP+ savings
Low-cost, high-impact ways to ramp up employee benefits plans include
- reinvesting into employee retirement plans;
- increasing maximums on existing benefits; or
- adding new types of health benefits to your existing plan.
Among these options, the fastest growing trend (and a personal favourite) is employee wellness programs.
Employee wellness programs can range from introducing an HSA for wellness costs like gym memberships or spas, to in-office exercise initiatives, smoking cessation programs, Employee Assistance Programs (EAPs), or just offering healthy lunches.
In all cases, the costs of wellness programs are easy to control (or in some cases, are free). More importantly, they can provide anywhere from three to eight times the return on investment.
Investing savings into low-cost, high-impact employee benefits can yield 8x the ROI.
For example, one study looked at how EAPs could improve workplace productivity and reduce absence from work. The study found that for every $1 invested into the EAP, they had an average $8.70 return. The best news is that in Canada, EAPs cost on average just $3 per employee per month.
Looking at the bigger picture
Even with these estimates, we won’t know the true impact of OHIP+ until the program launches in earnest. The question also remains if the savings will stay with insurance companies or be passed to employers right away.
What we do know is that increased access to health care and a focus on prevention can go a long way towards reducing benefits claims and improving our overall health—children and youth included.
With the Canadian benefits and healthcare landscape changing fast, employers have to keep up to date. Regularly reviewing policies with your benefits advisor will ensure that you’re getting the most out of your employee benefits plan and employee benefits costs.
Peter Demangos, MBA, CFP, CLU, is an active HR & benefits entrepreneur with over 9 years of experience in the employee benefits industry. In 2016, he co-founded Collage to help Canadian businesses proactively manage their employee benefits programs through digital HR solutions. Find out how Collage makes employee benefits better.