BC Hydro is responsible for paying for the cost of extended health claims, up to $25,000, for members under the Basic Plan as well as members under the Extra Plan. Retirees enrolled in the Basic Plan have extended health coverage up to the $25,000 maximum (coverage ends after the $25,000 maximum is reached). However, coverage continues for retirees enrolled in the Extra Plan, up to the $500,000 lifetime maximum. The costs of claims in excess of $25,000 under the Extra Plan are paid for by the Extra Plan premiums.
As the retiree extended health plan is self-insured, Sun Life does not set premiums for this plan. Rather, each year benefit consultants review the claims experience and inflationary increases to determine the cost of the Extra Plan and set the premiums accordingly. Furthermore, every three years there is a full actuarial valuation conducted of the retiree benefit plan which goes into more detail, including the number of plan members in the Extra Plan who are approaching or have exceeded the $25,000 maximum. The valuation that was conducted this year indicated that the number of plan members who have exceeded $25,000 in claims had increased by 53% since the last valuation, which was much higher than the anticipated increase from the previous valuation. The premium rate increase for the Extra Plan is primarily being driven by claim costs in excess of the $25,000 maximum as well as the increasing cost of high-priced specialty drugs. Any claim costs in excess of the $25,000 lifetime maximum for members in the Extra Plan are paid for by the Extra Plan premiums. Given the significant shift in the number of plan members in the Extra Plan exceeding the $25,000 lifetime maximum, we plan on conducting this analysis on an annual basis rather than on a tri-annual basis going forward.
Over the next several months, we will further analyze the anticipated increases expected over the next 1 to 5 years. We also want to explore what cost sustainment measures can be put in place to help sustain the cost of the Extra plan in the future. One opportunity is to communicate how plan members can play a role in sustaining the cost of the plan by being better health consumers. For example, using generic drugs instead of brand name drugs, purchasing prescriptions drugs from pharmacies with a lower dispensing fee, and using Sun Life’s Preferred Provider Network for specialty drugs. There are also external factors, such as National Pharmacare, that may impact the cost of the plan in the future. Other cost containment measures may be considered to help sustain the cost of prescriptions drugs (which helps sustain the cost of the Extra Plan premiums) and we will want to explore these options in the future, in consultation with our unions and members of the Pension Plan Consultative Committee (which includes retired members).
We recognize that this is a significant increase in premiums. However, it’s important to note that the total cost of the Extra Plan and the coverage it provides remains competitive to other plans in the market and it would be difficult to find a plan that offers this same level of coverage for retirees.
We will provide further communication to retiree members later this year once the analysis has been completed.