Alberta plan sponsors face a projected increase in drug claims as Bill 11 shifts costs to private plans starting October 1
Alberta’s Bill 11 was recently passed by its provincial government and will ultimately reshape how employer-sponsored drug and health claims will be paid out. But according to Jeannette Makad, the legislation has largely gone under the radar.
“A lot of plan sponsors aren’t even aware that this bill has been approved and will be effective in October," said Makad, associate vice president of benefits enablement and insights at NFP. “That's concerning for us, especially as consultants, because there are impacts.”
Starting October 1, the legislation will carry out two major changes for health benefit plans: private group plans will become the first payer for drug claims currently covered by government programs, and employers will be required to maintain drug and extended health coverage for active employees regardless of age.
Plan sponsors face projected increase of drug, health claims
One such impact Alberta-based plan sponsors can expect to see is a projected increase of anywhere “between 2 to 5 per cent of drug and health claims combined," said Margaret Wurzer, director of benefits design and strategy at Alberta Blue Cross, adding extended health claims carry an additional projected increase of up to 0.4 per cent of paid drug and health claims combined. While she underscored those are averages, individual plans could see figures well above or below that range.
"In the case of a retiree plan, because in most cases the retiree plans have a lot of people that are maybe seniors that have coordination and benefits for coverage for seniors, those groups are going to be highly impacted and they're probably seeing projections that are going to be much higher than that 2 to 5 per cent," Wurzer added.
Bill 11 introduces two distinct changes for employer drug coverage
Makad notes the legislation carries a few key changes for group benefits. The first eliminates age-based termination limits on active health plans. Most plans currently cap coverage at age 80 or retirement, and some still use 65. Under Bill 11, active employees in Alberta will qualify for drug coverage, private duty nursing, certain paramedical services, and chiropractic care regardless of age.
The second change makes the Alberta drug plan payer of last resort, which hits active employees over 65 hardest. Before October, a large portion of their drug costs flowed through the government plan first, with the group plan picking up whatever remained. That order reverses, making the private plan the first payer. Workers who opted into non-group coverage because their employer plan had low maximums or age-based exclusions will also be affected.
Despite the structural shift, Makad said the claims impact may be modest.
"We're not expecting a huge increase in claims again because the majority of our business out west already has no termination age in place," she said, also noting that relatively few employees over the age of 65 remain actively at work.
Payer-of-last-resort causes plan sponsors to revisit plans
Still, the payer-of-last-resort shift creates an urgent case for tightening specialty drug management. Before the legislation, a government program might cover the bulk of a specialty drug, leaving the private plan responsible for a copay capped at $35, said Wurzer. But now, that order flips.
"What's really important is that you need to make sure you're optimizing your specialty drug management because you, as a private plan, will be the first payer," Wurzer said. “What we've been saying to our plan sponsors is to make sure they’re optimizing their prior authorization processes.”
Wurzer also noted that Alberta Blue Cross customizes approved dosages based on a member's health condition or weight to ensure plans pay only up to Health Canada-approved doses for specialty medications.
Makad emphasized the legislation should prompt plan sponsors to revisit cost containment tools that are already available but underused. For example, she pointed to plan maximums, coinsurance levels, tiered reimbursement structures, and formulary management.
“Any changes should be evaluated carefully to balance out cost management objectives with member access because we certainly don't want to start cutting people off,” she said. “Some of these drugs do improve quality of life and some of them clearly are life changing and life sustaining. We don't want to mess with that in effect. But because it is a very competitive market right now and folks are definitely taking a look at what's available on benefit plans as part of their job search, we want to maintain that as well.”
For those facing higher costs, Wurzer suggested looking across the entire benefits package for savings, not just within drug coverage.
She acknowledged generic pricing, step therapy, prior authorization, and maintenance edit controls are all available levers on the drug side, and extended health and dental benefits offer additional room to manage costs. The key constraint, she cautioned, is consistency: any plan design changes must apply to all active employees uniformly particularly as the legislation prohibits carving out older workers from drug and extended health coverage based on age.
How plan sponsors should handle total rewards benefits
As to how plan sponsors should handle benefits not covered by the legislation - life, disability, dental, and travel, Wurzer believes it comes down to philosophy and budget.
“We know that the coverage for some of these other benefits get way more costly as an employee age, so this is where I think some employers are looking at it from a budgetary perspective and just going, ‘This is way too costly,’” said Wurzer. “I think this boils down to finding that balance between equity and sometimes employers, if they don't have the budget, just won't have the ability to be equitable for some of those older employees.”
According to Makad, while drug costs will shift, other benefit components may remain unaffected, giving plan sponsors room to reassess their overall allocation.
For example, she pointed to voluntary additions like group home and auto insurance that offer employee value without adding premium or administrative costs. Life benefits can also extend to higher age brackets, with built-in reductions at 60 and 70 keeping costs in check, and conversion options available for employees whose coverage decreases.
Additionally, disability typically ends at 65, aligning with federal retirement programs while dental claims pose less concern as older employees generate different claims and not more and the federal Canadian Dental Care Plan provides additional coverage for eligible Canadians.
Because details of the legislation are still being ironed out, Makad acknowledged most employers are holding steady on plan design while they assess the potential impact.
"One of our recommendations is let's see how this works before making any tremendous changes," she said, adding that Alberta's legislation is less restrictive than what exists in other provinces, highlighting Quebec's mandatory prescription drug coverage under RAMQ, for example, though she didn't rule out the possibility of tighter requirements down the road.
What plan sponsors should do ahead of October 1
To that end, Wurzer laid out a checklist for plan sponsors on both fronts. On the payer-of-last-resort shift, the first step is working with an insurer or consultant to model the demographic exposure - how much coordination of benefits is happening with non-group and Coverage for Seniors programs - and understand what that means for premiums and rate action. If the projected cost increase creates budgetary pressure, the second step, she suggests, is looking across the plan design for savings opportunities.
On the requirement to maintain coverage for all active employees, she said plan sponsors need to audit their current eligibility rules and contracts. Plans that terminate drug and extended health coverage at 65 or 70 will need to be updated before October 1. And for employers who have already removed older workers from coverage, the obligation is retroactive.
"If you've got some of those over age employees that currently don't have the benefits coverage for drug and extended health, if they're still actively working, they have to be reinstated on the plan," she said.
