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STRATA Benefits
Consulting
Newsletter
Fall 2010
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Welcome to the new STRATA Newsletter - providing
pertinent articles and valuable information to our clients. For
other live updates, you can also subscribe to our RSS News Feed by
clicking the link to the left.
These Newsletters, past and present, can also be
accessed at our Newsletter Archive.
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Harmonized Sales Tax
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Effective
July 1, 2010 Ontario and British Columbia implemented Harmonized Sales
Tax (HST). There is some inconsistency in the group benefits industry
regarding how applicable tax rates will be determined: some carriers feel
it should be based on province of billing and others feel it should be
based on province of contract address. We will continue to monitor CRA's
final position regarding Place of Supply Rules; in the meantime, we
recommend you follow your current carrier's guidelines.
There
is consistency in the following practices:
- Fully insured benefit plans are
not subject to HST.
- Administrative Services Only (ASO)
plans with stop loss arrangements are not subject to HST.
- Federal taxation (including GST)
is based on a whole contract, not on separate pieces of the contract
and as such if your Dental and/or Health Spending Account benefits
are covered under the same contract as the Health, and the Health
Plan has a stop loss arrangement, HST would not be applicable to any
benefits.
In
Ontario and Québec the above plans would continue to be subject to
Ontario Retail Sales Tax (RST) and Quebec Sales Tax (QST).
For
ASO plans without a stop loss arrangement, only the administration fees
would be subject to HST, with the applicable rate of HST being determined
as per the carrier's Place of Supply rules. In Ontario and Québec the RST
and QST will not apply to any administration fees subject to the HST;
however, ASO claims will continue to be subject to applicable RST and
QST.
The respective Premium Taxes for all provinces will
continue to apply as in the past. As additional information is released
we will keep you posted.
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Changes
to Generic Drug Pricing in Ontario
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In
regards to the Public Plan, the Ontario government reduced the cost of
generic drugs listed on the Ontario Drug Benefit (ODB) plan to 25% of the
equivalent brand-name drug effective July 1, 2010.
The
private market will see the following reduction schedule on the cost of
generic drugs listed on the Ontario Drug Benefit (ODB) plan:
- July 1, 2010 - March 31, 2011 -
costs will be 50% of the equivalent brand-name drug
- April 1, 2011 - March 31, 2012 -
costs will be 35% of the equivalent brand-name drug
- April 1, 2012 - costs will be 25%
of the equivalent brand-name drug
Industry
analysis expects that employer sponsored group benefits may realize a
slight decrease in costs within 2 years. The actual effect to your
program will depend on your plan design and the amount of generic drugs
being purchased.
Ontario
Professional Allowances:
In
regards to the Public Plan, the Ontario government eliminated
professional allowances that are paid to pharmacists by generic drug
companies for drugs listed on the Ontario Drug Benefit plan effective
July 1, 2010.
It
is expected, for drugs listed on the ODB plan, the professional
allowances will be phased out of the private market over the next few
years. Professional allowances for generic drugs not listed on the ODB
plan remain unregulated.
As
a result, it is likely there will be an increase to dispensing fees as
Pharmacists try to compensate their reduced income. These changes have
prompted insurance carriers to review their reasonable and customary
dispensing fee maximum for Ontario.
Industry
analysis does not anticipate these changes will have a significant impact
on group benefit costs. STRATA will continue to monitor the situation.
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Changes
to Generic Drug Pricing in Alberta
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Effective
April 1, 2010, the Alberta government reduced generic drug costs in order
to make drug coverage more affordable for all Albertans. Previously, most
generic equivalent drugs had been priced at 75% of the equivalent
brand-name drug. As of April 1st, drugs listed in the provincial
formulary prior to October 2009 were reduced to 56% of the brand-name
price, while new drugs added on the formulary on or after October 2009
are priced at 45% of the brand-name price.
To
compensate pharmacies for the lower pricing, the government implemented
the following three-year transitional allowance per prescriptions less than
$75 (brand-name and generic):
- $3 per prescription from April 1,
2010 to March 31, 2011
- $2 per prescription from April 1,
2011 to March 31, 2012
- $1 per prescription from April 1,
2012 to March 31, 2013
Most
insurance carriers have indicated they will cover the transitional
allowance under group benefits programs. However, there is still some
uncertainty regarding the administration of this allowance and whether
all pharmacists will apply this charge to their customers.
Industry
analysis expects long-term savings; however, the actual effect to your
program will depend on your plan design and the amount of generic drugs
being purchased. STRATA will continue to monitor the situation.
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STRATA
Business Solutions Blog
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 Insight into common HR Topics faced
by Small & Mid-Size Businesses, including Recruitment &
Selection, Employee Onboarding, Organizational Culture, HR Policies &
Processes, Change & Performance Management, HR Metrics and more!
Follow our posts and get involved in the conversation!
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