Do you want BETTER benefits? Yes / No

Pooling for High Cost Claims

Are we entitled?

Consider this, we live in a country where we ‘expect’ to be taken care of without ever having to ante up to pay the bill. We assume these expenses should be covered either through government programs or employee group benefit plans.

Without a doubt, advances in medicine have brought many life-saving drugs—and hope—to people suffering from serious health problems. At the same time, new ways to diagnose illness— sooner—are being developed. So are new treatment guidelines, which help control disease more effectively. The result is doctors now prescribe drugs sooner than they did in the past, and Canadians are taking more drugs than ever before. While these treatments improve life and sustain a healthy and contributing workforce, these drugs are costly, putting additional pressure on employee benefit plans.

This additional pressure can be seen with the rate increases annually. How many renewals have I presented in the last year alone where the claims far surpassed the premiums paid—in some cases two-to-three times—yet no one wants to pay more in premium. I get it. I’m right there with you. For sure when that employee with Multiple Sclerosis requires Gilenya at a cost of more than $30,000 annually, we expect the benefit plan will pay for it…but with no increase to the premium? Why?

Though the rates may increase, they are certainly not increasing to the levels to cover the additional expenses. Why? Because the plan is insured.

Which brings us to the purpose of insurance—to mitigate risk. It is for these high claims that stop-loss protection, or pooling, is in place. The claims experience is moved into the ‘pool’. What this means is expenditures in excess more than the pooling limit (typically $10,000) are not considered for the experience for the group. So where does the claims experience go? Who’s in charge of the pool? Who pays the bill?

In 2013, on fully insured plans, the Canadian Drug Insurance Pooling Corporation (CDIPC) began requiring the inclusion of pooling protection in the form of an Extended Healthcare Policy Protection Plan (EP3).

However, the CDIPC guidelines stipulate that self-insured, Administrative Services Only (ASO) plans are not eligible to have high-cost claims pooled in an EP3.

This healthcare pooling protects the plan from high claims. Once the combined claims of an employee—and his or her eligible dependents, if any—go higher than the specified amount, the claims become fully pooled. These costs are not reflected in benefit rate. Instead, clients are charged an annual pooling fee.

Pooling is security in numbers. Because claim costs are shared across the entire pool of clients under that insurer, customers become insulated from the full impact of any high-cost claims.

The CDIPC has set rules for all health care insurance carriers to follow when it comes to pooling.

Consider this, we live in a country where we ‘expect’ to be taken care of without ever having to ante up to pay the bill. We assume these expenses should be covered either through government programs or employee group benefit plans.

Without a doubt, advances in medicine have brought many life-saving drugs—and hope—to people suffering from serious health problems. At the same time, new ways to diagnose illness— sooner—are being developed. So are new treatment guidelines, which help control disease more effectively. The result is doctors now prescribe drugs sooner than they did in the past, and Canadians are taking more drugs than ever before. While these treatments improve life and sustain a healthy and contributing workforce, these drugs are costly, putting additional pressure on employee benefit plans.

This additional pressure can be seen with the rate increases annually. How many renewals have I presented in the last year alone where the claims far surpassed the premiums paid—in some cases two-to-three times—yet no one wants to pay more in premium. I get it. I’m right there with you. For sure when that employee with Multiple Sclerosis requires Gilenya at a cost of more than $30,000 annually, we expect the benefit plan will pay for it…but with no increase to the premium? Why?

Though the rates may increase, they are certainly not increasing to the levels to cover the additional expenses. Why? Because the plan is insured.

Which brings us to the purpose of insurance – to mitigate risk. It is for these high claims that stop-loss protection, or pooling, is in place. The claims experience is moved into the ‘pool’. What this means is expenditures in excess more than the pooling limit (typically $10,000) are not considered for the experience for the group. So where does the claims experience go? Who’s in charge of the pool? Who pays the bill?

In 2013, on fully insured plans, the Canadian Drug Insurance Pooling Corporation (CDIPC) began requiring the inclusion of pooling protection in the form of an Extended Healthcare Policy Protection Plan (EP3).

However, the CDIPC guidelines stipulate that self-insured, Administrative Services Only (ASO) plans are not eligible to have high-cost claims pooled in an EP3.

This healthcare pooling protects the plan from high claims. Once the combined claims of an employee—and his or her eligible dependents, if any – go higher than the specified amount, the claims become fully pooled. These costs are not reflected in benefit rate. Instead, clients are charged an annual pooling fee.

Pooling is security in numbers. Because claim costs are shared across the entire pool of clients under that insurer, customers become insulated from the full impact of any high-cost claims.

The CDIPC has set rules for all health care insurance carriers to follow when it comes to pooling.


Did you enjoy this article? It may a “benefit” to have a chat, or at least subscribe to our newsletter.




Contact for you Edmonton Group Benefits Specialist

Disclaimer: Please note that the information provided, while authoritative, is not guaranteed for accuracy and legality. The site is read by a world-wide audience and employment, taxation, legal vary accordingly. Please seek legal, accounting and human resources counsel from qualified professionals to make certain your legal/accounting/compliance interpretation and decisions are correct for your location. This information is for guidance, ideas, and assistance.