For insurers and administrators of employee benefit plans
Note: This QDIPCinfo replaces the first two versions of Bulletin 1, initially published in December 2004 and revised in 2011.
Under the Prescription Drug Insurance Act (the Act), which took effect in 1997, all insurers and administrators of employee benefit plans (the Participants) are required to pool the risks inherent in the cost of pharmaceutical services and medications of Quebec residents according to the agreed upon terms and conditions, as required by section 43 of the Act. To fulfill this obligation, the industry set up a risk-sharing (Pooling) system. The Quebec Drug Insurance Pooling Corporation, a private corporation founded in 1997, administers this system, and is the only body recognized for this purpose by the Quebec government.
The System’s Foundation
• The Act Respecting Prescription Drug Insurance and Section 43
The Quebec Drug Insurance Pooling Corporation (QDIPC) was created following the adoption of the Prescription Drug Insurance Act (the Act) on June 19, 1996, and the establishment of the basic prescription drug insurance plan, which has been in effect since January 1, 1997. Let us recall that this plan was created in order to provide all Quebec citizens with coverage for the cost of pharmaceutical services and medications. Since that time, the life and health insurance industry has been required to offer coverage for the medications included in the government formulary to every person eligible for a group insurance program or a non-insured employee benefit plan, without regard for the person’s sex, age, or state of health.
Aware that this requirement would necessarily have repercussions on the cost of employee benefit plans, insured or not, and that these repercussions could prove untenable for some insured persons with private coverage, the legislature adopted Section 43 of the Act, which reads as follows:
« All insurers transacting group insurance and all administrators of employee benefit plans who provide coverage for the cost of pharmaceutical services and medications must pool the risks arising from the basic plan coverage they provide according to the terms and conditions they determine.
The terms and conditions must be communicated by the representatives of the insurers and administrators, in writing, to the Minister not later than 1 November each year. Failing that, the terms and conditions shall be determined by government regulation for the period it indicates. »
• The Creation of a Task Force Representing the Industry
To avoid having the government impose risk pooling parameters for the year 1997, the industry itself was required to define the terms and conditions and submit these to the Minister by November 1st, 1996 at the latest. Therefore, beginning in Summer 1996, the life and health insurance industry complied with the Act by setting up a task force representing the various concerned parties, whose task was to define the parameters of the current risk-sharing system (see sidebar).
On December 5, 1996, the Quebec Health and Social Services Minister ratified the terms and conditions proposed by the industry. A committee responsible for the management of pooling then replaced the industry task force; this committee was incorporated on August 1st, 1997 as the Quebec Drug Insurance Pooling Corporation.
To this day, the Corporation’s risk pooling system remains the only mechanism of its kind recognised by the Quebec government, and the Corporation is the sole body authorised to oversee the proper management of this system.
The Pooling System
The cost of medications is pooled above a certain threshold, which varies based on the size of the groups of insured persons and the ability of those groups to absorb significant increases in the cost of medications. The objective is to prevent a given group from experiencing too great a cost increase, putting the plan’s sustainability at risk and depriving its members of adequate coverage. That being said, the Corporation’s pooling system is not a form of insurance, nor is it reinsurance.
For insured plans, a part of the premium – the “pooling factor” – is reserved for pooling. Non-insured plans are also required to pay the pooling factor to the Compensation Table. At the time of compensation, the pooling factor is revised to ensure complete compensation of the sums in question. Thus, the total of the amounts claimed above the pooling thresholds at the end of any given year is equal to the total of the amounts collected. No surplus or deficit is created.
The pooling system created by the industry is intended to be fair and equitable. Participants are required not to engage in anti-selective behavior towards the government system and other Participants. The industry retains and manages its risks. It seeks to distribute them equitably within the industry by means of this system.
Structure and Mandate
Although it was created following the enactment of the Act, the Quebec Drug Insurance Pooling Corporation is a private corporation. Its Board of Directors ensures independent industry representation, and comprises representatives of insurance companies or employee benefit administrators as well as independent members not associated with the industry. QDIPC’s management is based on rigorous governance rules.
QDIPC’s mandate is to oversee the proper management of the pooling system, which includes carrying out the compensation, and the annual review of the terms and conditions of risk pooling and their application. More specifically, it has the authority to designate a neutral party to manage the compensation process; to obtain all necessary information for the smooth operation of the compensation process; to receive and follow up on any request including, if necessary, an audit, by a designated neutral party, of contracts or claims submitted for pooling by a participant. The Corporation also has the authority to designate a neutral third party to audit the process and its results, as well as review the process and its terms and conditions.
Mission, Goal, and Values
The Quebec Drug Insurance Pooling Corporation subscribes to the principles of good governance. In 2017 it established its mission, goal, and values as follows:
Preserving the pooling system in order to guarantee fair treatment for everyone in the matter of prescription drug insurance.
Foster the trust that members, Participants and government have in the Corporation.
INTEGRITY: acting without compromise in the interest of the entities covered by the Act;
IMPARTIALITY: dealing with each Participant according to a just appreciation of what is due to him; and
FORESIGHT: considering events with sensitivity and openness in order to better predict their effects.
An Essential Collaboration
The success and proper functioning of the risk pooling system is the responsibility of all Participants. They make it possible to preserve the industry’s privilege of setting its own risk-sharing rules.
Since the Corporation is the recognized authority for risk pooling, it invites Participants to take an active part in the annual consultation to review the process and set the terms, conditions and parameters for the year. Participants are also invited to forward any questions relating to the existing system and to keep us informed of any situation that may contravene the spirit of pooling, the rules adopted, or situations that could lead to inequities within the industry.
For all questions or comments, please contact the Corporation at 1001, de Maisonneuve West blvd, Suite 630, Montreal (Quebec) H3A 3C8 or by e-mail at the following address: firstname.lastname@example.org.