Healthcare insurance: TAKING THE PULSE

Increasingly, automobile insurers are playing a greater role in healthcare financing through provincial healthcare levies and because of automobile accident benefits. In 1999, automobile insurers contributed over $1.1 billion to the Canadian healthcare system. The auto insurance industry, as a major funder of healthcare services, is therefore a key stakeholder in this debate.

While the auto insurance industry’s role in healthcare is relatively recent, prior to the late 1940s, healthcare in Canada was privately financed and based on ability to pay. The trend toward universal, publicly financed health insurance began in 1947 when the province of Saskatchewan introduced a public insurance plan for hospital services that continued to evolve until the introduction of the Canada Health Act in 1984.

The Canada Health Act, introduced by the federal government, consolidated the earlier Hospital Insurance and Diagnostic Services Act and the Medical Care Act and introduced broad standards for healthcare. Provincial governments must adhere to these standards in order to qualify for federal funding for medical practitioners and for specific designated hospital services. In order to receive federal transfers under the Act, provincial insurance plans must be publicly administered, comprehensive, universal, portable and accessible. The Canada Health Act and its five principles remain the cornerstone of Canada’s healthcare system.

Pressure on auto insurers

Over the past decade, however, automobile insurers have found themselves becoming an increasingly important funder of healthcare services, particularly in medical rehabilitation services. Auto insurers are now the largest source of funding for medical rehabilitation services in Canada. Recently the Insurance Bureau of Canada (IBC) formed a healthcare issues steering committee to examine the impact of rising auto insurer medical rehabilitation costs.

According to George Cooke, a member of the IBC’s healthcare steering committee, “insurers need to be proactive in the current healthcare debate in order to have a voice in Canada’s changing healthcare system”. Cooke also recently stated that, “we must participate, actively, when there is debate about the Canada Health Act, in order to ensure that the correct context for our day-to-day operations is established”.

Of particular interest to auto insurers is the definition of comprehensiveness within the Canada Health Act. In recent years, auto insurers in provinces with private insurance systems have been paying healthcare levies to cover the costs associated with the use of public health services by those involved as third parties in automobile accidents. In addition, mandatory accident benefit plans require that insurers cover the medical rehabilitation costs of those involved in third party automobile accidents. In 1999, auto insurers contributed over $1.1 billion directly to Canada’s healthcare system over and above their contributions through taxes. These contributions make auto insurers one of the largest payers of medical rehabilitation services in Canada.

The Canada Health Act clearly defines rehabilitation services as an enumerated hospital service. In section 2 of the Act, “[hospital services]…means any of the following services provided to in-patients or out-patients at the hospital, if the services are medically necessary for the purpose of maintaining health, preventing disease or diagnosing or treating an injury, illness or disability, namely….use of physiotherapy facilities”.

For historical reasons relating to the nature of healthcare delivery and medical technology when the healthcare act was written, the Canada Health Act defined publicly insured services in terms of where these services were delivered. This has important implications for auto insurers. It has also prompted Professor Debra Raiser, a health policy expert at the University of Toronto, to comment during the Dialogue on Health Reform in April that, “although still valid in principle, the operational definition of comprehensiveness in the Canada Health Act has now been outpaced by technology”.

Bringing up to date

Hospital centered healthcare policy originated in 1948 with the National Health Grants Program where the federal government subsidized the construction of hospitals. The language of the legislation has survived largely intact from the original 1957 Hospital Insurance and Diagnostic Services Act when health policymakers expected injured persons and healthcare services would be located in a hospital facility. As such, the Canada Health Act confined its criteria to the previously established definitions of facilities and healthcare providers.

However, the delivery of healthcare services, and of particular interest to automobile insurers, medical rehabilitation services, has undergone a tremendous transformation in recent years. Rapidly changing health technology has had direct and indirect implications for healthcare services that have traditionally been performed in hospitals. The delivery of medical rehabilitation services is no longer hospital based or necessarily even physician directed. Growth within rehabilitation related professional sectors have been significantly greater than other health sectors during the 1990s. New medical technologies, practices and medications have also reduced hospital stays or transferred care into the community and home.

Furthermore, services such as medical rehabilitation performed in hospitals when medicare legislation was initially drafted and thereby covered as publicly insured services, have been or are being transferred into the community or home. As these health reforms have accelerated, automobile insurers have seen medical and rehabilitation costs rise dramatically as these services are transferred out of hospitals. While a review of the Canada Health Act suggests the intention to publicly insure medical rehabilitation services, changing technology and medical practices have moved a significant segment of rehabilitation services/expenditures outside of the hospital system.

Cost velocity

For auto insurers, the de facto “offloading” of automobile related rehabilitation services has meant increasing medical/rehabilitation costs and provincial healthcare levies. Since 1990, medical rehabilitation costs for insurers in Canada have increased, on average, by more than 37% annually, or by more than $750 million. In contrast, healthcare costs in Canada have grown by an average of 2.5% annually over the same period. The Canada Health Act and its assumptions about medical technology and practices inherent in its definitions have clearly had an indirect but significant impact on auto insurers.

Auto insurers are one of the largest direct funders of rehabilitation services in Canada. However those medical services funded by auto insurers typically appear to be more costly per treatment and require longer to attain the best possible recovery of health status than for patients treated in either workers’ compensation or provincial medical plans. This evidence appears to question the value of the current system for road accident victims. More research needs to be done in this area.

A recent report by Alina Gildiner of the University of Toronto notes that the rehabilitation sector is fragmented with access and equity implications for rehab patients. And, Mark Webb, a member of the IBC’s healthcare steering committee recently noted, “developing a system of standard invoicing and the communication of practical medical rehab information to claims personnel will help in reducing fragmentation and improve resource utilization”.

Rick Evans, who also is a member of the industry steering committee, concurred with this statement. He added that, “it’s important that auto insurers work toward achieving similar outcome results consistent with other systems currently involved in the medical rehabilitation sector that appear to have some of the tools for more effective resource utilization”.

Prescription

As a significant purchaser of healthcare services, the automobile insurance industry has an
interest in initiatives that support the well being of automobile drivers, advances learning on effective rehabilitation practices and management, and promotes road safety. Auto insurers have an important role in the public policy debate surrounding healthcare. As important stakeholders, auto insurers can make a contribution not only by virtue of the amount that they spend on medical rehabilitation but also by virtue of the ideas that they develop and are able to bring to the table.

Robert Landry of the IBC healthcare steering committee commented in this regard, “to develop a framework that builds confidence that medical and rehabilitation resources are being used efficiently to help victims of automobile accidents achieve their best possible health status as soon as possible”.

Until recently, the industry has not taken an active role in the health policy debate, even as the effects of those policy decisions have had immediate and significant impacts upon automobile insurers and automobile accident victims. An industry committee on healthcare issues recently has begun developing an industry framework for action on healthcare issues that would guide the industry over the next five years as it enters the healthcare debate.

In this respect, Howard Moran of the steering committee noted, “while auto insurers have not historically been engaged in the healthcare debate…the industry is now formulating a framework that will allow the industry to work with government and other stakeholders while developing initiatives to improve industry practices in this rapidly changing sector, while continuing road safety and accident prevention initiatives”.

The healthcare debate

Entering the healthcare debate is one of the most complex challenges undertaken by the IBC in recent years. It will be on provincial and federal government agendas for the foreseeable future, the outcome of which will continue to have significant implications for the industry’s auto insurers. Auto insurers realize healthcare is a complex issue. But, by working with government and other stakeholders in developing practical tools to deal with health claims and the continued promotion of road safety, insurers can assist to ensure that medical and rehabilitation resources are used efficiently to help victims of automobile accidents. cu

There is a growing debate in Canada surrounding the funding and future direction of Canada’s healthcare system, and automobile insurers have an important role to play.