The Prescription Drug Insurance Act, and Section 43

The roots of the Société de compensation en assurance médicaments du Québec (the Société) go back to June 19, 1996, with the enactment of the Prescription Drug Insurance Act (The Act). Let us recall that the general drug insurance plan, which has been in effect since January 1, 1997, was created under this law in order to provide coverage for prescription medications to all Quebec citizens. Since that time, the life 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 program, without regard for the person's state of health.

Aware that this requirement would necessarily have repercussions on rating and that these repercussions could prove untenable for some insured persons, 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."

Structure and Mandate

Although it arises from the Prescription Drug Insurance Act, the Société is a private corporation under the control of the life insurance industry. The makeup of its Board of Directors ensures a balanced representation of the industry, bringing together representatives of insurance companies, employers and/or employee benefit administrators and/or trustees. The Société's form of management is based on rigorous governance rules.

The mandate of the Société is to oversee the good management of the pooling system, which includes the annual review of the terms and conditions of risk pooling and their application. More specifically, it has the authority: (Source: Risk Pooling Methods for Drug Insurance Proposed by the Insurance Industry to the Health Minister in Accordance with Section 43 of the Quebec Drug Insurance Act, October 25, 1996, p. 22, section 4.3)

  • to designate a neutral party to manage the compensation process;
  • to obtain all necessary information for the smooth operation of the compensation process, including, if necessary, verification by the designated neutral party of contracts submitted for pooling, and the validity of all claims for compensation made by insurers;
  • during the compensation process, to levy payments from insurers and pay out the appropriate compensations;
  • to receive any request from an insurer for verification of the process and follow up in an appropriate manner;
  • to review any verification of the process made by the neutral party as well as overall results of pooling for the past year;
  • to obtain any information necessary to justify the updating of pooling thresholds and annual charges;
  • to submit terms and conditions of pooling to the Minister by November 1 each year at the latest.

The pooling system developed by the Société is the only mechanism recognised by the government, and the Société is the sole body competent to oversee the good management of this system established in accordance with the law.