Pamela M White suggests that driving a hard bargain on the re-tendering of the federal employee health insurance plan but not performing due diligence resulted in poor service quality.

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The June 2024 report by the House of Commons Standing Committee on Government Operations and Estimates (known as “OGGO”) on the Public Service Health Care Plan (PSHCP) details mismanagement in the transition from SunLife to Canada Life. The report highlights the dangers of driving a hard bargain on benefit provisions and e-government service delivery while insufficiently attending to quality and assurance.

The PSHCP delivers health insurance to 1.7 million current and retired federal employees and dependents. The $514 million Treasury Board Secretariat contract with Canada Life experienced a rocky start on July 1, 2023. Call centres were under-resourced, and staff inadequately trained. Francophones, retirees, plan members with complex health needs, and those unable to re-enroll online were denied benefits and services. MSH International, a Canada Life subcontractor, has been incapable of providing health plan coverage to federal employees working abroad. In February 2024, it suffered a major data breach.

Photo Credit: Wikimedia Commons. Image Description: The Canada Life Building in Toronto.

The OGGO Standing Committee was asked to investigate why the promised seamless transition had not occurred. The committee made 9 recommendations. It calls on Treasury Board to improve plan benefits for members with disabilities, ensure contracting transparency, seek member involvement, provide services in both official languages and to those lacking internet access, and to compensate plan members denied health benefits. Auditing and performance reporting must commence, with the Committee stating that oversight governance should have begun July 1, 2023.

What went wrong?  Why did it take a Parliamentary Committee to make contracting compliance recommendations that Treasury Board Secretariat should have addressed once it became obvious that Canada Life was floundering?

At the centre of the PSHCP problem is a government department eager drive a hard bargain on cost-containment, e-government, and fraud detection, including the use of AI to identify it. Canada Life failed to deliver on quality and assurance of service delivery and subcontracting. Ironically, Canada Life was helped along by the Treasury Board Secretariat’s paradoxical failure to monitor and audit performance.

David Prest of Public Services and Procurement Canada told the Standing Committee that the Treasury Board Secretariat had concerns about fraud detection. Apprehension regarding out-of-date membership lists along with an e-government initiative resulted in an onerous online-only re-registration system that Canada Life officials admitted was uncommon in the health insurance business. Online-only registration disadvantaged retirees, a group comprising 47% of the plan membership, as many were unable to negotiate the complex re-registration system.

The philosopher Sophia Moreau argues that discrimination ought to be seen as a form of negligence – the failure to do something that a person could reasonably expect.  In this case, focusing on driving a hard bargain overrode an expected duty to accommodate owed to PSHCP members unable to enroll online. The re-tendered plan also established less generous caps on benefits required by members with disabilities.

The Treasury Board Secretariat needs to act quickly on all nine of the Standing Committee’s recommendations, including independent auditing of Canada Life and subcontractor performance: MSH International and HCL International. One year into the plan, Canada Life and its subcontractor MSH International remain unable to provide health care services to employees working abroad. The track record of MSH International on claims made by plan members for emergency health care incurred while travelling outside of one’s province or Canada is poor.

Prior authorizations continue to pose problems for many plan members. Put in place to contain costs, prior authorizations required for all non-generic medications including oncology drugs and biologics delay treatment and cause extra paperwork for overworked family doctors and specialists who now charge plan members for their completion. Members without a family doctor are shut out of the plan as walk-in clinics and ER departments will not fill-out prior authorization forms nor have access to the required health information needed to complete them. Without active and transparent monitoring, there is no reporting on prior authorization denials, successful appeals, and response times. Administrators of PSHCP member-only Reddit and Facebook groups continue to provide the support and plan information that the Treasury Board Secretariat and Canada Life should be offering.

In preparation for the November 2024 transition of the PSHCP Dental Plan for retired members, Canada Life is rolling out another re-registration exercise.  Time will tell whether the painful lessons of the July 2023 start-up have been learned.

Yet, the big-picture lesson that needs to be learned concerns the outcomes of driving a hard bargain on cost containment and e-government while failing to follow through on performance monitoring. To do so enables contractors to fail on quality and assurance.

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Pamela M White is a Senior Lecturer in Law, Kent Law School, University of Kent.