SPER Committee Meeting

37th PARLIAMENT, 2nd SESSION

Subcommittee on the Status of Persons with Disabilities of the Standing Committee on Human Resources Development and the Status of Persons with Disabilities

EVIDENCE

CONTENTS

Tuesday, May 6, 2003

¿

0915

The Chair (Ms. Carolyn Bennett (St. Paul's, Lib.))

Mr. Mark Daniels (President, Canadian Life and Health Insurance Association Inc.)

¿

0920

¿

0925

The Chair

Mrs. Sue Lott (Lawyer, As Individual)

¿

0930

¿

0935

The Chair

Mr. Blake Williams (Director, Workers' Advisers)

¿

0940

¿

0945

The Chair

Ms. Madeleine Dalphond-Guiral (Laval Centre, BQ)

Mr. Mark Daniels

Ms. Irene Klatt (Director, Health Insurance Policy, Canadian Life and Health Insurance Association Inc.)

Mr. Mark Daniels

¿

0950

Ms. Madeleine Dalphond-Guiral

Mr. Mark Daniels

Ms. Irene Klatt

Ms. Madeleine Dalphond-Guiral

Mr. Mark Daniels

Ms. Madeleine Dalphond-Guiral

Mr. Mark Daniels

The Chair

¿

0955

Mr. Mark Daniels

The Chair

Mr. Mark Daniels

The Chair

Mr. Mark Daniels

The Chair

Mr. Mark Daniels

The Chair

Mr. Mark Daniels

À

1000

The Chair

Mr. Mark Daniels

The Chair

Mr. Mark Daniels

The Chair

Mr. Mark Daniels

The Chair

Mr. Mark Daniels

The Chair

Mr. Mark Daniels

The Chair

Mr. Mark Daniels

Ms. Madeleine Dalphond-Guiral

Mr. Mark Daniels

À

1005

The Chair

Mr. Blake Williams

The Chair

Mr. Blake Williams

The Chair

Mr. Blake Williams

À

1010

The Chair

Mr. Blake Williams

The Chair

Mr. Blake Williams

The Chair

Mr. Blake Williams

The Chair

Mr. Blake Williams

The Chair

Mr. Blake Williams

À

1015

The Chair

Ms. Irene Klatt

À

1020

The Chair

Mr. Mark Daniels

The Chair

Mr. Mark Daniels

The Chair

Mr. Mark Daniels

The Chair

Ms. Sue Lott

Mr. Mark Daniels

The Chair

Mr. Mark Daniels

À

1025

The Chair

Mr. Mark Daniels

Mr. Greg Traversy (Executive Vice-President and Chief Operating Officer, Policy Development, Canadian Life and Health Insurance Association Inc.)

The Chair

Mr. Blake Williams

The Chair

Mr. Blake Williams

À

1030

The Chair

Ms. Sue Lott

Mr. Mark Daniels

The Chair

Mr. Mark Daniels

The Chair

Mr. Mark Daniels

The Chair

À

1035

Mr. Mark Daniels

Mr. Blake Williams

The Chair

Mr. Greg Traversy

À

1040

The Chair

Mr. Greg Traversy

The Chair

Mr. Mark Daniels

Mr. Greg Traversy

Mr. Mark Daniels

Mr. Greg Traversy

À

1045

The Chair

Mr. Greg Traversy

Ms. Irene Klatt

Mr. Mark Daniels

The Chair

Mr. Mark Daniels

The Chair

Mr. Blake Williams

The Chair

Ms. Sue Lott

The Chair

À

1050

Mr. Blake Williams

The Chair

Mr. Blake Williams

The Chair

Mr. Blake Williams

The Chair

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CANADA

Subcommittee on the Status of Persons with Disabilities of the Standing Committee on Human Resources Development and the Status of Persons with Disabilities

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NUMBER 012

l

2nd SESSION

l

37th PARLIAMENT

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EVIDENCE

Tuesday, May 6, 2003

[Recorded by Electronic Apparatus]

¿  (0915)  

[English]

    The Chair (Ms. Carolyn Bennett (St. Paul's, Lib.)): We'll call this more than tiny, perfect committee meeting to order. As all of you know, this committee is tiny and perfect, and therefore has fantastic reports that then get unanimously approved by the “big parent” committee after we've done our work.

    At this time of year I can't do anything except apologize for how 99 Liberals are expected somewhere else this morning. We will, I promise, be cheerleaders for all of your testimony and be prepared to make sure that what isn't in person is understood on paper and vice versa.

    I hope you won't take our small problem in terms of the attendance as any indication in terms of how much we actually care about this file, because we really do care. Hopefully you'll also see that what we've heard from the people of Canada is equally interesting, and we hope to be able to show you a little bit of that by next week. We have the preliminary report from the consultation.

    It's a great honour to welcome Mark Daniels from the Canadian Life and Health Insurance Association. You have with you Greg Traversy and Irene Klatt. We will also have Sue Lott giving an individual presentation, and then Blake Williams from the Workers' Advisers.

    So if you would begin, Mr. Daniels, that would be great.

    Mr. Mark Daniels (President, Canadian Life and Health Insurance Association Inc.): Thank you very much, Madam Chair.

    As you've noted, with me are Irene Klatt, our director of health insurance policy, and Greg Traversy, our chief operating officer.

    Madam Chair, we welcome this opportunity to contribute to your committee's study of Canada Pension Plan disability benefits. At the outset I'd like to commend the subcommittee for its highly innovative and inclusive e-consultation process. We particularly appreciate the provisions made for industry practitioners to participate. I'm aware that a number of individuals from our industry were able to contribute to the subcommittee study because of this initiative.

    Madam Chair, the CLHIA represents 71 life and health insurance companies, which together account for more than 98% of the life and health insurance in force in Canada. Disability insurance is an important element of the business of our members, although I should also note that other types of organizations deliver disability income plans as well.

    The subcommittee has before it copies in both French and English of the industry's submission entitled “The Role of Disability Income Insurance Plans in Canada's Disability Income System”. I'd like to provide the subcommittee with an overview of the submission, highlighting the key chapters.

    Very quickly, the submission is set out along the following lines: chapter II looks at the roles and responsibilities of the key partners in disability insurance plans; chapter III describes the income replacement benefits and other important benefits that these plans make available; chapter IV provides information about the Canadian clientele of disability insurance plans, along with the total payments these plans have made in recent years; the fifth chapter looks at various aspects of the relationship between DI plans and the disability component of the CPP; chapter VI deals with the advance payments of estimated CPP disability benefits that are made by disability insurance plans; the seventh chapter of the submission discusses some of the tax issues that affect disability insurance plans, as well as the recipients of those benefits; and finally, the last chapter provides some conclusions and recommendations.

    I want to move to a very brief overview as well of some key substantive points in these chapters. I'll begin by talking a bit about the benefits provided by disability insurance plans, which are described more fully in the fourth chapter of the submission. Clearly they provide income replacement benefits, but these plans also support and facilitate return to work through rehabilitation and other services. Moreover, disability income plans are often combined with extended health care benefits such as prescription drugs and special nursing services.

    As chapter IV points out, disability insurance plans currently provide protection to more than 8.4 million Canadian workers. In 2001, total disability insurance payments were $4.8 billion, almost double the 1990 figure, when plan payments totalled about $2.4 billion.

    I'd like to draw the subcommittee's attention to table 6 on page 12, which contrasts total disability insurance plan payments with total CPP disability payments. Table 6 shows that total CPPD payments have been virtually constant since 1994, while during the same period, total disability insurance payments grew by 63%. As a result, while total CPP disability payments were equal to total disability insurance payments in 1994, by 2000 they were only 59% as large.

    Chapter V notes that only those disability insurance recipients who suffer “severe and prolonged” disabilities may also qualify for CPP disability benefits. When disability insurance plan recipients appear to meet these criteria based on their initial disability assessments, they are advised to apply for CPP disability benefits.

    The reasons are quite important, Madam Chair. For one thing, all of them have contributed to the Canada Pension Plan and are entitled to apply for benefits. For another, if they qualify for CPP disability, the period during which they receive those benefits does not reduce the amount of their CPP retirement benefits. Furthermore, as time goes on their overall disability incomes will increase by the full amount of CPP disability's cost of living adjustments. Finally, Madam Chair, most disability income insurance plans are designed and priced on the assumption that applicants who appear to qualify for CPP disability benefits will apply for them.

¿  (0920)  

    I'd like to bring in some information about CPP disability approvals and rejections at this point. As table 7 on page 18 shows, CPPD's average monthly approvals have declined by 56% since 1994. In fact, the majority of applications for CPP disability meet with initial rejection. Fully 57% of initial applications were turned down in 2000. By the way, CPPD applications from disability insurance plan recipients seldom include relevant information from the disability assessments done by disability insurance plans. This no doubt contributes to the frequency of CPPD rejections.

    In any case, many CPP disability rejections are overturned on appeal, and disability insurance recipients whose disability assessments indicate they suffer from severe prolonged disabilities are often encouraged to appeal.

    Chapter VI examines the advance payments of estimated future CPP disability benefits to disability insurance recipients who have applied for CPPD. As members here are very aware, CPP disability decisions take considerable time. As a result, these advance payments are extremely important in terms of providing the full income replacement target level during a period when the recipients face so many other challenges. The amounts advanced are subsequently repaid to the disability insurance plan when CPP disability makes a retroactive payment of benefits.

    It's worth noting, Madam Chair, that the current arrangements for such advance payments have brought about a great improvement over the situation that prevailed prior to the 1991 amendments to CPP legislation. Overall, the arrangements for integrating disability insurance benefits and CPPD benefits work very well in the vast majority of cases in terms of both benefits going forward and retroactive payments.

    Infrequently, though, there may be cases in which some unanticipated taxes are owing as a result of the integration of benefits. This could very usefully be examined by the Minister of Finance's new Technical Advisory Committee on Tax Measures for Persons with Disabilities.

    There is another important point made in chapter VI, Madam Chair, and here I would like to refer to table 8 on page 30 showing the impact of provincial retail and sales taxes. This is very important. Premium taxes currently apply in every province and territory. As for retail sales taxes, Quebec and Ontario--get this--are the only jurisdictions in North America to have imposed them. Together these taxes add more than $330 million to the cost of disability insurance coverage. Since premiums are most often paid by plan members, most of this comes right out of the pockets of working Canadians.

    In light of the issues and challenges identified in our submission, the industry respectfully suggests, first, that the committee may wish to consider recommending that, subject to the appropriate consent of the CPP disability applicant, relevant information from the disability income plan's disability assessment could be considered in CPP disability's initial assessment of the application for benefits.

    Second, in its assessment of disability-related tax measures, the Minister of Finance's new technical advisory committee should take into account the possibility of unanticipated taxes owing arising from integration of benefits from a disability income plan and CPP disability benefits.

    Third, CPP disability and Canada Customs and Revenue Agency officials and disability insurance plan carriers together should develop a protocol for improved information sharing and communication with recipients to ensure that recipients do not become unnecessarily confused and concerned about the tax consequences of lump sum retroactive benefits from CPP disability.

    Finally, Madam Chair, provincial premium taxes and provincial retail sales taxes on disability income insurance plans should be significantly reduced as quickly as possible and ultimately eliminated.

    Madam Chair, that concludes our formal remarks. We look forward to any questions you might have. Thank you.

¿  (0925)  

    The Chair: Thank you very much.

    Mr. Young just informed me that 82 members of your industry, I think it was, who participated in the e-consultation ticked off that box identifying themselves. We think it's great. Thanks very much.

    Sue Lott.

    Mrs. Sue Lott (Lawyer, As Individual): Thank you very much, Madam Chair--and members of the committee, I guess I should say.

    I wanted to talk to you today about the relationship between CPP and private disability insurance. I come here mostly based on the fact that I did a research paper for the Office of Commissioner of Review Tribunals of OAS on April 30, 2002. It's called “Background on CPP and Private Disability Insurance”.

    This paper provided background for one of the task force reports submitted by the office to this committee, I understand, so I'm going to try not to tread over ground you're probably already familiar with from the research you've been given.

    Understanding the interaction between CPP and private disability insurance is important because disability insurance benefits represent the most significant additional source of income for CPPD recipients. The latest calculation had 25% of CPP disability beneficiaries receiving benefits from private insurers.

    What I wanted to talk to you about today were four issues: the adequacy of disabled recipients' incomes; the effective offsets and harmonization and assignment of benefits between CPPD and private disability insurance on the disability insurance contract; I wanted to briefly touch on CPPD as the first payer; and I wanted to talk very briefly about the financial strength of the private insurance industry.

    On the first point, about adequacy of disabled recipients' incomes, one of the impacts we know about harmonization and offsetting and this assignment of retroactive disability benefits is that there can be an overall reduction in the level of disability benefits to recipients.

    My question would be, can disability recipients afford this impact? In part of the research I looked at, I was looking at the 1996 report of the Auditor General, where they did this evaluation of CPP disability to assess whether it was meeting its objectives overall. Part of the study was a survey of beneficiaries. It provided information for them, basically on CPP disability recipients' incomes and the source of their income.

    The evaluation concluded overall that the program benefits had met their target of providing the amount they should, which is a 25% replacement of income at yearly maximum pensionable earnings. It's interesting that the auditor also stated that CPP disability provides on average about half of recipients' incomes.

    Part of the reason for this proportion is that some other income providers are reducing their benefits by the amount of CPP disability benefit. The extent to which CPP disability lowers the cost to other income providers, rather than helping the disabled, and the adequacy of disabled recipients' incomes were not issues, obviously, in the evaluation.

    The Auditor General then goes on to say that the beneficiary study found that close to 40% of beneficiaries surveyed had incomes below Statistics Canada's low-income cut-off levels. My concern is that I don't think we know enough about the impact of harmonization and offsetting and reimbursement practices on the level of disability insurance recipients' incomes.

    Again, the 1998 legislative changes to the CPP Act, which had an overall impact of effectively reducing disability benefits--the estimated reduction is about $100 to $200 a year in maximum payments to disability recipients.... It was interesting to me, when I looked at Michael Prince's report, which had also been submitted to the Office of the Commissioner of Review Tribunals, that he also reinforced this concern about our lack of information.

    He said on page 72:

While government reports claim that the contribution increases and benefit cuts are fair to current and future generations and to both men and women, a program evaluation or policy analysis has yet to be published by the federal government which estimates the impact of the benefit cuts by gender, income levels, age groups or other relevant categories.

    I would argue that it's critically important to have this information in order to evaluate the effect of offsetting of benefits by private insurance where the recipient is in receipt of, or in anticipation of receipt of, CPPD, and also the tax implications of the assignment of retroactive disability benefits, which we know can have a negative impact as a result of these agreements that were entered into by HRDC and private insurance companies.

    Second, I wanted to talk about the effects of offsets and harmonization between CPP and private disability insurance. On the nature of the disability contract itself--the private insurance contract--it's really important to remember what the nature of a disability insurance contract is. These have been termed by the courts to be good-faith and peace-of-mind contracts. This assessment of the nature of the insurance contract for disability was recently affirmed by the Supreme Court in Whiten v. Pilot Insurance.

¿  (0930)  

    I wanted to quote paragraph 129 where the court in majority says:

Insurance contracts [as Pilot's self-description shows] are sold by the insurance industry and purchased by members of the public for peace of mind. The more devastating the loss, the more the insured may be at the financial mercy of the insurer, and the more difficult it may be to challenge a wrongful refusal to pay the claim.

    If we look at the effect of surprise tax implications of retroactive assignment, if we look at the requirement that is now being made upon private insurance beneficiaries to apply for and to appeal CPP denials, all this needs to be looked at in light of what the real fundamental purpose of buying an insurance contract is for peace of mind.

    The other thing about life and disability contracts is that these have traditionally been viewed as non-indemnity contracts. What this means is that you pay benefits simply on proof that the event that has been insured against occurs, with no requirement of proof of actual financial loss. You could contrast this to what an indemnity insurance contract is, and that would be for something like property or automobile insurance. It's where the insurer agrees to compensate the insured for financial losses arising out of the insurance risk. This makes sense, obviously, to ensure financial loss arising out of a risk when we are talking about the insuring of a physical object and the loss of part or all of that physical object.

    But the effect of this offsetting and this coordination of benefits under private disability insurance, which is now found as a standard form in most contracts--there is a listing of specific income replacement payments that are to be deducted from the benefits payable from the policy. This is very much changing the private insurance contract from a non-indemnity to an indemnity contract.

    I also wanted to talk about CPPD as first payer. It is important to remember, as you know, that there is no expressed statutory basis for this principle. It's merely a presumption that arises from the way CPP disability is calculated, and this is that it doesn't take into account any other program benefits when it calculates its amounts.

    I would say there are some philosophical and practical questions that arise out of this. The philosophical issue is simply this: what is the significance when we say CPPD should be the first payer? On one hand, this means it retains its status as a universal program because we know that this is a program that guarantees coverage as a right for all those who have made the required contribution. It's not a means-tested program.

    What would be the effect of making CPPD a second payer? Would this turn it into a residual program? It's an important question, but at the same time, what is the implication when this public social security program links with private insurance as a result of this first-payer principle, resulting in a reduction of benefits overall to recipients and where you have effectively a public program that subsidizes a private program through these agreements that allow for assignment of retroactive benefits so that it ensures that the private insurance companies are made whole for not reducing their coverage by the estimated amount of CPPD?

    There are also practical issues here. As we know, the net effect of the first-payer principle is that it has resulted overall in a reduction of recipients' benefits. The private insurer reduces the private disability monthly benefit by the amount of the corresponding amount of CPPD benefit. There is also the effect of tax treatment of CPPD versus private insurance disability benefits. When they require recipients to apply for CPP we know that CPP is fully taxed to the recipient. Private insurance may not be. Where the employee pays all of the cost of the insurance, it's not considered income and therefore not taxed.

    In regard to the effect of assignment of retroactive CPP benefits to private insurers, this lump sum that goes directly back to the private insurance company, but for which the recipient is fully taxed--and often they are not aware of this until it happens--my question would be, how does all of this fit with the premises behind CPPD? We know that when this program was first instituted in 1965 under the Honourable Judy LaMarsh, who was the Minister of Health and Welfare at the time, she stated that the principle intended to be followed under the provisions of the pension plan is that the individual who is either a contributor or a dependant should not be unnecessarily burdened. After all, the whole idea of a pension plan is to provide benefits rather than creating costs.

    Finally, I wanted to talk a little bit about the financial strength of the private insurance industry. Given the offsetting of benefits by private insurance and the subsidization of the private insurance industry by CPP via the agreements that allow for this assignment of retroactive benefits, both of which produce significant financial savings to private insurers, the question then arises as to the financial health of the private insurance industry and whether it needs these financial supports.

¿  (0935)  

    It is important to remember that at the end of the year 2000, the Canadian Life and Health Insurance Association's own report indicated that the Canadian private life and health insurance industry had more than $267 billion in assets.

    The industry plays a significant role in sustaining the finances of all three levels of government through its security holdings. It also has substantial investments in foreign markets. It's also important to remember that the 1992 legislative changes to the Insurance Companies Act allowed the industry to diversify and expand both its investments and its business activities.

    Insurance companies may now invest in assets in real estate, mortgages, mutual funds, stocks, and bonds. They can engage in business activities that include investment counselling, portfolio management, and issuing and operating of credit card plans in cooperation with banks and trust companies. They can operate real estate brokerages and deal in real property, which gives them substantial areas of economic activity.

    Given the substantial holdings of private insurance companies, I would say it's important to assess in this light their arguments in opposition to recommendations with respect to private insurance agreements with CPP and the issue of the offsets of monthly disability cheques, the assignment of the retroactive disability benefits, which was set in place by federal legislation, and the issue of the costs of appealing CPP denials.

    In conclusion, I would just say that I do support the Office of the Commissioner of Review Tribunals task force recommendations with respect to CPPD and private insurance, with the additional argument that we need to assess the impacts of all of this on the level of individual disability recipients' incomes.

    Thanks very much.

    The Chair: Thanks very much.

    Mr. Williams.

    Mr. Blake Williams (Director, Workers' Advisers): Good morning, Madam Chair and honourable members of the subcommittee. Thank you for the opportunity to meet with you and to speak this morning.

    I appear before you wearing many hats, as a citizen, as a taxpayer, and as a director of the workers' advisers program for the Province of British Columbia, which is a statutory program to provide advice, assistance, and representation to injured workers and their dependants in the resolution of WCB matters. It's located in the Ministry of Skills Development and Labour. I am also a chair of CAWAA, the Canadian Association of Workers' Advisers/Advocates. I sit as an international advisory council member for National Institute of Disability Management and Research in Canada and for the Centre of National Research on Disability and Rehabilitation Medicine in Australia.

    In reviewing parts of the committee's important work, I can see that you were well briefed on the confusing landscape for disabled citizens within the Canadian safety net, including the issues of confusion over first payer, varying definitions of disability, different methods of assessment, complex policies and appeal systems, cost shifting and offloads, insurance policies requiring CPPD applications, the denial of appeal applications for CPPD benefits, and many others.

    You have read about the concerns of disabled Canadians with the scheme you are reviewing. You have to find solutions that look not just at CPP but also at how it interacts with other partners in the safety net.

    I'd like to commend the committee for your efforts to address the disability tax issue and for your tenaciousness with many of the vexing questions placed before you. I hope to offer you some ideas aimed at solutions.

    In the experience of far too many of our injured workers, they discover at the worst possible time--i.e. when they acquire a disability--that the WCB benefits their employers paid assessments for to provide no-fault coverage, that the private insurance they paid for, and that the CPP benefits they co-funded with their employers have lots of small print and financial offsets, which shock and anger them when they discover them at that time.

    Many injured workers ponder why there is no federal law restricting integration of CPPD benefits with other schemes in order to reduce cost shifting, to reduce the number of unnecessary appeals, and to ensure that intended recipients receive benefits from the system they helped fund.

    In addition to dealing with the pain, treatments, personal adjustments, and the restrictions of their disabilities, they find they have to run around the safety net to learn the various rules, benefit prerequisites, and appeal mechanisms just to maintain the asset base they have. This effort tires them out and defeats many of their efforts to return to work.

    To allay this confusion, we need some new thinking. Complex safety net systems need to be simpler for Canadians to access them effectively. Independent social safety net partners need to gather around some common goals to protect and invest in Canada's human capital to achieve as much re-employment as possible.

    Herman Melville once wrote, “Without work, all life goes rotten”. You've heard accounts supporting that view.

    Some time ago in British Columbia we created a small pilot project in partnership with the private sector and the provincial ministries of health, labour, advanced education, human resources--our social assistance ministry--NGO disability groups, workers' compensation, auto insurance, the Canada Pension Plan, and employment insurance to test some theories and find out why disabled clients of these programs were not returning to work. The CEOs of those groups and the working group learned a great deal during the “Returning to Work-Removing the Barriers” pilot project, subsequently reported in the In Unison report and the Auditor General's report. A significant discovery was that the elimination of disability supports upon return to work was a deterrent, perhaps more so than benefit stacking. The unanimous recommendations are contained in a report I'll table with the clerk for translation, and a copy of the evaluation report for background information.

¿  (0940)  

After viewing the different international legislative approaches of EU countries, the United States, Australia, and New Zealand, a collaborative framework with legislative supports may work best in Canada, including: working towards a common definition of disability; more precise assessment processes; earlier interventions to support return to work where viable; tracking of friction costs; and fast-track appeals where vocational rehabilitation is involved, particularly as we all know that delay is the enemy of rehabilitation--yet we don't have fast-track appeal processes to resolve those. The framework would also include targeted assistance for young disabled Canadians, who may end up on the scheme for life without proper interventions; creation of an inter-agency job bank and, to keep things moving, a contingency fund for accommodations while agency liability is being determined; and diligent reporting of objective results across the schemes, because what gets measured gets done. We need better measures, reports, and information, as other speakers have pointed out.

    These initiatives could form short-, medium- and long-term goals for the Canada Pension Plan and the safety net with CPP leadership.

    On the issue of representation for CPP/CPPD appeals, CAWAA is currently studying whether workers' advisers should or could provide qualified representation without cost in some jurisdictions where there is a statutory relationship between CPP and WCB benefits.

    I hope you may benefit from some of these suggestions for improvements. You will make a difference to many lives.

    Merci bien de votre attention.

¿  (0945)  

    The Chair: Thanks very much.

    Madam.

[Translation]

    Ms. Madeleine Dalphond-Guiral (Laval Centre, BQ): Ladies and gentlemen, good day.

    A little over 20 years ago, I was struggling with the long term disability claims system because of my husband, who had been stricken by a serious illness with no hope of returning to full health. So, for 13 years, we were lucky enough to receive benefits which ensured that economically, it was not a disaster. But what I remember most about those days, and it was quite a while ago, was the kind of aggressive feeling I had every time I had to fill in those damned forms for someone who obviously was not getting better.

    I wonder if there have been changes since then. My question is for Mr. Daniels or Ms. Klatt. In the procedures for assessing disability, is everyone treated the same way, that is, is there an assessment every six months or every year, or is there a hierarchy where certain people who are eligible for your benefits but who you know are not going to improve are free of this very unpleasant and useless chore? That should be an easy question to answer, I hope.

[English]

    Mr. Mark Daniels: Irene, do you want to take that question? I think it's better for you....

    Ms. Irene Klatt (Director, Health Insurance Policy, Canadian Life and Health Insurance Association Inc.): Thank you for your question. And thank you for sharing your personal story. I think the situation you've explained highlights the fact that each case is individual, or that each disability case has its own situation. Every person responds to a disability--even the same disability--in a different way. This is what makes these assessments so very complex, though there may be cases that are more readily apparent in terms of their complexities.

    Certainly in our work within the industry we've taken steps to streamline those processes. They are never that simple; they are very, very complex issues. We are taking steps to work with disabled individuals to make the whole process much more streamlined.

    One of the initiatives we are looking at, which crosses boundaries between the private insurance industry, Canada Pension Plan, workers comp, and others, is to look at what can be done to streamline the disability forms being used, to make it easier for the physician working with that individual's case by allowing some common information that wouldn't need to be repeated and wouldn't make individuals go through the assessments as frequently. There are periodic reviews on a disability file, but they also will depend on the conditions the individual has.

    I hope that gives you a little bit more information on this.

    Mr. Mark Daniels: If I may just add a point parenthetically for you, Madam Chair and Madame Dalphond-Guiral, I was not at all familiar with this area until I got very much into this file--though Irene Klatt and other people who work with us are very familiar with it--but one really central thing I have learned is that every every one of these disability files has a case manager. I don't know whether this will bring you comfort or not, but there is nothing automatic about this stuff--nothing. So every file has to be treated individually. And I imagine that in some cases they may be handled more aggressively than they should or shouldn't. I simply can't answer that.

    From what we have learned in our extensive look at the latest disability administration, I would be very surprised if we ever move away from a system where individual files are managed individually. Now, that's both a plus and a minus to be sure, but as Irene says, I know the companies are clearly anxious not to incur.... These people are clients, and the last thing you want to do is to be making a difficult life and circumstance even more difficult by asking for unnecessary information. But it would be a mistake to suggest that somehow this is ever going to become automatic, because I don't think it will.

¿  (0950)  

[Translation]

    Ms. Madeleine Dalphond-Guiral: Certainly, I would object vehemently to it being automatic. I think that in any sphere of activity, things that are automatic are necessarily worse, but, on the other hand, I have worked in the health field for a long time—I will not tell you how long because you would find it discouraging—and I know almost as well as my colleague that there are irreversible conditions. In the end, the point would be to take these irreversible conditions into account in order to show some respect for the claimant and his or her family.

    Secondly, I am surely not mistaken in thinking that insurance companies are not non-profit organizations. I believe that long term disability is the area where they have the highest costs, because the long term can be very long. In your presentation, Mr. Daniels, you referred to the rather large number of people who were rejected when they made a claim to the federal disability system. But you also said that many of them were accepted later on appeal.

    Form your point of view, what is the percentage of people rejected? Because I imagine that there are some who make a claim just to see, just because you never know.

[English]

    Mr. Mark Daniels: That's an interesting question.

    Greg, do you know the answer to what percentage of applicants for LTD would be turned down?

    Irene, have you got a sense of that?

    Ms. Irene Klatt: Yes, the percentage would actually be fairly low, because the disability definitions on the long-term disability files are typically less stringent than what you might see compared to CPP, for example. There would be some, but they tend to be much less stringent in the definition, so much fewer LDT applicants would be declined.

[Translation]

    Ms. Madeleine Dalphond-Guiral: Do you run at a loss?

[English]

    Mr. Mark Daniels: Do you mean in the business generally speaking?

[Translation]

    Ms. Madeleine Dalphond-Guiral: No, just in the long-term disability program.

[English]

    Mr. Mark Daniels: Excuse me, no, it is not.

    As a matter of fact, just in terms of the business aspects of it, it is not a heavy income earner for companies--but they don't run it at a loss, of course. They wouldn't run it at a loss.

    The Chair: When you look at LTD and STD and the CPPD total in table 6, the definitions are different. Right?

    A voice: Yes.

    The Chair: Even though I think it is a little suspicious that it stayed at exactly the same price over all these years, is Irene saying your LTD definition is looser?

¿  (0955)  

    Mr. Mark Daniels: Yes, indeed.

    The Chair: I guess my question is, how much of the CPP total went to pay off insurance companies? How much out of that second column was actually payable to an insurance company instead of to an individual?

    Mr. Mark Daniels: I think the answer to your question is none.

    There was confusion about what happens here. I should mention that it's very, very important to realize that virtually all of disability insurance contracts are written on the assumption that the person is entitled to CPPD benefits, period. There is virtually no stacking of contracts at all. There are a couple of exceptions to that, but they are not even worth discussing here. When an employer decides to offer group disability in the name of employees, then their tenders go out and companies bid on them, but the assumption is that if an individual is entitled to CPP disability--which is more serious or prolonged--they are going to get it. In consequence, of course, the price is lower than it would be if CPP disability weren't even in the equation.

    The Chair: So it is worth a conversation, meaning that if we were to de-link them, then all that would happen is that the premiums would go up, right?

    Mr. Mark Daniels: Sure.

    The Chair: Because of the assumption that's being made, right?

    Mr. Mark Daniels: Exactly.

    If you or somebody else wished to write a contract that didn't pay any attention to CPP disability or its application, you could of course do that. Undoubtedly there would be a company that would bid on it, but the price would be much higher. I'm just not aware that there is any talk about that.

    To make another point about the first payer, the fact is that CPPD is universal, mandatory, and contributory. I can't imagine that a plan like it would not be a first payer. In fact, that is not even a question, because you couldn't have a plan like that that wouldn't guarantee payment to anybody. Just think about it: it's universal, it's contributory, and it's mandatory. So there is no question whether you might or might not get the benefit--of course, you'll get it.

    So the first-payer issue is curious. I find the debate a bit odd, because it is a payer--and whether it's first doesn't really matter. It is going to flow, and when private insurers get into it, it's because employers or individuals on their own behalf say, “Look, that's not going to be enough if I get injured; I want something else”. Then these contracts are written, typically to provide 70% of income replacement. That's the usual parameter; it's not always that, but it's almost always that. If you picked another number like 120 or 30 or 65, or any other number, you could do it.

    The Chair: Isn't workmen's compensation also a first payer?

    I would love to hear the other panel on this, and I would really love to hear all of you have a conversation amongst yourselves, because I'm sure Sue and Blake have some comments on the insurance industry's presentation, and vice versa. What we really want is to hear you thrash this out in terms of the first-payer issue, because when I look at table 6, I am really confused about how much of this is offset. These really don't seem to be separate numbers, because so much is bleeding from column to column all of the time, which confuses me. How much of CPP went to offset LTD, and how much of the LTD...? These columns aren't really pure.

    Mr. Mark Daniels: Yes, I guess. But, Madam Chair, I'm not sure I see your confusion. Remember, the offset simply works here because there's a delay in CPPD assessment. It takes time. The way it used to run before 1991 was that sometimes the companies would say, “Well, we'll wait until we hear, and so we'll pay our share; if they come through finally, that's fine, and if they don't, we'll make up the difference”.

    What happens now is the company starts paying right at the beginning. In effect, they're paying the CPPD share for the first six, eight, nine months, or whatever it is. After that, if CPPD says it is fine, then that retroactive payment is made to the company because they've been paying the amount all along. In effect, the company has been providing an interest-free loan to the recipient of the disability payment. That's one way to look at it. It is most assuredly not a subsidy. I find that word astonishing in this debate; it's utterly astonishing, and it's simply wrong.

    These are done with the plan sponsors, who are often the employer. They and the insurance companies agree that life is difficult enough for a disability recipient without having an income stream becoming all fouled up because there is a delay in the approval of CPPD. Suppose it were the other way around.

À  (1000)  

    The Chair: So in the front-end loading of the payments or the loan, none of those...?

    Mr. Mark Daniels: Yes, they wash out.

    The Chair: Is that in this graph?

    Mr. Mark Daniels: Of course it is; it's all included in there. All that happens is that those amounts are paid.

    What there could be here is a little bit of year-over-year flipping around. Do you know why that doesn't matter? The fact of the matter is, whether you look at it as an arithmetic anomaly or not, CPPD pays the same amount every year regardless of the number of people who come in the door.

    The Chair: Yes, well, that's what I find puzzling.

    Mr. Mark Daniels: It's hardly puzzling.

    The Chair: It's called containment, yes.

    Mr. Mark Daniels: The fact is, the number is being held constant, though I am not sure by what measure. But it sure isn't the number of the disabled who are coming in the door.

    The Chair: No. But does your column “LTD & STD” include the total amount paid out, or does it include the amount paid out minus what you got reimbursed from CPP?

    Mr. Mark Daniels: It's the total amount paid out in the year. In the year in question, you would have netted out the amount that you got back from CPP. So there are some advances and some retroactive payments in that column.

    The Chair: So am I looking at a gross or a net payout here?

    Mr. Mark Daniels: You're looking at the net of.... Some of those payments involve a CPPD payment that's going to come back later, and there are other moneys that have flowed in there and reduced the payment. So it's a net calculation.

    There could be a little hiccup inter-year, because the calendar year is the accounting year here. But I think because CPPD is a constant, it would wash out.

[Translation]

    Ms. Madeleine Dalphond-Guiral: I have a question.

    There is an interesting recommendation in your document. We know for certain that most of the people on disability are not very rich. You are suggesting that perhaps the sales taxes, in Ontario and Quebec in particular, could be reduced or eliminated. I imagine you have tried this idea out on the Ontario and Quebec finance ministers. What was their response? I have a hard time imagining a finance minister willing to give up a cash cow.

[English]

    Mr. Mark Daniels: The fact is, the industry doesn't like sales taxes on premium, and it doesn't like premium taxes. So right off the bat, every year, we go into semi-hysterical fits about these taxes because they push up the price of the product to the buyers. So let's be clear.

    Here, however, since in the majority of cases it's the individual workers--and we're talking about workers here; these are not high-income people--who are actually paying these taxes, we're saying, look, if you're going to start reducing these taxes, start with this one, because these really are a tax, the burden of which is directly on workers. It's not as if it's shifted off into a broader array.

    We've made the point before, but we haven't testified in a forum like this, where we've identified premium and sales taxes as being a particular problem in the disability world. But it's certainly true that when we put this up, we think the whole idea of sales and premium taxes is questionable, but it's the sales tax issue that's the real issue, because it's only Quebec and Ontario in the entire continent that has this particular tax grab. Good heavens, we have all sorts of them around--surprise, surprise--but the fact is, if you were going to do something, because it's the individuals who pay this, not the employers, you see, it really is a regressive tax. I don't think there's much question about that.

À  (1005)  

    The Chair: Can you tell us what workers' compensation does in its relationship with the insurance companies and with the clients? Does it operate just like an insurance company, or does it have a different way of dealing with clients?

    Mr. Blake Williams: Generally, each province has its own legislation. They're remarkably similar.

    Generally, a claim is filed. In some instances--and this is some small problem in British Columbia--a claim is not filed. An insurance form is filed for short-term or long-term disability.

    Where the situation is operating properly, an injury at work results in a claim with the WCB, which then adjudicates the claim and determines. Once they accept it, they establish the rate. Until last June the rate was 75% of gross. It's now 90% of net. B.C. was one of the last provinces to change.

    Where short-term or long-term disability carriers are involved, they usually have assignments that are filed with the WCB. Just as the human resources ministry pays welfare, there will be an assignment form so that if there is a lump sum benefit that results from a workers' compensation appeal, for instance, and the periods of benefit are similar for workers' compensation wage loss or pension benefit and the period paid by the insurance carrier, then there is a provision in those waivers for the WCB to pay the insurer back. This is not statutory, but it's a matter of inter-agency and inter-body policy.

    The Chair: But on the relationship with CPP disability, before the changes to the CPP Act in 1997, I thought there was some provision that CPP couldn't offset workers' compensation, and now it can.

    Mr. Blake Williams: Yes.

    The Chair: Do you know why that change was made, and is it something on which we should comment?

    Mr. Blake Williams: I think the first point is that there is an inconsistent treatment across Canada in terms of the offset of the Canada Pension Plan.

    B.C. did not offset the Canada Pension Plan through their pension treatments at all, except, ironically, in the case of survivors after a workplace fatality. It now has that as of June 30 last, but Alberta doesn't.

    Also, the rate of financial relationship is quite different. In Ontario it's 100% an offset; in British Columbia, a 50% offset; and in the Yukon and Alberta, a zero percent offset.

    So it's very inconsistent across the country, and I think this is confusing, because we have workers who travel and work in different provinces, and they may have accidents or exposure to industrial or occupational diseases in different places. Sorting all this out in terms of who's responsible for what, what percentage do you get, and all that, is often beyond the grasp of the ordinary citizen.

À  (1010)  

    The Chair: So is that something that you think should be part of a recommendation in terms of just the communication around what everybody should be able to expect?

    Mr. Blake Williams: I think so. I think we have made the system too complex.

    The injured worker requires some very basic things: they want medical treatment; they want transitional income; they want vocational counselling; and they want to return to work. Yet we have various partners or agencies, whether private sector, government, or the not-for-government system, that don't coordinate the activity to produce those outcomes.

    The Chair: So maybe to go back to your pilot, in your pilot, when everybody was at the same table, like the return-to-work round table in Ontario, did you find that people did cooperate?

    Mr. Blake Williams: Yes.

    The Chair: Was the number one focus getting people back to work?

    Mr. Blake Williams: Absolutely.

    The Chair: And that was good for everybody.

    Mr. Blake Williams: That was good for everybody, and I might just say, a lot of that project came as a result of looking at models internationally.

    I went through the German system and looked at those. Some countries do not require a cost-benefit analysis to know that if you have someone who acquires a disability and you can get them back to work, things are better for everybody in the system. CPP costs are reduced, private insurance payments are reduced, welfare costs paid by provinces are reduced, and health care costs are dramatically reduced because you don't have chronic pain developing, pharmaceutical addictions, and a whole range of other things. So it's keeping that done.

    In Germany they have rehabilitation coordination legislation that says it's the role of everybody in the system to ensure that these outcomes are produced. In Holland they put in some other legislation that did it. But what often happens is there are turf battles that occur that can frustrate it. In our project we managed to keep people around the table.

    The Chair: In Patrick Loisel's presentation, it looks as though there are some early front-end costs to try to get people back to work. Right?

    Mr. Blake Williams: Yes.

    The Chair: Is that what the fight is about, who spends that money?

    When we heard from CIBC two weeks ago, clearly the employers who carry their own insurance seem to be highly motivated to get people back to work in a hurry. Is there a lesson that we can learn from either your round table or people who carry their own insurance, or Australia or Quebec? Help us with how it would look in a best possible system.

    Also, what happens if somebody is hurt in a car accident and is covered by their property and casualty people? Do you guys fight amongst one another in terms of which insurance company pays too? How does that turf get sorted out? Obviously it would be good to get those people back to work too. How do we sort this front-end cost out? What leadership could the federal government give on this, but also, how do we incent the insurance industry, the employers, workers' compensation, everybody, to be on the same page on this in terms of what this committee should recommend?

    Mr. Blake Williams: Madam Chair, I think we have it backwards in Canada. We have a system that decides it is more valuable to fight among the various providers to sort out who is liable first and then take a lot of the activity.

    There are some countries that have taken a different approach. I mentioned Germany as one. There are others that have decided it is a social priority to provide those services up front in a very coordinated, integrated, and effective way to produce the maximum chance of someone returning to healthy, gainful employment.

    This doesn't happen by accident. Every country has a complex systems of insurers, workers' compensation systems, health departments, and everything else, but they recognize that if it's done properly, everyone saves--the individual, the community, the family, and the country--as a productivity measure.

    We have demographic trends in Canada that this also becomes a retention strategy for competitive economies. So there's a lot going on.

    I do want to mention that this was not really a round table. This was a Petri dish, if you will, where we took actual severely disabled people and we asked them, how do you know there are multi-agency clients?

    In the example you gave, someone in an automobile accident who is at work is automatically a client of the insurance company and the workers' compensation board. If there is a battle and they say, “He's yours, over to you”, the person may end up on welfare. They then become a client of the province or the territory. Then, if they have private insurance, they have that.

    But then you get into the offset things and people say, “I'm not made whole from this process”. You get caught up in the minutiae of where are the benefits rather than how do I get back to work.

À  (1015)  

    The Chair: In terms of incentives, we've heard from a couple of witnesses that maybe there would be an approach where employers who seemed to get it could pay less premiums because they were an exemplary return-to-work workplace or something. These people got it.

    Is that something you have seen work, and is it something the insurance industry...? I think everybody knows this is the right thing to do. What could we as the government do better to incent that other than to behave ourselves with our own employees?

    Is the insurance industry doing enough to help people get back to work? I think what we keep hearing is if the attitude is “prove to us that you're not well enough to work, you have to prove to us you're sick”, the incentive is wrong from day one, as opposed to “prove to us what you think you might be able to do”.

    How do we--

    Ms. Irene Klatt: Madam Chair, I'd like to address that on behalf of the industry. I have received a number of case studies from our members, and I think really the key is working with that individual and what that individual needs.

    In one instance I heard about a case where a lady had both depression and required hip surgery. The insurer actually worked with her to assist her in moving up her needs for her treatments in order for her to return to work. She returned to work 14 months earlier. In other cases, they provided equipment for her in instances where they needed certain types of equipment.

    I think the key is identifying, through a rehabilitation consultant or that caseworker who works with the individual, what specifically the person needs. In some instances it's retraining or vocational assistance, but for each individual it's going to be a different set of factors that are required, and they are as varied as the individual and the problems they have.

    Going back to your questions on the auto insurance, I'm a personal case of that. I've had two auto accidents within the last two years, and I've personally gone through the paperwork that's required and dealing with the integrations between the different policies.

    Residing in Ontario, the key is that your group insurance plan looks after your interests first and then subsequently coordinates with any of the activities with the auto insurer. I would say even in my own case, where I kept working most of the time, it could have been coordinated much better. There are lessons we can take from this that can be applied to the whole system.

    I think the key is looking at what the individual needs for that individual to return to meaningful work, and then identifying those things in a constructive plan and working with all the parties to implement it.

À  (1020)  

    The Chair: Mark and then Sue.

    Mr. Mark Daniels: I have a comment, because running all through this--and it is certainly a characteristic of the world we live in, in Canada--is the fact that we deal with multiple levels of government and authorities. We came in here and addressed only the question of CPPD and private disability insurance integration. There are issues there, to be sure.

    When you move out and get into the world of other providers, including workers' comp, you get into quite an array of issues. Whether or not there's a kind of overall fashion in which one could create a better system.... You'll notice one of our recommendations is really that a number of the players get together and at least make sure that the disabled, who are after all the target of all of this, be better informed than we clearly are able to do, or have accomplished, in many cases.

    But I have to say that on the other side of this we have nearly a quarter of a million Canadians getting private disability insurance. That's a lot of people. I'm not suggesting for a moment that there aren't big issues to be dealt with there, but by and large I think we have a system that's doing not a bad job. I wouldn't want to get lost in suggesting that the disabled aren't being handled overall in ways that are appropriate.

    The Chair: I have one or two comments.

    In your original testimony you did agree or suggest that you think it would be reasonable to share with CPP disability the intake interview and medical information that you would receive at the insurance company.

    Mr. Mark Daniels: With the approval of the applicant, I couldn't agree more.

    The Chair: So the client doesn't have to say the same thing.

    Mr. Mark Daniels: Exactly. It would make a lot of sense.

    The Chair: Sue.

    Ms. Sue Lott: I wanted to respond to a few of Mr. Daniels' comments.

    I don't believe there is necessarily an inherent logical connection here between describing CPPD as the first payer and the issue of offsetting of benefits by private insurance companies. The bottom-line issue here is that disability benefit recipients should not receive an amount when they become disabled that's more than their pre-disability income. That just makes sense.

    But if we look at the way the offsets work and the tax implications, the problem is that the CPP disability recipient is not being made whole. That is, in effect, the unfairness. CPPD, in effect, becomes a punishment for people when they're already in receipt of private insurance, because of the differing tax implication. So the recipient isn't being made whole.

    In the issue of overpayment, it seems unlikely that would ever happen given the fact that private disability insurance only covers up to, at most, 70% of somebody's pre-disability income and that we know CPPD is set at a 25% yearly maximum of pensionable earnings. So it's very difficult to see how a fear of an unfairness or an overpayment could occur here.

    But the issue really becomes one of practical reality for a recipient when there is an unfairness that results in the attempt to integrate and offset benefits, with the result that the recipient isn't left whole; they are in a worse position than they were prior to becoming disabled. That really is the bottom-line issue here.

    Mr. Mark Daniels: May I respond to that, Madam Chair?

    We don't disagree for a moment that there are some tax issues hanging in all of this. I have to point out that those issues are not industry issues. With respect, they're yours.

    There are some tax questions, although--be careful here--they are probably not that serious. Why I say that is because sadly the income of disability recipients is so low that they're not in a taxpaying position anyway.

    The Chair: But for those individuals--

    Mr. Mark Daniels: If you have multiple sources of income, it is true that when private insurance is paying out and then all of a sudden it's substituted for a retroactive disability payment and the person starts getting CPPD, then there may be some tax implications.

    As far as we can tell--and we've looked hard at this--that is not a particularly common occurrence. But it's important, and again, we highlight it in our own recommendations. That's why it's such good news that your colleague has set up a committee to look at this, because there are clearly some tax matters, but they are entirely in the government's hands.

À  (1025)  

    The Chair: As an industry, though, when you are repaid the CPP, if that client has not paid their...obviously, he now finds he has this tax owing; all the money goes to you and this person has this huge debt. I certainly have patients like that. It's pretty scary for them.

    It isn't just our problem. It's also the way they are dealt with by your member companies. No? You are saying, we are going to take all our money, even though you owe all this tax, right?

    Mr. Mark Daniels: “Owe all this tax” is probably not going to be the case. We have to be careful here, because even a $300 or $400 bill for a person on disability is a big chunk of money. So there is no question...I don't want to make light of that. Indeed, in come cases, some of the companies are dealing now....

    Irene, you can perhaps describe what's being done with this, or, Greg, why don't you? You have a pretty good idea of how that works.

    Mr. Greg Traversy (Executive Vice-President and Chief Operating Officer, Policy Development, Canadian Life and Health Insurance Association Inc.): Yes. Some plan designs offset only a proportion of CPPD to take that tax ability into account.

    But, Madam Chair, I did want to emphasize what my colleague, Mr. Daniels, has indicated, and that is, contrary to some assertions made here, it is not the case that integration of CPP and DI benefits is typically a “punishment” for the individual or “does not leave them whole”. Those are very atypical situations. Where they exist, the circumstances arise from the fact that CPPD is a taxable benefit, but CPPD almost never withholds taxes at source, which of course everyone's employer does and so on.

    So there is the chance of unanticipated taxes owing arising, and we think that issue should be looked at hard by the new technical advisory committee. We look forward to contributing to its deliberations. To the extent that there are any problems at all, we want to be a constructive part of solving them--very much so.

    The Chair: Thank you.

    Blake and then Sue.

    Mr. Blake Williams: You asked--

    The Chair: This bell is trying to get us to vote. We are trying to figure out with our respective whips whether or not Madeleine and I can just stay here offsetting one another.

    Mr. Blake Williams: Do a virtual vote.

    I think you asked the question, Madam Chair, what you can do to try to get a better handle on this problem. I think we've all spoken about it.

    Part of it is information systems. There's inadequate comprehensive information about this. Ironically, the private sector probably has the best. In our experience, the private insurer who was part of our pilot was able to identify the involvement of all other players on it. Workers' compensation, for example, was unable to. Social assistance often is able to identify the other because they have the assignment forms. But in order to really tackle this, we have a system, and if the system doesn't have good information systems, then good referrals and coordinated efforts are not really possible.

    There are privacy issues, of course, and those are tricky and have to be sorted out. But in my experience, most injured workers are prepared to sign a document to allow information to flow. They're surprised it's not flowing, and they want results. They want the help in order for them to get going.

    I think the other portion of it is if there was a leader in the safety net--and the Canada Pension Plan might be that leader, I don't know--then in the leveraging impact in terms of the barriers that affect all the workers, whether they're covered by private insurance or workers' compensation, all of that, ideally we want a system that is almost like an escalator. Whether you fall off your roof at home or are in an auto accident--and I'm not talking about universal disability--we want an effective, well-working Canadian safety net that escalates you back to where you fell from, regardless of the scheme.

    There are barriers in the system that affect working Canadians in this. We discovered that when one party, one agency, went out to try to address those barriers, they were very resistant, but when we went out as a group, it was a no-brainer because the first response would be, well, where is your money? Do you have more money for us to fix this HandyDART transportation for the disabled so they can get to work and start a job? Well, no, we're not bringing you money. We're sitting here as a safety net telling you that none of us is happy, whether it's federal government, provincial government, not-for-profits, WCB, or what have you.

    So leadership in the safety net can help drive some of the systemic barriers on which most researchers and governments have commissioned reports, where we are collectively frustrated that the results of removing those barriers have not been more productive over the last several decades.

À  (1030)  

    The Chair: Sue.

    Ms. Sue Lott: I just want to respond, and I think you did partially, to Mr. Daniels' comments about hiving off the tax implications, that it's the federal government's responsibility.

    Requiring private disability benefit recipients to apply for CPP as an automatic condition, as standard form in most private disability insurance contracts, means they are very much involved in this. The way they're involved is that they really have to allow for informed consent by recipients to all these decisions in which they're going to have to be involved in terms of other sources of income and the tax implications and the agreements they make for assignment of retroactive benefits.

    We have to remember that we're asking people to make these fundamental income decisions at times in their lives when they're probably least capable of making these decisions, when they are first informed that they are disabled or unwell. So I think we always have to keep that in mind when we talk about how this process, the complexity of the process, is unfolding at the time and for whom it's unfolding.

    Mr. Mark Daniels: I agree with Ms. Lott's point, because it's hard to imagine spending too much time assisting clients in one of these difficult time periods. I'm not sure that once the machine starts rolling, everybody is fairly treated at each stage in the process.

    I come back again to our recommendation, but if the burden of your point, Ms. Lott, is that we ought to be very, very careful to make sure that people, at a time like this, have as much understandable information as they can possibly get, I couldn't agree more.

    We certainly would accept our responsibility in improving the perception and just the simple access. Some people do it well; some people don't, or don't do it as well. Clearly that is not something you can just brush aside and say, over to you.

    The Chair: I guess the bottom line that we keep hearing is that if someone who has been asked to apply for CPP disability could actually be worse off financially if they get it, it somehow doesn't speak to the fairness of Canada that you would actually push somebody to get a government pension and then have their take-home be worse every month. Right?

    Mr. Mark Daniels: Except, Madam Chair, first, that isn't going to happen often, and secondly, if they understood right at the outset....

    How many individuals even understand what their disability plan is about? There are brochures, and so on, but the reality is, nobody thinks about it, and when the event occurs, you're dealing with a real human tragedy in almost every instance. Whatever is clear, it's not pleasant for the people involved.

    The Chair: I think it goes to Mr. Williams' point about all the fine print around all these things, that people maybe don't really know, and some of the plain language communication up front--

    Mr. Mark Daniels: Okay, point made, and we accept that.

    The Chair: I think as a Canadian I would want to say, “Carolyn, your premium would be this”, or “You can pay a little bit more of a premium in order to get that”. Then I get a sort of informed consent around what I'm doing. Maybe I'd rather spend $10 more a month, but it would be an informed decision I was taking, like whether I signed the thing on my rental agreement or not. You sort of know what the consequences are.

    I guess that's the issue we're up against. It's just that some people then come back and say, “I didn't know that”. Really, as I think the witnesses have said, they find it out at the worst possible time.

À  (1035)  

    Mr. Mark Daniels: Of course they do, and this is not to deny the prospect, but again, I have to be very careful, because once we got into this in detail, we were just not able to find a whole lot of cases in which that turned out to be true. The reason for that is because the incomes involved are usually below the tax thresholds, you see. That's not a good thing. That's too bad. But there it is.

    So I don't want you to think we're dealing here with a system where tax anomalies are an enduring characteristic of most people's situation. It doesn't happen. In fact, as far as we can tell, it only happens in cases where there are other incomes involved, other sources of income, from property or stuff like that, because that then means their CPP disability payment turns out to be taxable. But if that's coming in at a level...for most of these recipients it's simply not going to be taxable anyway because they're below the income threshold.

    Mr. Blake Williams: I think there are other developments, and some of them occur over long periods of time. That's why I mentioned young workers, because the consumer price indexing formulas are different. CPP is fully indexed; workers' compensation in Ontario and British Columbia have caps. Over time, if you look at a young worker with a severe disability moving forward, at the front end, workers' compensation plays a major role and CPP plays a more minor role. Run that out over a number of years and they don't quite reverse, but the relationships are quite different, just the factor of indexing that.

    The other thing is, in British Columbia we don't seem to have an awareness of the Quebec Pension Plan. There's an assumption that these are both equivalent, but our legislation only refers to the Canada Pension Plan. So we have migrant workers from Quebec who come to pick fruit in our Okanagan area. The B.C. worker beside them would be offset for the Canada Pension Plan. The worker from Quebec may be able to stack benefits. So even within the same occupation there are sometimes major differences. I think there are inconsistencies that have developed in legislation over time that make people crazy.

    The Chair: It's a good idea to keep it secret.

    Let me go back to the tax problem. Would the industry have a suggestion about what to do about these...? Obviously, the provincial ones are interesting. Certainly, the new technical advisory committee could make some recommendations on this, I suppose, but I'm not sure it's in its mandate. As could we, but I'm not sure anybody would listen.

    But on the actual...the individual is receiving both insurance and CPP benefits. What recommendation would you have in terms of the tax problems they are facing?

    Mr. Greg Traversy: Madam Chair, we noted earlier, and I think the submission notes as well, one source of unanticipated taxes owing at year end for people who are in the circumstance you described--namely, they are on an LTD plan, they've applied for CPPD, they are accepted, and they begin now receiving two payments--is that the CPPD is always taxable. Yet, strangely, taxes are withheld at source only very rarely on CPPD benefits. So the hypothetical individual you conjure is receiving, month after month, the CPPD disability cheque, and perhaps for the first time in her or his life they are receiving a cheque from the government that does not have the taxes actually withheld. I'm sure many of them may suppose that the amount they are receiving is either tax free or is net of taxes. Surprise, surprise, at the end of the year. You have been receiving all this money. It turns out it is from CPPD. They are pre-tax funds and you may have taxes owing on those CPPD benefits.

    Facilitating some initiative that would advise people early on, when they are first accepted for CPPD payments, that these are taxable benefits and enable them to readily request withholding of taxes would be, I think, very salutary. We had noted in some bilateral discussions that by all appearances, whereas CCRA had until quite recently a special form that permitted CPP recipients to request withholding at source, regrettably that special form has now been abolished, or whatever, so it's even harder than it used to be for CPPD recipients to reach out and request that taxes be withheld at source on their ongoing payments.

    That would, I think, be a very constructive step, making them aware that these are taxable benefits and giving them the opportunity, if they so wish--if they think they may at year end be above the tax threshold--to request that some portion be withheld and be remitted to CCRA, as is the case with salaries, as is the case with taxable LTD benefits, and so on.

À  (1040)  

    The Chair: What does your industry do in the...? I understand there is a different treatment, whether it is the totally worker paid ones, which is what...? Is it 75%?

    Mr. Greg Traversy: Yes. In about 75% of the cases--

    The Chair: And in the 25% where the employer contributes--

    Mr. Mark Daniels: Then it's taxable.

    Mr. Greg Traversy: It's taxable, and the plan administrator withholds taxes on a monthly basis and remits them to CCRA, exactly as they do, for example, with salaries or whatever.

    Mr. Mark Daniels: In a curious way, Madam Chair, you'd get exactly the.... In a case like that, where you were being taxed and then all of a sudden the CPPD started paying part of it and they weren't netting tax out, you could find a person in an anomaly having withheld on the private side but not on the CPP side. So you could theoretically get two odd tax situations, both of which would potentially have the recipient in line for a $200 or $300 hit when they did their taxes at year end.

    As far as we can tell, there is no information provided now of a standard kind. As Greg said, even this form that used to be provided is no longer provided by CCRA.

    Mr. Greg Traversy: Madam Chair, with your permission, a small supplementary. In the case of taxable LTD plans, which, as you were pointing out, are a minority--probably about 25% of the coverage is in that range--we do think there are circumstances in which members of such plans who apply for and are accepted by CPPD may find themselves quite unnecessarily confused and concerned about potential tax liabilities at year end. If you are in a taxable LTD plan and you get integrated with CPPD and so on, you are not going to have a problem in reality. But with the complexity of the current information and the fact that nobody, as far as we can tell, is taking upon themselves among the CPPD plan carriers and the CCRA to explain things in plain language, nobody is there to say, “Listen, don't be worried”, we recommend that the committee consider recommending that the industry sit down with CCRA and with CPPD to get a better information sharing protocol and a better way of communicating about tax liabilities with plan members.

À  (1045)  

    The Chair: Mr. Daniels, did the form you referred to used to come, like in the old days with the CPP cheque, where you could tick off that you would like your taxes deducted first? Are we not doing something we used to do and that we should do?

    Mr. Greg Traversy: Madam Chair, it's certainly the case that CCRA no longer appears to have a special dedicated form for CPP recipients to request withholding of tax at source. CCRA used to have it, but it's disappeared.

    Whether or not that form was routinely enclosed with the benefit cheques by CPPD, I don't know. Perhaps, Irene, you would be more aware of that. I don't know.

    Ms. Irene Klatt: I don't think routinely it was, because you have to keep in mind that these tax situations only come up with people with higher incomes or other incomes. For the majority of CPP recipients it really will not be a factor. However, it does come up in a few cases.

    What our industry has done--and we have done a few things--is to offer different plan design arrangements for employers to purchase, if they wish to address these issues. We are also taking steps to work with CPP and to sit down with CCRA to see what can be done to better communicate information to the individual at the time the awards are made and to let them know about any potential tax liability, if that would be the case.

    Perhaps we can do more as an industry in that area as well, and we are taking steps already to do that.

    Mr. Mark Daniels: Madam Chair, as I'm sitting listening to this, it may be that one of the obvious things to do is for CCRA and CPPD to simply put together a brochure or some kind of document. The trouble with this stuff is that for most normal people, their eyes glaze over the minute they lift it up. That won't change, I guess, but the reality is that there is nothing around that will do it.

    I mean, we are having this conversation now, and I have to confess that for myself, in the work that's gone into trying to understand these issues, as I believe we do, it has been very difficult getting through it. Finally, I think it's crystal clear, but the reality is it isn't. We probably need something, and it may simply be a document that would be made available as a standard--

    The Chair: In terms of all the tax treatments.

    Mr. Mark Daniels: Yes, at least enough to trigger people's interest and recognition that they could be facing a situation with an anomaly in it.

    The Chair: Blake or Sue.

    Mr. Blake Williams: I think there is an evolution occurring in Canada around short-term disability/long-term disability and how that all plays out. I teach disability management, and I have taught it for a number of years to a number of people who go off into industry, whether they are from labour or from management, and they work together to try to ensure that there is as seamless a system as possible in it.

    When you have a classroom of representatives from different companies and you begin to look at the different language in their short-term/long-term contract agreements, some of them support return to work and some of them are clearly “disincentived”. So even among different insurers there are now companies who are saying, “Look, we negotiate this language with you”. So it's becoming a little more interactive, and I see that as a positive sign.

    The Chair: Sue.

    Ms. Sue Lott: I would certainly very much support the Canadian Life and Health Insurance Association talking about sitting down to put together some kind of plain language documents or brochures, to help people understand the complexity of all this. I think that's a great idea.

    In terms of what people know and the information they get, it's also important to point out the difference between individual and group insurance. Group insurance is often negotiated by the employer or the union on behalf of its individual employees or members, so as the recipient, you often don't get even a chance to look at the master policy. So you really don't have a lot of information to begin with. Usually all you have is the certificate. Because a lot of people receive private disability insurance through group plans, this is another case where full and fair disclosure in plain language would certainly be of great benefit.

    The Chair: Mr. Williams, I want to go back to your pilot project, because we obviously love proposing pilots around here. Was the insurance industry represented in your pilot...?

À  (1050)  

    Mr. Blake Williams: Yes, it was.

    The Chair: How would those findings be incorporated? If we thought those should be broadened, mainstreamed, or whatever, what should they look like in terms of a recommendation from this committee?

    Mr. Blake Williams: I think that's the cohesive safety net approach. It says, “We want these outcomes and we are going to measure against them, and how well is the system as a whole introducing them?” That's the discipline and the rigour around the measurements that are selected.

    The private sector or private insurers have a dual role. Number one, they're involved in the business and have some insights and information they can provide. The other thing we found is that they were very effective prods to the group, saying, “Why does it take government so long to kind of get this thing done; let's just do it”. They saw the value of the committee and pilot work. So I think there are those dual roles.

    The other thing is that they had the best information systems--

    The Chair: Did the pilot project just have a case-by-case methodology? There were so many people from all over the place with various plans that the graph on return to work, which we saw from the round table, looked like fishnet stockings.... The conference was so case by case that it would have been bizarre if any Canadian had actually attempted to figure out what a particular individual might or might not be entitled to and where they might or might not look for help.

    Are you saying that anybody who had anything to do with that case was put around the table and asked, “What can we do to help?”

    Mr. Blake Williams: We adopted a very modest notion that the design of the Canadian safety net right now is such that a person with a disability has to run around and learn the system. But we said, “We, the organizations who have all the resources, should be doing the running around”. So by putting everybody around the table, we said, “Okay, here is a case of this person not getting services. Who is going to do it?” We even proposed that where there is disagreement about who is responsible, there should be a default provider. What has occurred in some cases is that insurance has been the default provider initially, but eventually workers' compensation or the Canada Pension Plan....

    We also said, “Because time is of the essence in these cases, people should not be put on hold. We know that delay is the enemy of rehabilitation.” A multi-stakeholder contingency fund, which any default provider could access for wheelchairs, or ramps, or accommodations to promote re-entry to the workforce, just makes sense. We said, “Do that up front and then journal-voucher each other when you've sorted out who you think is finally responsible”.

    Thirdly, where there are disputes around the rehabilitation plan, it should be mediated using ADR or a fast-track appeal mechanism, because if it goes into the mainstream--which is where it goes right now with most people--it is almost assured they will not be back to work simply because of the timeframe.

    So those were some of the things that we thought might be valuable.

    The Chair: Thank you very much.

    It's amazing, but we are still learning. We're looking forward to the round table we'll have next week with some of the interesting people who have presented solutions to us online. I think it is very exciting for us to be able to take it out to the people and to get to meet them and have a proper round table on some of their proposed solutions.

    We hope you'll stay tuned. As we always say at this committee, it's an ongoing relationship we're building--not only with the disability community but with all of those who are trying to help.

    Thank you very much for being here, and à bientôt.