More employers offering group insurance benefits – it's a good thing
The latest HRinfodesk Poll asked poll participants: Are your employees entitled to group insurance benefits (health, dental, life insurance, etc.), and if yes, when? According to 273 (78 percent) out of 350 poll respondents, their organizations do provide employees with group insurance benefits; however, with an entitlement period of 90 days. Despite all the media coverage about employers wanting to reduce their benefit costs, employees still have access to a significant range of insurance coverage and employers seem committed to continuing to offer this range. Few employers are looking to reduce the number of benefits or cut benefit amounts.
In addition, more small- to medium-sized businesses are now offering employees access to group insurance benefits.
According to Statistics Canada, over the course of the survey period (1999 to 2005), the number of workplaces providing non-wage benefits rose by over six percent, giving almost three-quarters of all Canadian workers (74 percent) access to at least one non-wage benefit. Health benefits plans are the most common type of non-wage benefit in Canada. Fifty-nine percent of workers have life and disability insurance, 56 percent have dental plans and 51 percent have supplemental medical insurance.
In the 2008 Sanofi-aventis Health Care Survey, an annual survey of Canadians with an employer-sponsored group benefits program, respondents made it clear that their health benefits are an important part of their overall compensation package. And while plan members' preferences about the features of the plans were found to be changing, the vast majority reported they are still satisfied with their programs.
With more employers offering benefits to more Canadians, are plan members responding with greater levels of loyalty, engagement, and productivity? The Sanofi-aventis survey found high levels of satisfaction amongst the plan members surveyed. Ninety-four percent of employees agreed with the following statement, “An employer who spends company time and resources on health benefits and preventive health programs shows its employees it really cares about them.”
The following tables summarize the information received from the 350 organizations who responded to the HRinfodesk poll. The following brief commentary also provides an overview on group insurance benefits plans and certain considerations for implementing such plans.
What is a group insurance benefits plan and why offer it?
Benefits can be generally defined as part of the total compensation package, other than pay, for time worked provided to employees in whole or in part by employer payments. More specifically, group benefit plans are defined as any type of plan that provides benefits to plan members as one group, independently of government-sponsored benefits.
A company group insurance benefit plan shares the financial risk of health related expenses among the group of employees, under one contract, who pay into a fund or pool. Group plans pool the rates for all employees of a particular company into a single plan. These plans are available for groups as small as two people.
When an employer has a group insurance benefits plan in place for their employees, any member of the group who becomes ill or requires services is financially compensated by the plan according to the terms laid out in the contract between the employer and the insurance company.
Family members of employees are also covered under the plan as specified by the contract.
Group insurance generally consists of group term life insurance, accidental death and dismemberment insurance, extended health insurance, dental insurance, prescription drugs, short-term and long-term disability insurance, critical illness insurance, an RRSP, etc.
Employers will offer group insurance plans to keep a competitive edge in the job market. They want to ensure that they attract and retain employees as it can help minimize costs associated with high turnover.
According to benefits experts, offering group insurance benefits is a cost effective method to protect employees, increase productivity and increase morale. This in turns provides financial security and support to employees. It is also a tax effective form of compensation. Most premiums an employer pays are tax deductible as a business expense. Conversely, not providing them can say a lot about the philosophy and working environment of your organization.
Things to consider when implementing a group insurance benefits plan
Before implementing a group insurance benefits plan, employers need to find out the kind of benefits they want for their company and their employees. Also, don't be afraid to ask your employees what they want. Benefits experts recommend asking employees to provide a list of the three to five benefits they most desire.
Start with a basic plan: perhaps life insurance, accidental death and dismemberment, health and prescription drug benefits, including health travel insurance. As the years progress, you can easily add vision, dental, short- and long-term disability and more, because you should revisit your plan and needs with every yearly renewal.
An employer may choose to pay the entire cost of this insurance or share a portion with the employee. Most benefits are received by the employee on a tax-free basis.
Most employers grant benefits only to full-time staff, those who work 32 hours or more per week.
Benefits experts and human resources consultants suggest, when choosing your plan, consider offering several tiers of coverage that employees can work up to. In addition, they suggest implementing a rewards program of additional benefits in lieu of bonuses or raises to reduce the taxes that both you and your employees pay; “It's a tax effective form of compensation.”
As well, sharing the cost of coverage in the right places could save you and your employees money. For example, if an employees pay 100 percent of his or her long-term disability premium (thereby reducing your costs), that benefit becomes tax-free to them if they ever use it.
You may also want to integrate your plan with existing government programs. For example, consider forgoing short-term disability at the start, because employment insurance (EI) sickness benefits of 15 weeks may be sufficient.
Canadian group benefits are also regulated, and court cases, provincial and federal legislative changes, and tax rulings are always in a state of fluctuation and can impact the way you manage your group benefits plan. It is important to keep yourself updated to ensure you are managing your benefits plan alongside compliance.
For example, protecting plan members' personal information is the duty of members, employers, administrators, advisors, and insurance providers. Employers and plan administrators need to be sensitive to the personal information of plan members and respect the plan members' right to disclose only information that is necessary for plan administration or that has been authorized to view.
A group insurance contract is between the employer and an insurer. Therefore, the employer or the insurer has the ability to change, reduce or even eliminate group insurance benefits without the employee's consent. Reductions or cancellation of benefits often occur when employers need to reduce operating costs or offset large premium increases due to heavy claims usage.
How long must employees wait after hire date to become eligible?
The entitlement period is the time period after an employee has been hired, during which the employee will not receive benefits, or before any claims can be submitted. Traditionally, benefits commence 30 to 90 days after the hire date.
This is because employers require employees to work for them for a certain amount of time before they are eligible for employer-provided benefits. It also allows time for the insurance provider to process and complete the new employee application, which usually takes up to four weeks.
However, some employers are flexible (depending on the specific circumstances of the new employee) and consent to the waiver of the entitlement period by letting new employees access benefits from the hire date. This is usually negotiated after an offer of employment has been submitted and approved on a case by case basis.
Communication and governance
According to Watson Wyatt's latest Employee Perspectives on Health Care: Voice of the Consumer survey, many employees do not understand how their benefits plans work and are unfamiliar with much of the basic health benefits vocabulary. Better communication that meets the needs of employees based on generational or cultural differences can help empower employees to become more engaged in their health benefits programs.
As a result, effective communication and good governance are becoming increasingly important indicators of a fit organization and a successful healthcare plan.
Employers with well-drafted plan booklets and good employee communications will be well positioned to encourage shared responsibilities (instead of entitlement attitude) and healthy lifestyles, and will be protected from claims of miscommunication.
However, communication is just one element of good governance. Audit and self-audit of the organization's practices or lack of practices is viewed in part as a method of cost containment and due diligence.
It is important for employers to note that they owe a duty of care to their employees when it comes to administration of their benefits. In a recent court case where an employee died at work, his family successfully sued his employer for failure to provide insurance coverage pursuant to his benefit plan. The court ruled that the employee was not provided sufficient details about the coverage available and the timelines in applying for the coverage.
However, the court also noted that the employee was aware of the benefits policy and was therefore negligent in failing to apply. The final result was that the employer was held liable for 50 percent of the estate's damages.
Why consult an expert?
The cost of employee group insurance benefits plans has risen dramatically in recent years. That's why it is crucial that you shop around and consult an expert who will be able to advise you properly and ensure you start your benefits plan the right way.
Qualified independent group benefit specialists know how each insurance company ranks when it comes to key plan features. This knowledge lets them make recommendations that produce the best group benefit value.
Sources and resources:
For more information on the tax implications of health related benefits, consult the Canada Revenue Agency website at www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/bnfts /hlth/menu-eng.html