…and the corporate policy
There are a multitude of reasons why an employee group benefit plan SHOULD be set up as “mandatory” benefits.
Mandatory means all hired, eligible, full-time employee, working more than 20-hours a week (unless the contract stipulates differently) MUST be enrolled for coverage, especially for the life and disability coverage.
Mandatory plans minimize confusion, simplifies plan administration, and ensures that employees are protected and empowered to live happier, healthier lives. The benefits will be there when they need them, instead of being left to wonder at the time of need “why don’t I have coverage” or “can I get coverage now.”
Note, employees who have comparable, spousal coverage for health and/or dental may waive this portion of coverage ONLY. Individual, personal health and dental coverage is not eligible for waiving the group health and dental offering.
Considerations
It can be argued that mandatory plans actually result in plan savings as well as price stability due to the law of large numbers. This is because mandatory plans generally mean a greater spread of risk (more likely to have an equitable mix of people who need the plan and those who do not).
Non-mandatory plans
Contrary to this, non-mandatory plans do exist whether supported by the policy contract and corporate application or not. Contractually, within a benefit plan, there must still be a minimum 75% participation rate overall to help prevent risks from anti-selection. However, in many cases, this isn’t tracked effectively and when an audit is performed, it is often found anti-selection has taken place and many times only 25% of people are participating—those who need the coverage, and the costs have become cost prohibitive and everyone else has opted off.
Technically, when participation falls below this 75% threshold, where allowable, the insurer has the right to terminate coverage. However, as mentioned, because it is not tracked effectively, it is not measured, and the insurer seldom finds out until or unless there is a market study completed (an audit) because the rates have escalated due to the increased claims and lack of participation spreading the risk.
Without a doubt, non-mandatory plans are a challenge for plan administrators, leaving them at risk of a significant claim from an employee not presently covered who should have been enrolled on the plan.
Corporate Policies
This is where the corporate policy NEEDS to support the fundamentals of the corporation. As with any policy, it should align with the benefit policy contract so executives and employees alike know and understand how decisions will be made when it comes to their care and coverage in the event of a death, disability, or catastrophic health claim.
When Employees Refuse Benefits (never recommended):
If the plan is not considered mandatory, supported by both the corporate policy and the insurance policy, leaving employees the option to refuse all benefits, including life and disability, the corporation needs to understand the risks.
Plan administrators and employees should be aware of these risks including, but not limited to:
· Contract requirements on participation and what will be done to ensure participation is upheld to maintain coverage.
· What constitutes a reason for employees to refuse coverage?
· What is the corporate policy when a plan member becomes disabled/dies/or becomes ill after refusing coverage–understand, it may be very difficult or impossible for this same employee to gain coverage in the future; meaning they will not be eligible for support/assistance provided by the plan during these difficult situations.
· If you have a waiver of benefits signed, will it hold up if challenged in court? Has the spouse or beneficiary signed the waiver, so they understand the implications in the event of a death or disability?
o As a side note, if employees are insisting on refusing ALL benefits, including life and disability (where applicable) we recommend the employee engage a lawyer directly at their own cost to draw up the letter and have it signed and notarized by the law firm. This will have a much better chance of standing up in court if challenged.
o This allows the employee to explain to the lawyer their intention and it is documented. Further, they are getting actual legal advice, instead of expecting your plan administrator to carry the burden, and it hold harmless the corporation from having to explain to the court in the event the refusal is challenged with the “I didn’t know” / “I didn’t understand what I was waiving” argument.
· When or if an employee changes their mind, these plan members need to understand that they will be considered late applicants and will NOT be able to return to the plan without providing health questionnaire/evidence of insurability and they run the risk that they will not be eligible for coverage.
- This is because many times employees change their mind as a result of a life change that means they “need” the coverage and therefore present a “risk” and that “risk” will usually be the very thing that will prevent them from being eligible for coverage.
o Without guarantying coverage acceptance, any associated costs to provide proof of good health is usually at the employee’s own expense.
o There is a high risk that the employee will be declined for some or all coverage and / or having limits placed on their coverage, such as a first-year dental restriction.
o The requirement for medical evidence also applies to their spouse and covered dependents.
Liability
Allowing a benefit refusal may become a liability risk as the employee may be upset with their employer for “not informing” them of the risks of refusing coverage, especially when life happens and there is no other insurance in place.
Rule of thumb
For those employees who suggest they cannot “afford” to participate in the coverage are not only walking away from additional compensation from their employer through their paying a substantial portion of the premium costs, but these are the very same employees who cannot afford to have a claim.
Plan administrators need to understand the implications so they can communicate what refusing benefits means for the employee and their family and the risks of not being approved for coverage in the future.
What can be waived without undue risk?
If employees have access to coverage through a spousal plan, this is only for Health and/or Dental coverage. Other employers will not protect incomes of people who are not staff, therefore life and disability are not applicable for waiving coverage. In this event, employees can choose to waive their health and dental coverage in favour of their spousal plan. They must have full disclosure and report this coverage to their employer’s insurance policy.
Following the insurer-required process includes:
· The employee providing proof of coverage through another plan.
· The spousal employer’s insurer’s name and policy number.
This information is essential in the event the spouse loses their coverage, the employee can re-access their own benefit coverage for health and dental within 31 days of coverage termination and not have to provide medical evidence or proof of good health where they can run the risk of refusal. After the 31-days, late application status will be applied and a medical (and potential refusal) may result.
Benefits show employers DO care.
Employers that offer benefits care about their employees and want to help them achieve good health and/or support them in the event their health changes (nobody plans to get sick). In addition, they invest a great deal of money to support the benefit plan. Employees, no matter how someone tries to shake out those numbers, will never afford a comparable plan with the substantial coverage available on a benefit plan through individual coverage.
1) Because employers pay at least half the cost, whereas on an individual plan, employees pay 100% of the cost.
2) Employee benefits (outside Quebec) are non-taxable for health and dental.
3) Individual plans are subject to pre-existing conditions and limitations on coverage provisions.
We’d be pleased to engage in a meaningful conversation. Give us a call.
Note: this was written without the aid of Artificial Intelligence (AI)
Disclaimer: Please note that the information provided, while authoritative, is not guaranteed for accuracy and legality. The site is read by a world-wide audience and employment, taxation, legal vary accordingly. Please seek legal, accounting and human resources counsel from qualified professionals to make certain your legal/accounting/compliance interpretation and decisions are correct for your location. This information is for guidance, ideas, and assistance.
