If I were to break down, in the simplest of terms possible, the “why” people purchase insurance—any insurance—it would be to pay the claim IF a covered event/risk happens.
Sure, the purpose of insurance is to mitigate risk:
· Risk of loss of life
· Risk of loss of income
· Risk of a catastrophic event
But the JOB is to pay the claim.
The role of the employer
Understanding the ONE JOB, then the role of the employer when choosing a benefit plan for the employees is to decide which claims will be paid under a benefit plan.
· Pharmacy, health, vision, and/or dental
· Salary replacement
How you want the claims to be paid:
· Through an insured vehicle where the insurer covers the “risk of claim,
· Or via a self-insured model like a health spending account (HAS) or administrative services only (ASO) where the risk of claim is assumed by the corporation.
Finally, to what amount do you want the claims to be paid:
· The co-insurance level, i.e., 80%, 100% (the difference being what the employee will be out of pocket, in after-tax dollars).
· The maximums associated with coverage, i.e., unlimited pharmacy, $1,500 for dental, $250-every 24 months for vision, etc.
The role of the insurer/benefit provider
In the simplest of terms, when the employer decides what they want covered for their employees, how and to what amount, the insurer/benefit provider, then submits this to underwriting to establish IF they can cover the risk as outlined. Once they determine they will accept the risk, then based on the parameters, they will price (establish the premium required) to cover the “risk” in the event of claims. This involves:
· Considering the industry of the business,
· Utilizing internal and external data points on “risks” of claims based on the criteria,
· Applying previous experience as applicable,
· What are the marketplace trends,
· How viable is the business as a sustainable client
The expectation…where perception wars with reality
Very often the ONE JOB gets confused with coverage that is available through provincial plans, which is primarily funded through our tax dollars and riddled with consumer let downs like:
· Long wait times,
· Limited coverage options,
· Lack of service
Whereas benefit coverage is specifically for payment of claims for health professionals as outlined by Health Canada offered and administered through private FOR PROFIT industry, funded by consumer premiums.
What this means is when the benefit plan is used (claim paid), to the limits and as prescribed by the policy, premiums will increase to cover the expectation of claims going forward, in the same manner our tax exposure increases to sustain infrastructure costs associated with the services provided by the government.
Having enough in funding (premium) to coverage the expected claims for the coming year is based on the past experience. When there is enough premium to cover the claims, there is a decrease, but if the premium is reduced too much, then there will be a larger increase at the next renewal as the plan would be underfunded.
This is budget planning for benefits …
Let’s have a conversation.
Reach out if you would like to explore your corporate benefit options, like:
· Is your plan Reactive or Preventative
· Coverage never matters UNTIL it matters
· Between the Financial Lines
Note: From a human’s mind … 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.
