Traditional fully insured plan
The cost of a fully insured plan comprises 12-15 months of guaranteed monthly premiums. The premiums are re-calculated each anniversary of the plan. Factors affecting the premiums are claims experience, demographic makeup of the group, at times the performance of the carrier’s pool of clients, trends, inflation, commissions, and a risk, administrative and profit component.
Built into the monthly premium is also a pooling charge so that very large claims by an employee or dependent do not adversely affect the premium renewal calculation. This pooling typically occurs at levels between 7,500 and 15,000 per employee depending on the size of the insured group.
The plan design of the group plan can include:
- Prescription drug (generic or brand)
- Private or semi-private hospital
- Private duty nursing
- Ambulance services
- Paramedical practitioners – these can include physiotherapists, chiropractors, osteopaths, naturopaths, podiatrists, psychologists, speech therapists, registered massage therapists, acupuncturists
- Accidental dental
- Out of province/out of country emergency medical assistance
- Medical supplies and services
- Vision care
- Dental care – basic, minor restorative, major restorative and orthodontics
- Survivor benefits – to extend coverage for typically 24 months after the death of the plan member
The coverage can vary in the list of plan coverages, the employee/ employer co-pay of each ranging from typically 70% to 100% paid for by the plan, and maximums in each area.
Most common plans include 80% drug coverage, 100% other extended health care, $300 – $500 per paramedical practitioner, $150 – $250 vision care, 80% dental care basic and minor restorative only to a maximum of $1,500 per year.
There may be a cost sharing of the premiums between the employer and employee via payroll deductions instead of or in addition to the co-pays built into the plan design.
Along with your CEEB advisor, we will work with the plan sponsor to build the most valued plan.
Administrative services only plan (ASO)
An ASO plan is essentially a self-funded plan. The employer (plan sponsor) is not charged a premium similar to a traditional group plan. The cost is exclusively the claims (A) paid plus an administration fee (B) (commonly ranging from 8-18% of paid claims). There is no element of insurance in this type of arrangement since the insurance carrier is simply acting as the administrator of the plan. As the employer assumes the full liability for all claims incurred under this arrangement, often the plan will include the option of purchasing stop-loss insurance from the carrier. Then the employer is only liable for the health claims for each employee up to the stop-loss level (commonly ranging from 1500 to 10,000 per employee per year) in exchange for a stop-loss insurance premium(C).
Often times A + B + C is less than the cost of the traditionally insured plan.
Typically, the ASO plan is funded (budgeted ASO) with similar dollars as is paid in premiums to the traditionally insured plan. When an ASO plan is in a deficit position (claims exceeded the budget but still under the stop-loss ceiling), the employer must add to the funding.
Alternatively, as is most often the case, if the plan is in a surplus position, the EMPLOYER RECEIVES A REFUND.
The plan coverage under this arrangement or the traditionally fully insured plan could be exactly the same as often the employees would never know if the plan is fully insured or ASO.
Group pooled insurance benefits
- Group basic life insurance – the contract pays a death benefit only, with no build-up of cash values.
- Accidental death and dismemberment (AD&D) – in the event the employee dies in an accident or suffers specified injuries or loses there is an additional benefit paid most commonly the same amount as the death benefit. Often this benefit is referred to as “double indemnity”.
- Dependent life insurance – the benefit amount is often $5,000 or $10,000 on the death of the employee’s spouse and 50% of those amounts for a child.
- Short-term disability (STD or WI) – the contract pays a weekly benefit to the employee during a short duration until a more long term arrangement is made. Most STD plans provide for payment after the first day of an accident or the eighth day of a sickness and can last 17 weeks at which time LTD may commence.
- Long-term disability (LTD) – the contract pays a monthly benefit to the employee to support a sick or disabled employee who is unable to work. Most LTD plans provide for payment to commence 120 days after being absent from work. This 120 days elimination period coincides with either STD plan, or the Employment Insurance disability benefit.
- Critical illness insurance – the contract pays a lump-sum benefit after the diagnosis of a major illness or condition. Even though there are no rules with respect to the spending of the cash benefit, its purpose is to ease the financial burden of paying debts, altering the home, or receiving additional medical attention. (Canadians under the age of 65 are ten times more likely to suffer a critical illness and be unable to work than to die)
- Employee assistance program (EAP) – a program that assists employees and their families with access to resources for help in anything that might interfere with their workplace wellbeing. Examples include family and marital concerns, financial concerns, nutritional counselling, mental illness, addictions and more. The rational behind the program is a happier and healthier employee could result in lower health claims and disability claims and time away from the workplace. With increasing demands of modern living this benefit should be a must in any benefits program. The cost is relatively inexpensive given the impact the program could have on an employee’s welfare.
Funding and tax treatment of group pooled insurance benefits
Unlike health and dental benefits which are tax deductible to the employer and tax free to the employee (expect in Quebec), pooled benefits are tax deductible to the employer as a payroll cost and a taxable benefit for the employee.
Often, the pooled insurance benefits are paid for by the employee through payroll deduction and as such are paid with personal after-tax income, the benefits are all tax free to the employee or the named beneficiary.
Optional top-up products
- Optional basic life insurance
- Optional basic spousal life insurance
- Optional accidental death and dismemberment (AD&D)
- Optional critical illness insurance (CI)
Many companies include group pooled insurance benefits such as life, dependent life, AD&D, STD, LTD and CI. These would be mandatory benefits provided to all employees. Participation in these benefits would be mandatory even when the employee opts out of health and dental due to having a plan with their spouse.
Typically the cost of the mandatory pooled benefits are very cost effective and do not require medical evidence of insurability. Conversely, their coverages are often limited. The optional top-up products provides more coverage to the employee and their family and is typically paid for through payroll deduction after completing the application and providing the required medical evidence. The cost is often age, gender, and smoking status banded.
The Health Spending Account (H S A)
The company contributes to a Health Spending Trust Account for its employees. The contribution is tax deductible and is a 100% tax free benefit to the employee.
How Does It Work
Sam owns a consulting company and is paying $30,000 per year in premiums to provide medical expense benefits to his 10 employees. Alternatively, he could contributes $250 per month ($3,000 per year) to an H S A. Each employee chooses when and how to spend their health care dollars. One can spend it all on glasses and dental, one can spend it on drugs and massages, and one can save it up for many years and spend it later on laser eye surgery or orthodontics for the children. If the company objective is to spend less than $30,000 per year, then the employer would fund less than $250 per month per employee to the HSA. There is no plan design, strictly dollars.
The down side of a stand alone health spending account to some employees is the lack of an insurance element. What if I need 20,000 of prescription drugs or am hospitalized and want a semi-private room, or need medical attention outside of Canada.
Catastrophic health insurance within and outside Canada can be added by each employee independent of each other. The premium for this insurance component can be funded by the health spending account dollars provided by the employer. Depending on the coverage, the deductible and the carrier selected, the cost could range from $10 – $60 per month for single coverage to $20 – $80 per month for family coverage.
What Is A Medical Expense
The list is in accordance with the rules governing the medical expenses as defined by CRA and can differ by province of service. Please verify the list from the CRA website to confirm eligibility.
The items could include services provided by the following licensed medical practitioners:
- Acupuncturist, Traditional Chinese medicine practitioner
- Chiropodist, podiatrist
- Dental hygienist, technician, dentist
- Licensed dietician
- Registered nurse
- Occupational therapist
- Optician, optometrist
- Pharmacist – therefore prescription drugs, dispensing fees
- Physician, surgeon (including outside of Canada) – excluding purely cosmetic surgery
- Psychologist, social work, speech pathologist
- Registered massage therapist
As such, the items eligible would be prescription drugs, Provincial Health Plan (i.e. Trillium plan in Ontario) drug deductible, prescription glasses, medically surgeries, fertility treatments, orthodontics, dental implants, care for an elderly parent or special needs child and more.
Hybrid/Flex/Cafeteria style plans
Whether your priority is budget certainty, risk aversion, plan member choice, lowest cost we will tailor the benefits solution that could utilize one or more of the 5 group products:
- Traditional fully insured health and dental group plan
- ASO – administrative self insured plan
- Group pooled insured benefits
- Other top-up products
- Health Spending Account
Your plan could be:
Health spending account (#5) and Group pooled insured benefits (#3)
Many employers recognize the need to provide pooled benefits to their employees. This is a low cost with a high perceived benefit plan. In addition, often the pooled premiums are paid for by the employees. For budget certainty, some employers are reluctant to offer a traditional insured plan, and instead provide a fixed health spending account. The employer knows their cost under this model and it cannot change even at renewal unless the employer changes the amount contributed to the spending account.
Health spending account (#5) and an ASO group plan (#2) – (with or without pooled benefits)
The ASO group plan could be limited to drugs, semi-private hospital, and out of country medical emergency. This would reduce the cost of the group plan as you have eliminated vision, dental, and paramedical services. To offset the reduction in coverage an employer could fund an H S A where each employee can choose when and where to spending their dollars on vision, dental, paramedical services, and other medical expenses.
Fully insured plan (#1) and a health spending account (#5)
The fully insured plan could have reduced coverage to reduce premiums, and use the savings to fund an H S A where each employee can decide if they want to use the dollars to fund the areas where coverage has been reduced. Instead of having a plan that gives each employees $250 for glasses and $500 for massages and 100% drug coverage, change the plan to 80% drug coverage and no vision or massage coverage. Those who are affected by the change may use their H S A to pay for glasses, massages and the 20% co-pay on drugs. Others who may not need these benefits will use their H S A to help pay for their child’s orthodontics, or save for laser eye surgery, etc.
Group Retirement Programs
After dialogue with company leadership in charge of your retirement programs and running our CEEB Group Retirement Diagnostic, we will provide your best options.
Our Group specialization covers a full range of retirement program structures, including:
- Defined Contribution (DC) Pension Plans
- Defined Benefit (DB) Pension Plans
- Group Registered Retirement Savings Plans (RRSP)
- Employee Profit Sharing Plans
- Deferred Profit Sharing Plans
- Non-Registered Savings Plans, which could include tax free savings accounts
- Executive Retirement Arrangements, including Retirement Compensation Arrangements (RCA) and Individual Pension Plans (IPP)
The CEEB Retirement Diagnostic
As with our Group Benefit reviews, we start with getting a sense of your company culture and end with a shortlist of the most sensible options for your specific group. This process is conducted as follows:
- Discuss your firm’s objectives and existing concerns
- Survey current corporate policy and compare with expressed objectives
- Place particular focus on CAP guidelines
- Consider supplier performance
- Analyze fund selection in light of employee trends, investment goals, and projected needs
- Investment goals and procedures
- Communication resources to help your employees make better use of their plan.
Based on the results of the review we can tailor a plan and financial arrangement that meets your corporate needs.