Clients' Edge Employee Benefits

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I'm paying too much for my group benefits

The amount you pay normally is very sensitive to the claims by the carrier. The first place to direct the attention is to the claim detail. This will tell a lot of the story. Some common observations are as follows:

  1. Claims are low but premiums are high in relation as your company is too small, and the rates are based on the carriers pool and not your own experience. If this is the case you should consider health spending accounts.
  2. Claims are high, and upon obtaining more reports, it is caused by one or more high drug claimers. If this is the case, firstly you should verify that the carrier is excluding a portion of the claims above large account pooling level. Often this is not applied correctly by the carrier. Secondly, is there a better option for both the employer and employee with respect to high drug claims.
  3. Claims are high and upon obtaining more reports, it is caused by high usage in other areas (non-drug) of your plan. If this is the case, you should determine is the high usage throughout all employees, or more commonly dominated by a few (the 80-20 rule). Too control the cost of the plan, you must control claims. This is especially true if its caused by non-drug areas. A plan design change would be warranted. As per your analysis, you see that a change would have no negative effect on the majority. In certain situations, it would make economic sense to reduce or eliminate the non-drug areas of coverage and replace them with a health spending account.

I have no idea what my employee claims are

At CEEB, we obtain from all carriers claims experience on a monthly or quarterly basis. Without this information, you can never assess the value in the plan. With this knowledge we can review the plan and determine the coverage and which type of plan is best tailored to the needs of the Company and its employees. If after this review we believe changes are required, we do not wait until the end of the policy year. Claims review is paramount to the CEEB analysis and tailored benefit solutions and is a requirement for the carrier to provide benefits to our clients.

I'm a low claiming group but still spend a lot on premiums

Claims were $3,500 and the premiums are going from $7,800 to $8,400 for the year. Two of the three have health and dental (a single and a family) and $25,000 of life insurance and one has life insurance only.

As per the owner the objective of the benefits program was to give his office person (the family) coverage, and because the insurance carrier would not do a plan for one person, he added his 30 year old daughter on the plan (single coverage) who works part time in the business. The insurance carrier still needed a bit more to consider this a group so required each to have life insurance and needed a 3rd person so the owner went on the for life only. He didn’t need “insurance” as he had a plan with his spouses’s employer.

I then explained the health spending account solution to his situation.

Even the office manager was $3,000 of the $3,500 – he could give her 300 per month in a health spending account. If she spends $3,000 again, she has $3,600 to use and therefore has $600 left over for another year. If she spends less, she has more to carry over. If she has more it unlikely given the history of claims I reviewed, she may use up most of her account and if that is the case that is her issue and should not be a burden to the employer. He liked this idea and thought it would work. I said it will only work if she views this as a better plan not that it got worse and offered to speak with her and do a needs analysis.

I spoke to her and initially she loved the idea. She thought she would not need more and liked the carry over provision. She then said my only issue with the insurer plan ending is her 3 kids may need orthodontics in a few years. I went on to alert her that her that the current plan does not cover orthodontics. With only 3 on the plan, they cannot include orthodontics. Even if they had more employees, the premiums would be more than you would spend and many plans cap the orthodontics at $1,000 per child lifetime. I went on to say you are getting $3,600 per year and what you don’t spend carries over and assuming you can manage and are now rewarding for careful spending, you can save for the orthodontics costs. She was now sold.

Even though she didn’t ask, I pointed out that the only down side was what if one day she or someone in her family needs $10,000 – $20,000 in prescription drugs, or a semi-private hospital room; or needs emergency medical insurance while outside of Canada which is not provided by one of your credit cards. She like many didn’t think that could happen. But I went on to say for $20 per month you can buy that type of catastrophic coverage should that ever occur. So think of the spendable funds now as $280 per month and not $300. (in fact the owner later agreed to give her $320 so she nets $300). If the insurance cost is low enough everyone should buy it just in case. Once claims are a lot more, there is more due diligence and rationalizing.

I went back to the owner and said his employee is on side with the switch from a fully insured plan that was costing his $450 per month for just her, to $320 per month plus 10% admin fee and what she doesn’t use is still hers to keep. He was pleased and so was she.

I then said what about his daughter and himself.

He said let’s give the daughter $80 per month, and $10 for the single insurance.

He said he has full coverage elsewhere and said not to burden the business with anything for him.

He did not want $25,000 of life insurance but were forced to buy it

He turned an $8,400 plus pst cost to $5,500 plus pst cost with a health spending account and his main employee was happier than before.

I need to offer benefits to my employees but can't afford it and am scared to start

Many employers are reluctant to offer a benefits program for fear that the cost today may be very different than the future cost. It would be hard to cancel the plan once started. If this is the situation, a health spending account may be the best type of plan. 100% budget certainty as you commit to an amount per amount and there are no renewal increases. You set the amount and on anniversary of the plan, you decide to lower the amount, increase the amount or stay the same.

Alternatively, if you want a typical insurance plan, that offers drugs, dental, paramedicals, and so on, you can limit your cost with an ASO (administrative services only plan). You pay for only the claims incurred by your employees plus an administration fee. You then limit the claims either through a limited plan design, or by adding a stop-loss insurance component which can limit your cost to health claims up to a pre-determined ceiling as low as $1,500 per employee per year. With a known stop-loss premium and worst case scenario of claims of up to $1,500 per employee, you can achieve the worst case scenario of budget certainty.

My child is going to school outside of Canada

Emergency medical and travel coverage plans are perfect for post-secondary students studying away from home, within Canada or abroad. Even if you have coverage within your home jurisdiction, you may want to consider this out of jurisdiction plan so that treatment can be facilitated in the area of the school so that the school term is not affected.

My relatives are visiting from another country and need insurance

Emergency medical insurance for new arrivals or visitors to Canada is available through various carriers. Depending on your age, length of stay, and required coverage levels your CEEB advisor can recommend and provide the appropriate policy.

I need out of Canada travel insurance

Protect yourself from the unexpected. Many individuals have insurance through their employer.

This group plan may have trip duration limitations. It is important to know if you are covered. The cost of just one medical emergency while travelling can be financially overwhelming. Not to mention trip cancellations and delays that can cause a further strain..

Buying travel insurance is the best way to safeguard your finances when something unexpected happens during your travels. CEEB suggests individual travel insurance coverage to meet a variety of needs.

Whether you’re a Snowbird, a family on vacation, a cross-border shopper, or away on business, you can travel care-free with emergency medical, trip and baggage.

I am incurring a lot of healthcare and not covered by my insurance plan

Most insurance plans do not cover things like tuition for my child with a learning disability or cover orthodontics for children (and if they do, only at 50% or to a $1,000 lifetime limit). No matter what the shortfall is, you can through your company set up a Health care spending account. You can contribute the amount of this shortfall plus an administration fee into an H S A and make the contributions tax deductible to the company and tax free to the recipient. In other words, you have turned an after-tax event into a pre-tax event and potential save up to 30% on the cost.

My company is too small or it's just me and don't qualify for group insurance

Like many Canadian, you are self-employed or have a small business that may be too small for group benefits. And if your size qualifies for group benefits, you are afraid to enter that field due to the unknown costs. You may know the costs today, but if you have a high claimer in your small group, your future costs could be very high. At that point it is often hard to change the plan.

The easiest solution is to do nothing and you and your staff pay for health care with after tax dollars. Or purchase an individual plan with high premiums and limited coverage.

There is a better way. With a health care spending account, you can 100% budget certainty. You set the amount to contribute into the account for each employee including yourself. The amount could be different per class of employee. An H S A works like a bank account established exclusively for the purposes of health-care spending. With the funds in this bank account the employee can be reimbursed for your health-care spending and purchase if they decide a drug and catastrophic health insurance plan to protect against the unexpected and catastrophic.

The minimum size is one employee.

I'm buying a house and need insurance because I now have a mortgage

Most often the financial institution will attempt to sell you insurance. It will always be more inflexible and expensive than purchasing term insurance from an insurance company. Another disadvantage of buying insurance from the financial institution is the coverage decreases as the mortgage gets paid down yet the cost remains level. The mortgage is going down in value yet you are paying the same premium.

I have a traditional insurance plan but have heard of ASO. Can that help me reduce cost?

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I need to be able to predict my costs

One of the largest fears of the business owner/CFO of the company is what would the plan cost in the future. If claims increase exponentially, the premium could increase in relative forms. How can you build budget certainty in the plan? Your options include the following:

  1. Use a health spending account instead of a more common group plan. Unlike your common group plan which is sensitive to unknown claims usage. The health spending account is 100% budget certain. You decide the amount to contribute and that is guaranteed to be your cost.
  2. Similar to #1 above, but you still have a group plan with only basic limited coverage and have a health spending account for greater coverage.
  3. Most commonly exponential claims could only be caused by drug claims as all other areas of coverage have inherent plan limits. Therefore drug management is paramount to control future costs

There are many ideas with respect to drug management. They would include:

  • Mandatory generic
  • Co-pay – a portion paid by the employee
  • Dispensing fee deductible – this is not only to reduce the claims by the dispensing fee but could change buying behavior. This could also be the result of a co-pay.
  • Drug maximum
  • As low a large account pooling level as possible – most often this is predicated on your company size. The larger the company, the larger ceiling
  • A lower stop loss ceiling under an administrative only (ASO) model. Some carriers have a lower ceiling so that higher claims are borne by the carrier and not your company. The premiums are higher for this protection but you are increasing budget certainty.