Group Benefits FAQs
What kinds of benefits are generally included in a group benefits plan?
Six different kinds of benefits are commonly included in group benefits plans:
- Life and Accidental Death & Dismemberment
- Short Term Disability
- Long Term Disability
- Critical Illness Insurance
- Health Benefits
- Dental Benefits
In addition, some group benefits plans offer:
- “Best Doctors”
- Medical Reimbursement Plans
What is Accidental Death & Dismemberment?
Accidental Death and Dismemberment is included with the life insurance component on almost all group benefits plans. Most people remember this type of benefit due to the rather gruesome wording found in benefit booklets. In addition to different dollar amounts assigned to different types of injuries (eg. loss of finger $3,000, loss of leg $8,000), there is also a flat amount payable if the insured happens to die due to an accident (as opposed to an illness). This amount is often a multiple of the life insurance benefit.
How much life insurance coverage do most group benefits plans provide? How is the annual premium calculated?
Life insurance offered as a part of a group benefits plan usually provides either a flat amount of coverage, or a coverage amount calculated as a function of the insured’s annual income. The life insurance premiums are based on the average age of the group members, and the male/female ratio. The higher the average age in the group, the higher the premium will be; the higher the percentage of females in the group, the lower the premiums will be.
How long does Short Term Disability last?
Short term disability plans pay the claimant a portion of their income if they are unable to work due to sickness or injury. Usually, these plans are integrated with Employment Insurance (EI), start a week or two after the individual is determined to be unable to work, and continue for four or six months. In many cases, a company that has a Short Term Disability Plan also has a Long Term Disability Plan which is structured to begin as the Short Term Disability period ends. The advantage of this is that there is no interruption to the income of the claimant.
How much of my income is protected by Long Term Disability insurance?
The most common coverage amount found in Long Term Disability Plans is 66?% of the monthly income of the employee. The premiums for long term disability associated with a group benefits plan are affected by various factors including average age in the group, type of work performed and percentage of male/female in the group’s demographics. A higher average age in the group will translate into a higher premium as will having a greater number of female employees in the group, while white collar occupations will usually result in lower premiums.
What is Critical Illness insurance?
A Critical Illness Policy will list certain illnesses (generally things such as heart attack, stroke, cancer, coronary artery bypass) and if the insured employee contracts any one of these named illnesses and survives for thirty days, the benefit is paid to the individual. This benefit has grown in popularity as an option for group benefits plans because employees see it as an opportunity to receive money that can be used at their own discretion – for example, to pay for health care treatments that may not be available here in Canada.
What is usually covered under the Health Benefit portion of the plan?
Typically, prescriptions drugs make up over 70% of the cost of the health benefit portion of a group benefits plan. Other benefits available in the Health Benefit portion of a group benefits plan include:
- Professional services, such as chiropractors, psychologists, speech therapists, etc
- Semi-private hospital coverage
- Home care nursing
- Paramedical supplies
- Out-of-province or country medical protection
- Vision care
Benefits under the health portion of the plan are often offered under a “co-insurance” type of system. At 100% co-insurance, the insurance company would pay 100% of the cost of the benefit being covered. At 80%, the insured will pay 20% of the cost of the benefit being covered and the benefit carrier will pay the rest. The greater the percentage of costs covered by benefit carrier number, the higher the premium will be.
What kinds of dental work may be covered under the dental portion of a group benefits program?
Dental coverage is divided into three categories:
- The “Basic and preventative” category covers treatments like cleanings, fillings, x-rays which are required to maintain dental health.
- The “Major and restorative” category covers other, more serious (and expensive) treatments such as caps and crowns. These treatments are normally viewed to be more cosmetic than a requirement for the health of the teeth
- The “Orthodontics” category covers braces and other treatments and appliances involved in straightening teeth. Orthodontics are not covered in many plans today and when they are it is often with a 50% deductible and a cap on benefits payable.
What is "Best Doctors"?
Through Best Doctors, plan members and their local doctors or specialists have immediate access to the latest technologies, the opinions of world-class specialists and clinical guidance. Best doctors can assist with confirming the diagnosis of a covered condition and can suggest the most effective treatment plan by drawing on a global database of 50,000 peer-ranked specialists.
What is the Medical Reimbursement Plan?
The Medical Reimbursement Plan may be a tax-effective way to supplement health, dental and vision coverage that may be limited or not covered under your existing group plan, and it allows you to provide enhanced benefits to your key plan members in a way that is more tax-efficient than a salary increase.
Does a company need to take all of the pieces of a group plan, or only some of them?
For most groups, there is an obligation to take the Life and AD&D portion and then at least one additional component (i.e. Short Term Disability, Long Term Disability, Critical Illness, Health, or Dental).
Why do health premiums tend to increase every year?
Newly approved drugs tend to be very expensive, the aging population is putting increased pressure on the health care system in general and as governments download as many costs as possible to the private sector so they can balance their books, group plans end up paying for expenses that they did not have to previously. All of these factors contribute to increased number and cost of claims, which in turn affects your premiums.
If a company implements a benefit plan, do they have to offer it to all staff?
The company is not obligated to offer the plan to all staff but they are obligated to offer it to homogenous and clearly defined groups within the company. For instance, you can have a plan which is offered to the Marketing department but not the Sales Department. However, you could not implement a plan which only includes your favorite staff members from each department.
Can the employees pick and choose which benefits they would like to have?
The answer is no. The insurance company will set the premium based on how they believe the “average” user will use the plan. Obviously, in a group of individuals there will be some healthy individuals and also be some unhealthy individuals. In recognition of this, the rates will be set somewhere in the middle. If employees have the option of joining the plan or not, experience has shown that unhealthy people join the plan in droves while the healthy people will generally not bother. The result, of course is that rates rise significantly, making it more difficult for the employer to keep a benefit program in place for their employees.
This is why in smaller groups all employees are normally required to join in all the benefits offered. The only exception may occur if a spouse has benefits elsewhere. In that situation, an employee may be allowed to “opt out” of the benefit that their spouse already has.