Interestingly enough, when sitting down with small business owners for the first time and going through the various options available that they can offer their employees…Traditional Group Insurance, Health Care Spending Accounts, Flex Benefits, and Hybrid…they have questions other than, “How much does it cost?”. Here are the more common questions as they relate to Traditional Group Insurance.
Q. What Is Traditional Group Insurance and How Does it Work?
A. Traditional Group Insurance (TGI), is a tax-effective way of compensating your employees by paying monthly premiums to a Carrier (Insurance Company or Third Party Administrator). In turn, they reimburse your employees according to the parameters such as reimbursement levels and maximums set out in the Benefits Contract. The allowable coverage included in the Benefits Contract is dependent on Canada Revenue Agency guidelines. The Carrier takes on 100% of the risk for this “regular insured” program, which basically means that if they pay out more in claims than they receive in premium, then they absorb the loss. Of course, the flip-side is true…if they pay out less than anticipated in claims than they receive in premium, then they profit. Your premium payments are an eligible business expense.
Q. What does it cover?
A. The Carriers offer a wide variety of innovative and cost-effective plan options. Depending on how the Underwriter views the risk (# of employees; industry; family content; etc…) and how they bundle their mandatory benefits, you can customize a Plan Design that could include any combination of the following:
|Basic Life Insurance||Medical Services & Supplies||Basic Dental|
|AD&D||Prescription Drugs||Preventative Dental|
|Dependent Life||Vision Care||Major Restorative|
|Short-Term Disability||Paramedical||Health Care Spending Accounts|
|Long-Term Disability||Semi-Private Hospital||Cost Plus|
Q. How much does it cost?
A. Each Carrier will have different levels of emphasis that they place on their underwriting criteria. When first implementing a TGI, the Carrier underwrites the initial rates based on:
- Employee Demographics (Age, Sex, Marital Status, Occupation, Salary, Province of Residence, Date of Hire)
- Business Profile (Nature of Industry, #years in Operation)
- Plan Design that you choose
Q. Will the cost ever increase?
A. Once a year, the Carrier will calculate Renewal Rates based on:
- Change in Demographics
- Change in Plan Design
- Prediction of future claim levels based on pattern/trends in past years
Q. What is involved with administering the Program?
A. First, you will need to determine:
- What is the definition of an eligible employee?
- Will you ask your employees to share in paying the premium?
- Will you allow your employees to opt out of Health and/or Dental, if they have coverage through their Spouse?
- Will you have different Plan Designs for different Classes of Employees, i.e. Hourly, Salaried, Management, etc…?
After that, most of the administration of the Program occurs at implementation…the employees will have filled out their Enrolment Forms and you will have signed the Application along with submitting the first month’s deposit cheque. Moving forward, you will more than likely need to just let the Carrier know of any employee additions/status changes…and, of course, pay the monthly premium. As a general rule, you shouldn’t be involved with making claims for your employees unless they are Life or Disability claims. Most of the administration is done on-line.
Q. What’s the downside?
A. If there is a downside to the TGI, then it is the fact that you don’t…and you shouldn’t…know anything about the health of your employees and/or their dependents. As a result, you should have no idea how they will claim. Not knowing how your employees will claim could lead to Premiums increasing at a rate that you may not have budgetted for.
For more information on how to set up and maintain a Benefits Program that fits your needs and budget, connect with Sharkey Group Insurance for independent advice & counsel.