Administering a group insurance plan goes beyond reporting wage increases and changes to coverage. It also involves several tasks and responsibilities that are often underestimated or plainly ignored, although they pose major risks for the employer. Indeed, the legislation imposes responsibilities on the contract holder who may be held accountable if the contract administrator neglects or fails to fulfill its mandate.
Let’s look at some of the best practices you can implement to avoid this situation.
Premium waiver requests for CSST and SAAQ cases
In workplace and automobile injury cases, the disability benefits are paid by the CSST and the SAAQ, and not by the insurer. Therefore, employers are often unaware that they must nonetheless request a premium waiver from the life insurance provider. This request is needed to stop the life insurance premiums from being charged, and especially to ensure that the insurer will be responsible for paying the insured amount in the event of the employee’s death. If no such request is made and the employee dies, the employer may have to pay the life insurance benefit. Don’t wait for the deadline to be expired before making this request. A similar waiver request should be made to the accidental death and dismemberment insurance provider if it is different from the life insurer.
Extension or end of coverage during employee absences
Insurance contracts always set out which coverage can be maintained and the maximum extension period for any type of employee absence (maternity/paternity/parental leaves, temporary layoffs, leaves without pay, etc.). In some cases, employees are allowed to select which coverage will be maintained. When such an option is available, it is a good practice to give the employee a letter confirming which coverage he/she selected and the consequences of such a choice, especially if he/she did not keep the disability insurance. This will avoid many problems should the absent employee become disabled and there is no documented proof that he/she decided not to extend his/her disability coverage.
Refusal to pay the premiums for coverage maintained during an absence
What can you do when an employee who decided to keep one or several benefits during an absence then refuses to pay for the maintained coverage? The employer must write a first letter reminding the employee that he/she owes money, and that insurance coverage will be terminated if no payment is received within 30 days (legally prescribed minimum notice period for interrupting the prescription drug coverage for non-payment). If such payment is not received within the required time, the employer should send a second letter confirming the end of coverage due to non-payment. This practice can also apply in the case of a maternity/paternity/parental leave during which the employee only pays his/her portion of the insurance cost, since under labour standards, the employer is not bound to pay the total cost of the insurance during this type of absence, but is only required to maintain coverage and make the customary payments.
Coverage extension upon termination of employment
When coverage extension is granted to a terminated employee, the employer must obtain the insurer’s consent before confirming to the employee which coverage is extended, especially if the extension is not standard. Generally, the insurer will offer up to 6 months extension for medical and dental care benefits, but travel insurance is seldom extended. The extension of disability plans (short and long-term) is always denied, except in provinces where employers are legally required to maintain all the working conditions during the notice period (e.g., Ontario). Once the insurer’s confirmation is obtained, the extended coverage must be specifically documented (with an indication that travel insurance is excluded from medical care coverage, if applicable) in the letter to the terminated employee.
Always document!
In short, the best practice to incorporate into your group insurance plan administration consists in documenting all employee decisions that affect the insurance coverage and ensuring the employee understands their impact. You must also remember that insurers are only responsible for the risks they know of and they agreed to insure. A good group insurance advisor should be able to guide you in selecting the best administrative practices and identifying the practices that represent a risk.
Louise started her career at Blue Cross before working as a Senior Advisor for a large actuarial firm for more than 15 years. Fellow of the Canadian Institute of Actuaries, Louise joined AGA in June 2014. She assumes responsibility for training, provides technical support, and supplies advisory activities for the large business clientele. Louise is also lecturer at l’UQAM.