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Posted by Louise Gagne, FICA, FSA, juillet 19 2017
Plan Implementation
Group Insurance Plan: Mandatory Membership for Businesses

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You just hired new employees. Congratulations! On their first day at the office, you welcome and introduce them to your group insurance plan. When you advise them of how much they will need to pay for it, they find it too expensive and their first reaction is to refuse to enroll. In sympathy with them, you are prepared to give in to their request... but did you know that contractual and legal obligations prevent you from doing so? Read on, to find out more on the subject!

Contractual obligation regarding a group insurance plan

Group insurance plans are based on the principle that the cost of claims filed by some individuals will be shared among a higher number of members. This is not called group insurance for nothing! For the system to work with reasonable costs per insured member, all eligible employees must be insured and pay premiums.

If the individuals filing claims were the only ones insured and if it were possible to disengage from the plan at will, the insurance costs would be gradually spread out among an increasingly smaller number of individuals who would have to share the burden of increasingly higher claims. It wouldn’t be sustainable for very long….

This is why enrollment is usually mandatory for most benefits under insurance contracts. An employee cannot opt out of basic life insurance, short- and long-term disability insurance, accidental death & dismemberment insurance, or dental care insurance. However, in some contracts, dependent life insurance is optional. Employees may often be exempted from their plan’s dental care coverage if they can be covered under their spouse’s plan, but in any case, enrollment remains mandatory for this benefit.

Legal obligation

On top of the contractual obligation, Quebec employees are legally required to enroll in the group insurance plan when this coverage is provided by their employer. For more details, read our article: Prescription Drug Insurance Plan: The Impact on your Life.

Coverage in case of absence

There are other circumstances where insurance coverage is not left up to employees and is governed by the contract. For instance, if employees are on a leave without pay, maternity leave or temporary layoff, the contract clearly states which benefits can (or must) be maintained or not, along with the maximum length of extension. The basic principle is that for each type of absence, all employees in this situation must receive the same treatment and selecting what can or cannot be maintained is usually not left up to each individual.

To find out more about the administration of your group insurance plan, read the article: Group insurance plan administration, not an easy task!

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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.
Louise Gagne, FICA, FSA