Group insurance has evolved considerably since it was created. It first appeared in the form of mutual assistance funds in the early 1950s, when groups of unionized workers established this type of fund to support their fellow members in times of sickness.
The idea was taken up by insurance companies in the 1970s. However, what really contributed to the emergence of group insurance in its current format was the wage and price control policy implemented by the Canadian government between 1975 and 1978. As employers could no longer offer meaningful wage increases, they turned to group benefits.
Early plans were kept rather simple for such reasons as their arduous administration. As there were no computers at the time, managing claims was quite a challenge! Since then, the service offering has been expanded to meet an increasingly diverse range of needs. Read on to learn more!
The 10 signs below are likely indications that a group insurance benefits plan was not updated over the years. If one or more of these signs apply to your situation, you would probably be well advised to review the relevance of your plan’s provisions while taking into account your budget constraints:
1. You don’t have a single-parent family rate
As our society evolves, there are a growing number of single-parent families. Providing rates specific to their situation reflects the fact these families can only count on one salary instead of two. Of course, such a change often involves raising family rates. This factor must be assessed and discussed with your advisor.
2. $10,000 or $20,000 life insurance
Your employees’ financial security is one of the most important aspects of your plan. Very few families have sufficient life insurance coverage to cope with a tragic event. To give them the necessary time to adapt, it is usually recommended to offer at least one time the annual salary as basic life insurance coverage. Given the relatively low cost of this benefit, there is no reason to do without it!
3. $2,500 and $5,000 dependent life insurance
The main purpose of this benefit is to cover the funeral expenses for your employees’ dependents. Along with the cost of living, these expenses have increased over the years and can easily amount to $10,000. Yet, most plans still offer $2,500 in life insurance coverage for children and $5,000 for a spouse. These amounts were suitable 20 years ago, but the time has come to update them.
4. Your maximum disability benefits are too low
Also related to your employees’ financial security, it is important to ensure that your employees will receive sufficient replacement income should they become disabled. You must therefore offer the highest possible maximums with and without evidence of insurability. As with all maximum dollar amounts, it is advisable they be reviewed to reflect inflation.
5. You have the same Group Insurance Benefits plan for all your employees
Group insurance is meant to protect your employees against certain risks. Obviously, needs are rarely the same for all employees. At inception, it is normal to have a single benefits plan for everyone in order to streamline administration. However, as your staff increases, it could be advisable to offer greater flexibility by making such additions as a Health Spending Account or a Modular Plan. Also, it is often appropriate to provide more generous coverage to certain classes of employees, such as managers or professionals.
6. You don’t have an Employee Assistance Program (EAP)
Mental health issues now account for more than 30% of long-term disability cases. It is important to set up tools employees can turn to when they experience professional or personal problems. An Employee Assistance Program is an inexpensive tool that can help your employees and their dependents in different ways, and particularly with psychological support.
7. Different co-payments for brand-name and generic prescription drugs
There was a time when it became popular to set a higher reimbursement level for generic (e.g. 90%) vs. brand-name drugs (e.g. 80%) in order to encourage the use of less expensive generic drugs. Besides penalizing those who take medications that have no generic equivalent, this measure has become obsolete, as technology now enables us to force generic substitution right at the pharmacy through the pay direct card. In fact, the Quebec basic prescription drug insurance plan provides for mandatory generic substitution, just like more than 70% of group insurance benefits plans according to the latest statistics.
8. No cost management measures in place
Over time, the cost of group insurance benefits has gone up substantially, for such reasons as aging demographics and the increasing use and cost of medications. Several cost management measures can be implemented above and beyond the mandatory generic substitution described above. If you have not already done so, it might be time to consider taking such action.
9. Your deductibles are still set at $25 / $50 (single / family)
The idea behind deductibles is that employees pay the cost of the first claims and are reimbursed only once their expenses exceed a certain threshold. However, in many cases, as deductibles have not been updated to inflation for the past 20 years, the deductible is often reached upon the first claim! Thus, a deductible set at $50 / $100 twenty years ago should now be closer to $100 / $200 based on a 3% annual inflation rate. This must be considered and discussed with your advisor in order to determine what the best approach would be: increasing the deductible, eliminating it and reducing the reimbursement percentage, replacing it with user fees on medications, etc.
10. $20 per visit limit for paramedical specialists
Health specialists are covered under group insurance benefits plans to ensure employees with physical ailments can be treated before their condition worsens and forces them to miss work. By maintaining a limit as low as $20 per visit, many employees will choose not to consult and will continue to work while injured. The cost management objective will indeed be met as claims will decrease, but will this really pay off in the long term?
Reflection, analysis and discussion
The role of an advisor is to support you in providing a group insurance benefits plan that meets your own and your employees’ needs. Before changing anything, the first step would be to prepare a comprehensive assessment of your plan and determine what you and your employees really need. AGA can assist you with this and coordinate a survey of your employees. Informed choices will then be easier to make!
Please do not hesitate to contact us for a free assessment of your group insurance benefits plan.
Group Insurance and Group Annuity Plans Advisor | With a Bachelor in finance, Alexandre Timothy understands the challenges and realities of his clients, both from a financial point of view as well as a level of human resources and benefits. With his new outlook in a traditional industry, Alexandre offers innovative solutions to ensure the sustainability of social benefits while meeting the needs of participants and employers. During his ten years of experience, Alexandre has stood out for his creativity and integrity, becoming a highly valued adviser by many of his customers.
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