In our most recent article titled ‘5 Most Commonly Asked Questions about Starting a New Benefit Plans’, question 3 touched on a very important fact: participation in an insured group benefits plan is mandatory for employees. In Canada, companies are not obligated to offer a group benefits plan. However, once they do, Canadian insurers require that employees get with the program. It becomes the responsibility of the employer to make sure that if an employee does opt out of their benefits plan, it is because they meet the following exemptions:
1. They are already covered under a spouse or common-law partner benefits plan; in which case an employee can waive health and dental benefits but are still required to stay on any protection based benefit such as life and disability insurance.
2. They are not physically present due to a leave of absence such as disability or maternity. Keep in mind that there are legislations governing how long the employees are to stay on a plan depending on the province of residence.
Why is it important for employers to enforce participation?
While insurers dictate employee participation in group benefits plans, there are still companies that do not do their due diligence in ensuring their employees meet those exemptions upon receiving an out opt of their plans. Here are two reasons why taking their word for it, is not only a bad business decision, but could cost the company more than just money.
1. Liability Issues: There could be legal implications which stem from not enforcing participation in a benefits plan, and companies should seriously ponder those implications. If for any reason, an employee finds themselves paying out of pocket for large medical expenses, they could legally pursue the company and target the organization’s negligence in upholding their participation in the benefits plan. Neither the employee who opts out nor the company who lets them could anticipate anything like this occurring, but the fact is it can. As benefits consultants, we strongly recommend that companies enforce participation in their group benefits plan to protect themselves from potential legal repercussions later on. We can also guide the company and its employees through exemption criteria and help streamline any concerns.
2. Overall Plan Collapse: Another consideration to make is the inevitable rising costs per individual and the ensuing failure of the group benefits plan. Group plan quotes are initially provided by insurers based on employee census data provided by the company, with the assumption of full participation in the plan. Some people might claim more than others, which balances out the break-even loss ratio that insurers generally seek to maintain. Employees who opt out are generally those who see no value in the plan because they are claiming very little. This means that those who do decide to continue participating will be submitting higher-than-average claims, driving an inevitable plan cost increase year after year. At some point, the plan itself might even become too costly for the high claimers. The result? The plan will fail, and the company will be starting from scratch, hopefully with a new benefits plan consultant.
Neither of these two scenarios should ever occur. Group benefits plans are put in place to ensure the health and wellbeing of a company’s most important asset: its employees. For that reason alone, proper enforcement needs to be monitored and upheld. Working with a knowledgeable and trusted benefits plan consultant assists companies in navigating any hurdles or uncertainties, while keeping employees interested in these added-value perks.
Whether you are with a business, association, or owner operator, we have the solution for your needs.