Optional Life allows employees and their spouses to buy additional life insurance, at their own expense, to supplement the Basic Life coverage. Schedule of Insurance
Optional Life is most commonly offered in units of $10,000 to a maximum of $200,000 or $250,000.
All amounts of coverage are subject to evidence of insurability.
Employees and their spouses, under age 65, may be entitled to convert their Optional Life coverage when the group coverage terminates. Spouses may also be eligible for conversion upon the employee’s death.
There are two products designed to provide income replacement benefits in the event the employee becomes disabled and is unable to work.
Weekly Indemnity
Long Term Disability
WEEKLY INDEMNITY
Weekly Indemnity (WI) benefits are designed to replace a portion of the employee’s income which is lost due to a short-term absence. Schedule of Benefits
The reimbursement percentage is typically 60% to 66.7% of gross weekly earnings for non-taxable plans and 70% to 75% for taxable plans.
Overall Maximum and Non-Evidence Maximum (NEM)
The overall maximum WI benefit a carrier will offer is based on the size of the group.
A certain amount of WI insurance may be available to all employees without evidence of insurability. Employees eligible for additional coverage are required to submit evidence of insurability.
Taxability Status
If the employer pays any portion of the WI premium the benefit payments are taxable income to the employee.
If the employee pays 100% of the premium the WI benefits are non-taxable.
Elimination Period
The elimination period is the length of time between the date the employee becomes disabled and the date WI benefits commence.
There is typically no elimination period for disabilities resulting from an accident and an elimination period of between 4 to 7 days for disabilities resulting from sickness.
Benefit Period
The benefit period is the length of time benefits will be paid after the elimination period.
Typical WI benefit periods are 13, 26 and 52 weeks, with 26 weeks being the most common.
Recurrent Disability
Successive periods of disability caused by the same sickness or injury are considered to be one period of disability unless the employee had returned to work for 2 weeks or longer.
Termination of Coverage
Coverage generally terminates at the earlier of age 65 or retirement. However, some carriers extend coverage to age 70 for active employees.
LONG TERM DISABILITY
Long Term Disability (LTD) is disability income insurance similar to WI but is designed to provide benefits for an extended period of time for severe and prolonged illnesses or injury.
Schedule of Insurance
The reimbursement percentage options are the same as those offered under WI plans.
Graded schedules are also available under non-taxable plans in order to minimize the clawed back effect of the 85% all-source maximum for higher wage earners.
Overall Maximum and Non-Evidence Maximum (NEM)
The overall maximum LTD benefit a carrier will offer is based on the size of the group.
A certain amount of LTD insurance may be available to all employees without evidence of insurability. Employees eligible for additional coverage are required to submit evidence of insurability.
Taxability Status
If the employer pays any portion of the LTD premium the benefit payments are taxable income to the employee.
If the employee pays 100% of the premium the LTD benefits are non-taxable.
Elimination Period
The elimination period will usually correspond with the length of time benefits are paid under the group’s WI or short-term salary continuance plan.
Definition of Disability
The definition of disability relates to the employee’s ability to work and will determine whether or not they are entitled to benefits.
The two most common definitions are: “own occupation” and “any occupation”.
Under the own occupation definition the employee must be unable to perform the essential and material duties of their own, or regular, occupation.
Under the any occupation definition the employee must be unable to perform the duties of any occupation for which they are fitted, or could become fitted, by training, education or experience.
Most plans determine eligibility during the first two years of disability based on the own occupation definition and the any occupation definition thereafter.
Although not standard in most contract, many carriers also offer partial and residual disability coverage which provides a benefit for disabled employees who are able to work in a reduced capacity.
Waiver of Premium
Once an LTD claim is approved the premiums for the coverage are waived until the employee recovers and returns to work.
Benefit Period
The benefit period is the length of time LTD benefits will be paid.
The most common benefit period is “to age 65”, however, most carriers also offer 2 or 5 year benefit periods.
Pre-existing Conditions Exclusion
Most contracts exclude coverage for 12 months for any condition that was present in the 3 month period immediately prior to the effective date of the employee’s coverage.
When there is a change in carrier the employee’s original effective date of LTD coverage will be used when administering this provision.
Recurrent Disability
Successive periods of disability caused by the same sickness or injury are considered as one period of disability unless the employee had returned to work for 6 months or longer.
Integration of Benefits
LTD benefits are integrated with, or offset by, income the disabled employee receives from other sources.
This additional income is considered either a “direct” or “indirect” offset.
LTD benefits are automatically reduced by direct offsets which generally includes WSIB and Primary C/QPP Disability benefits.
If the LTD benefit, combined with the income the employee receives from other sources, exceeds the contracts “All Source Maximum” (typically 85% of their pre-disability earnings), then the LTD benefit is further reduces so that the total income doesn’t exceed the 85% threshold. These additional sources of income are referred to as indirect offsets.
Indirect offsets typically include: no-fault automobile indemnity payments,
retirement benefits, disability benefits from any group, association or franchise insurance plan, any third party settlement received which is related to the disability, and any salary continuance from the employer.
Cost-of-Living Adjustment (COLA)
Most carriers offer a COLA, usually between 2% and 5%, as an optional benefit.
The monthly LTD benefit is increased annually (January 1st) by the lesser of: CPI or the COLA percentage indicated in the contract.
Survivor Benefit
The survivor benefit, if include, provides a lump sum payment usually equal to 3 times the monthly LTD benefit to the spouse and dependents of a deceased claimant.
Termination of Coverage
LTD coverage ceases at the earlier of age 65 or retirement.
Extended Health Care (EHC) provides benefits for expenses and services not covered under the provincial health plan. Covered expenses typically include the following:
Prescription Drugs
Semi-Private or Private Hospital Room
Paramedical Practitioners such as: Chiropractor, Podiatrist, Osteopath, Naturopath, Massage Therapy, Speech Therapist, Physiotherapist and Psychologist.
Medical Services, Equipment & Supplies
Ambulance
Accidental Dental Treatment
Out-of-Canada Coverage
Vision Care (optional)
Drug Plans
For most EHC plans, Drugs represent the largest expenditure equaling between 70% to 85% of all paid health claims.
There are various components to the Drug plan which include:
Definition of eligible drugs,
Brand-name or generic drugs,
Inclusion of life-style drugs, and
payment method of either reimbursement or pay-direct
Deductibles
Deductibles require the employee to share the cost of their medical claims by contributing a fixed amount annually.
Pay-direct drug plans may include a 'per prescription deductible' ranging from $1, $2, $5, $10 or a deductible “equal to the dispensing fee”.
Dispensing fee caps are an alternative to a drug deductible.
Co-Insurance
Most plans pay 100% for Semi-Private Hospital Room charges and Out-of-Canada expenses.
The balance of the EHC plan may have a different co-insurance factor, such as 70%, 80% or 90%.
Co-ordination of Benefits (COB)
The provision identifies which insurer is first and second payer, when the spouse also has group health coverage, and ensures that each family member’s claim is first submitted to the appropriate insurance company.
Termination of Coverage
Coverage generally terminates at the earlier to age 70, or retirement.
Dental coverage is deemed a very valuable benefit to employees because, unlike health insurance, almost all employees and their families will use the benefit. There are basically three types of dental plans available:
Basic Treatment covers routine services such as exams, x-rays, cleaning, fillings, endodontics, periodontics, extractions and oral surgery.
Major Restorative Services includes crowns, bridges, onlays and dentures.
Orthodontia coverage provides for braces and space maintainers required to straighten teeth.
Pre-Determination of Benefit
It is advisable to submit a detailed treatment plan, for pre-authorization, if the proposed dental procedures are expected to exceed $500.
Deductibles
Deductibles require the employee to share the cost of their dental claims by contributing a fixed amount annually.
Co-insurance
Co-insurance levels typically range from 80% to 100% for Basic Treatment; 50% to 80% for Major Restorative Services; and 50% to 60% for Orthodontia.
Per Person Maximums
Various options are available under Basic Treatment plans ranging from $750 per year to unlimited.
Major Restorative Services are usually capped at $1,000 to $2,500 per year.
Orthodontia has a lifetime maximum per person which usually ranges from $1,000 to $2,500.
Fee Guide
Most contracts reimburse all eligible dental expenses in accordance with the “current” provincial dental fee guide (except Alberta) for General Practitioners.
Some carriers offer, for an additional premium, reimbursement based on the applicable Specialist’s fee schedule.
Co-ordination of Benefits
The provision identifies which insurer is first and second payer, when the spouse also has group dental coverage, and ensures that each family member’s claim is first submitted to the appropriate insurance company.
Termination of Coverage
Coverage generally terminates at the earlier to age 70, or retirement.
An Employee Assistance Program (EAP) provides quick access to professional counseling and referral services for employees and their families, on a confidential basis, when they are experiencing personal problems.
The services are provided on a 24/7 basis, 365 days a year and generally include the following:
Access to a 24 hour hot-line for crisis situations
Face-to-face short term counseling with a trained professional
Referral to community resources if the short term counseling isn’t expected to resolve the problem
Telephone counseling
Critical Illness (CI) insurance provides a lump sum payment to the insured individual in the event they are diagnosed with a covered illnesses, such as, but not limited to:
Heart attack
Stroke
Life threatening cancer
Alzheimer’s disease
Parkinson’s disease
Multiple Sclerosis
Coronary artery bypass surgery
Major organ transplant
CI insurance is intended to bridge the gap between life and disability insurance and group health benefits.
The product’s purpose is to provide the insured and their family with financial peace of mind so that they can focus on recovery.
The individual can use the CI benefit for whatever he/she desires.
A Health Spending Account (HSA) is an individual employee account, funded by employer contributions, that provides for reimbursement of certain health and dental expenses.
Eligible expenses include anything that the Income Tax Act (Section 118.2 (2) and listed in Interpretation Bulletin 519) allows as an eligible medical expense and may include, but are not limited to:
Deductibles
Co-insurance
Dental Implants
Cosmetic Surgery
Laser Eye Surgery
ED Drugs
The benefits the employee receives are non-taxable.
HSA accounts may be established based on a fixed dollar amount, a percentage of the employee’s salary or some other factor such as years of service.
Two types of “carry-over” plans are offered: Expense Carry-Forward or Credits Carry-Forward.
The Canada Revenue Agency (CRA) requires that any unused benefits be forfeited after two years in order for the HSA to qualify as a Private Health Services Plan, and thereby, receive favorable taxability status.
Flexible benefit plans are an alternative way for employers to deliver benefits to their employees by using “flexible” options that are not always available with traditional group plans.
Employees are able to select the type and level of coverage from a menu of available benefit options.
These programs permit employees to build an individualized benefit program that most closely meets their coverage needs and budget requirements and to change their benefit elections over time as their life circumstances change.
Flexible benefit plans are generally paid for using “flex credits”. The flex credits are a defined contribution based on either a flat dollar amount or a percentage of the employee’s salary. The employee then allocates his/her flex credits to various benefits according to what they need.
There are basically three types of flexible benefits plans:
Modular Plan
Core Plan plus Options
Cafeteria Style
Administrative Services Only describes all the services an insurance carrier or claims payment provider could provide, other than the undertaking of the particular insurance risk.
The insurance carrier or claims payment provider is contracted for the sole purpose of either administering the plan and/or adjudicating claims on the employer’s behalf.
The party administering the claims doesn’t establish any reserves and the entire financial risk is borne by the employer.
In order to protect the employer from unforeseen financial risk ASO plans usually include a pooling feature, commonly referred to as stop-loss protection.
The stop-loss protection may be applicable to all In-Canada Health benefits or, in some cases, only the Drug benefit.
There are several different methods of funding ASO plan costs:
Monthly deposit rates similar to premium rates;
Level monthly deposit (i.e. a flat dollar amount); or
The service provider bills at the end of the month for paid claims and expenses.
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