What is Group Benefits Insurance?
Group Health Insurance (or Group Benefits Insurance) is a type of insurance that is offered to a group of people, usually through their employer. Health insurance, life insurance, disability insurance, and other types of coverage are examples of these benefits. The primary benefit of group benefits insurance is that it allows employees to obtain insurance at a lower cost than they could individually. This is due to the fact that group insurance plans can negotiate lower rates with insurance carriers than individual plans. Furthermore, group benefits insurance can provide employees with more comprehensive coverage than they could obtain on their own. Employers typically pay a portion of group insurance premiums, and employees may be required to contribute as well. This helps the employees to be financially prepared for unexpected health related issues.
What are the Benefits of Group Insurance?
Offering a group benefits plan to your employees could increase how engaged your employees are with your company and business more than simply giving workers a raise in pay. Here are three major reasons:
- Benefits can be a tax-effective way to compensate your employees—health and dental benefits are tax-free for employees in all provinces except Quebec (other exceptions may apply.)
- You can help protect the well-being of your employees and their families by assisting them to manage their health and wellness, creating a sense of security and belonging.
- You can improve team member appreciation and loyalty by conveying your support for your employees beyond their day-to-day work.
Who qualifies for Group Benefits Insurance?
Full-Time Employees/Members of an organization. Group plans can be created with two or more Employees/Members.
What if my spouse already has a Group Benefit Plan and I’m covered already?
When someone is covered by more than one group benefits plan, the plans work together to pay any claims. This is called “Coordination of Benefits.” The way it works is you can submit your claim to your benefits plan first, for payment according to your coverage. Then you can submit a claim for the remaining amount to the second plan and it will be paid according to the coverage of that plan. Note: The reimbursement under both plans won’t exceed more than 100% of the original claim amount.
What are the key points for a successful group benefits plan?
Build a Group Employee Benefit program whereby the employer pays 100% (except for long-term disability (LTD), where the employee pays 100% of the premium) of the plan.
The option for employers to pay 100% of premiums. This is helpful when renewal increases arise because it is often difficult for business owners to take premium increases to employees. When employers pay 100% of the premium, the employer is the one responsible for the increase and not the employees.
It’s all about being informed for owner and employees, often they have no idea that the price changes year to year based on usage.
For some clients, to make group affordable, the plan may involve using large coinsurance’s e.g., 50% coinsurance on EHC or Dental (usually 80% with a $50 Single / $100 Family deductible)
The owner who is communicating that the plan is mandatory and part of their “total compensation package”.
Which benefits do employees pay?
LTD is usually employee paid so the benefit is tax-free at time of claim.
Any additional amounts the employer wishes to pass on to the employee (assuming the LTD is not enough) can be either:
Paying 100% of the Life, AD&D, and Dependent Life and Critical illness benefits
A percentage of the EHC and Dental.
Which benefits do employers pay?
Group Plans are flexible and can be setup to match the needs of your business and its employees. However, the greater the contribution from the employer, the greater the chance of implementing a plan. If the employer covers the cost of the Extended Health Care (EHC) and Dental, it will really go a long way to getting a plan in place.
Here’s some general tips and guidelines:
Employers can pay the premiums for the Life Insurance (Life), Accidental Death and Dismemberment (AD&D), and Short Term Disability (STD) (note: STD would then be taxable) with the Life Insurance premium charged to the employee as a taxable benefit, rather than have employees pay the premiums.
The employer offers health and dental benefits to all employees (and their immediate family).
The employer offers to pay 100% of the single rate for ALL Employees. Employees with families pay the difference between the single and family rate. For example, if the single rate = $50, and the family rate = $150, then the employees with a family pays the $100 difference.
Are there any tax issues to consider with Group Benefits?
To maximize tax efficiency and to help with cost sharing, the employees should pay for the Life, AD&D, Dependant Life, and Long Term Disability (LTD). This will ensure that Life, AD&D, Dependent Life are not taxable benefits. With LTD, the employee would receive non-taxable benefit at the time of a claim.
What are the best ways to keep the cost down for new groups?
With the introduction of many specialty medications, and the rising overall cost of drugs in the marketplace, groups can always consider implementing what’s called a Drug cap (perhaps $2,000).
A Drug cap allows for the majority of basic medications to be covered, however, it will cap out any high cost claims, or employees taking several medications that add up to more than the Drug cap maximum.
The Drug cap reduces the insurance company’s risk significantly and there will be large reductions to the EHC premiums which will increase the affordability of a basic plan.
Having 80% co-insurance, a dispensing fee deductible on drugs (this is often overlooked), mandatory generic drugs, and combined paramedical maximums can all be nice cost containment features.
Once the plan is up and running it can always be enhanced over time as the company grows.
How do I buy group health insurance?
Contact one of our Group Benefits Consultants to review and customize a plan based on your organization’s unique needs.
