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General Employee Benefits Questions

What is the implementation process when I sign up for a Benefits plan with BF Partners?

Signing up for a benefit plan is easy. A master application is signed by the employer, laying out the details of the plan design selected. A deposit check is required (premiums are paid one month in advance). Finally, each employee completes an enrolment form, so the insurance company knows who it I allowed to pay claims for. Once all documents are received, setup takes 6 to 8 weeks.

When the plan is all set up, each employee will receive a full benefit plan communication package, detailing the coverage they have, and how to make a claim. Further communication is recommended, including employee meetings to explain the plan and ensure employees fully understand and appreciate what the employer is putting in place for their benefit.

What are the tax benefits associated with an Employee Benefits plan?

Unlike almost any other area of the CRA Tax Act, an employer can pay 100% of medical, dental and Visioncare premium costs, write off those premiums 100% as a business expense, and those premiums paid by the employer are NOT a taxable benefit to the employee! Talk about having your cake and eating it too! (And, with proper structure, the owner’s benefit plan premiums are treated the same as regular employees: deductible for the business, not a taxable benefit for the owner Read More

Do I have to offer the plan to all my employees?

No. You can offer benefits to certain classes of employees, and not to others, or better coverage to one class vs another. As long as the class distinctions are clear and not random. Common is a Management class, and an All Other Employees class, with different levels of coverage.

Is there a waiting period for new hires before I have to give them coverage?

Yes- that is a plan design decision you make. 3 months and 6 months after date of hire are most common. You can waive the waiting period to zero for a critical new hire.

Does each eligible employee have to join the plan?

Yes for benefits such as Life Insurance and Disability coverage. For Medical and/or Dental: Yes, coverage is mandatory unless the employee shows they are covered by a spouse. The reason is for cost and risk sharing: if people could pick and choose, only the unhealthy employees would choose to join, and Group coverage would be impossible.

Can I split the premium costs of the benefit plan with employees?

Yes, that’s quite common. 50/50 is quite common. Also common is having employees pay for the Insurance coverages like Life and Disability, and the company pays extended medical and dental.

Is a benefit plan hard to administer?

No. Insurance companies make it very easy, with online systems and processes. You must update the insurer with new hires + terminations, salary changes (only if you have insuranc coverages) and status changes when an employee goes from single to family coverage

Benefit Plan Costs

Will I pay the same as the business down the street? They have the same number of employees.

No. Your employees may all be young and single, whereas the other company may have older employees who all have families. The other business could be a higher risk one as well, which is especially relevant for the insurance benefits. Rest assured BFP will get you the best possible rates specifically for your business!

Traditional Max Protection Fully Insured Plans

How long are my dental and medical premiums fixed for?

On plan startup, rates are fixed regardless of claims experience, for 15 to 16 months. Rates change every 12 months thereafter.

After my first year, how are my dental and medical renewal premiums determined?

After your first year of having a plan, renewal Premiums are determined in large part by the level of paid claims for your plan. Higher claims = higher premiums. For a good, low rate increase renewal, claims should generally be about 65-70% of paid premium (this ratio is higher for bigger businesses, lower for very small businesses). This ratio, claims divided by premium, is called the Loss Ratio. Also important is How valid or “credible” the claims experience is- a small company with 2 or 3 employees generally has low credibility. Low credibility means your renewal rates are determined only partially by the paid claims your employees made, with the balance of the renewal rate calculation based on the Insurance company’s overall claims experience.

Is there a maximum amount of extended medical claims an employee can be paid?

Generally no. there are limits for a large number of categories of claims, (for example, $300/year for massage and $150 every 2 years for glasses), but no overall combined annual maximum. This is especially important for drugs: there is generally no annual maximum limit for drugs.

What happens to my costs next year if an employee has really high drug claims?

Each extended health plan has a special insurance policy built into it to limit the costs to your plan. This special insurance is called Stop Loss (also called Large Claim Pooling). Your plan is charged for the first $7,500 to $10,000 per year in claims for an individual your plan covers, then the Stop Loss insurance pays the rest. Your Stop Loss premium doesn’t go up based on your claims-in goes up based on the overall claims of the insurance company.

How many high cost drugs are there?

In 2015, there were 124 drugs available in Canada that cost more than $10,000 per year. That number is growing rapidly: there were just 20 drugs in 2005 that cost more than $10,000/year. In 2015, 20 of those 124 drugs cost more than $50,000 per year.

New Flat Max Plans

Who Would Use a Flat Max Plan?

The Flat Max plan has been created for Small Businesses who currently don’t have a benefit plan, but want to offer one. They need a “starter plan” one that provides good coverage, but also offers absolute 100% fixed annual costs.

This seems like a really good idea, having my annual premium costs fixed forever unless I increase the annual allowable maximum claims each employee can be paid. Whats the downside?

A Flat Max plan is 100% better than not having a plan. However, a Flat Max plan can’t deal with high drug and other medical costs as well as a Fully Insured plan.

Whats different about coverage for high cost drugs?

Just like fully Insured plans, Flat Max plans have Stop Loss/Catastrophic coverage to pay high drug costs. But, the claim limit is much lower, leaving employees exposed. Flat Max plans allow drug coverage of $25,000 per year for up to 2 years for a newly diagnosed illness. Fully insured plans generally offer unlimited annual coverage, with no cutoff after 2 years.

How cost efficient is a Flat Max plan?

Very. Total plan costs = paid claims +10%. This is quite a bit lower than a Fully Insured plan.

Why would I consider a Flat Max plan then?

The way we look at this is on a paid claims basis. This is a chart showing actual employee by employee paid claims for one of our clients, who had 49 employees. They had a Max Protection plan. The top claiming employee received about $4,700 back. The level of claim reimbursement falls rapidly, with low claiming employees under $500 in paid claims. If they had a Flat Max plan, with a $2,000 annual maximum claims, employees #1 through 15 would have received significantly less in paid claims. Employees 16 through 49 would have been paid more, as Flat Max has no annual limits on each category, and allows claims for items the Max Protection Plan wouldn’t such as glasses and orthodontics. For the business, the Max Protection plan had a modest rate increase the following year. A Flat Max plan would have zero cost increase, as the maximum claim limit would have still been $2,000.
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