Why Insurers Require 100% of Eligible Employees to Enrol in an Employee Benefit Plan?

There are many factors that Insurers require in order to provide your business with a long term and viable Employee Benefit plan. One main criteria is anti-selection. Typically employees can choose to go on a Benefit plan and those who need to claim health expenses will join. Often healthy employees who don’t anticipate high heath expense claims will decide not to go on the plan. Insurers try and avoid anti-selection since a mix of low and high claiming employees is needed in order to make a plan financial viable for the insurer and therefore beneficial to the employer.

From your position as the business owner, having employees choose whether or not to go on the plan is an “administration nightmare” considering some employees would want to not join, then join later when they have claims, then go off again. And getting on the plan in the future is also not simple. If an employee is not enrolled when you they were eligible, they are treated as a late applicant, with full medical underwriting, and severe restrictions in dental claiming in the next 12 months even if medically approved.

The worst case for the employee and employer is when an employee does not enrol in a Health Benefit plan and then becomes disabled or dies. This is a potential legal liability for the business owner, as they could be sued by the employee/employee’s estate claiming they were not told about enrolling in the plan and what happens if they did not enrol.

It’s therefore far better to make the plan a condition of employment, explained when you hire them, forms completed at time of hire, and automatically submit paperwork when they reach the end of the eligibility waiting period.

One area of enrolment flexibility employees do have is for Extended Health, Visioncare and Dental. If an employee can show they already have coverage through their spouses plan, they can “waive” or not take those benefits. They still have to take all other benefits they don’t get though their spouses plan. That would include Life Insurance, Accidental death/loss of use, critical illness long term and short term disability.

BF Partners is a Financial Service company offering Employee Benefits and Financial Planning/Pension advice for businesses and business owners. The BFP brand stands for quality, integrity, commitment and professionalism. Click here for more information on BF Partners Employee Benefits plans.

Mark Bajus - CEBS, CLU, CFP - is the Director, Group Benefits for BF Partners. Learn more about Mark.