Understanding Employee Benefit Plans
As Canadian employees rely, to a remarkable extent, on employer-sponsored benefit plans, it is a relief that they cover much more than drug and dental expenses. However, it’s hardly the case that employees understand these benefits well.
Government sponsored individual insurance does give you basic advantages but does not cover all the healthcare costs. This is why it is important to go with a mix of national healthcare, employer’s insurance as well as private insurance if need be. That makes it very important for every employee to understand what advantages employer-sponsored health plans, including life insurance and medical insurance, have to offer to employees.
What Types of Plans do Employers Offer?
Here is what employers can sponsor as benefits to their employees:
- Group Life Insurance
- Accidental Death Insurance
- Dismemberment Insurance
- Extended Healthcare Plan
- Dental Care
- Disability Benefit Plan
Employer’s insurance, just like any other insurance, offers a certain cover amount and certain benefits.
Let’s discuss all these in detail.
Group Life Insurance
Group life insurance insures the member’s (that is, the employee’s) life and pays for the family if they die while being a member of the plan. The insurance lasts only as long as the job with the same employer. The benefit is typically calculated on the basis of a multiple of the insured member’s earnings. At times, you will be offered a flat amount, and at times a mix of the two. Employers may also buy you optional dependent life insurance, which extends additional coverage for your dependents.
Accidental Death and Dismemberment Insurance
This insurance provides additional benefits to the beneficiary of the insured in case of accidental death. In case the insured person gets paralyzed, loses a limb their hearing, eyesight or speech because of an accident, the benefits are paid to the plan member and their family.
Extended Healthcare Plan
Extended health care aims to reimburse all eligible medical claims that are not covered by the provincial healthcare plan of the insured member. For e.g., prescription drugs, eye care, hospitalization, medical services and equipment, paramedical services and support for emergency out-of-province travel.
As the name suggests, dental care from the employer covers preemptive as well as diagnostic dental care and treatment.
Disability Benefits Plan
These benefits are devised to compensate for a part of the insured member’s income in case they are unable to work because of illness or injury. Employers usually pay for a mix of short-term and long-term disability coverage in this case.
Apart from these, there are two more terms that you should be familiar with:
This sort of benefit plans have gained popularity during recent years. Herein, there is no one basic plan for all members. A flex(ible) plan is carved out which included a list of benefit options for the members to pick and choose from. All members are granted a credit limit that is to be allocated to the benefits that they choose. In case the benefit needs a higher credit, the member needs to pay the surplus.
Health Spending Account
At times, this account is offered in addition to flexible benefits. Similar to flexible benefits plan, the insured member receives credits which they can apply to miscellaneous healthcare expenses which may not be covered under their provincial plan or regular employee cover.
Some important questions that you must know the answers to:
What is the employer’s role in managing a plan? Is there anyone else who gets involved in the process?
The employer is the sponsor of the plan. in a typical process, the employer will hire an insurer that provides group insurance for the plan members. It is this insurance provider that will further manage various aspects payment of claims. Employers can also hire benefit plan consultants to help them select the right insurance vendor, apart from dispensing other responsibilities.
In some cases, the employer may choose to fund the claims that are submitted by the plan members. This is called an ASO (Administrative Services Only) plan. The employer pays the insurer to settle as well as report the management of claims. More often than not, ASO plans cover health and dental benefits.
If I leave the employer, does the benefit move with me?
Certain plans can be converted into individual cover within a certain stipulated period of time after you leave an employer. However, since it is not a staple, you will need to talk to the human resource department regarding the same before you leave, especially if the next employer doesn’t offer an immediate comprehensive cover. It is also a great idea to consult a financial planning advisor.
Will I need to make contributions to be a part of a group benefit plan?
Benefit plans are like compensation and are provided by the employer. Nevertheless, in the case of flexible benefits, something maybe charged from you. This is when you opt for a benefit that is over and above the credits that your employer offers. You will then be needed to pay the excess from your pocket. Usually it will be a systematic monthly deduction from your paycheck.
How much does being a member of an employer-sponsored plan help me?
It will help you in five major ways.
- Canadian provincial plans can only offer so much. It is not enough to cover all your healthcare and medical emergency expenses. An additional cover always does good.
- Reimbursed claims are not taxable. So, it benefits you more than a fatter paycheck will.
- Even if you pay excess in case of flexible benefits plan, the premiums will be much lower for members of group insurance as compared to those of individual insurance.
- Since it is a group cover, you don’t need to go through any medical examination to prove eligibility for basic coverage.
- These plans usually cover your dependents as well.