beneplan presentation to eo ottawa - legal, premiums & genetics - april 2015

Beneplan.ca All rights reserved Beneplan Inc 2015

EO Ottawa — The Beneplan Co-operative !

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Legal Issues around Employee Benefits

��1April 2015

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Agenda !

- About Beneplan - Legal Issues - Negotiating Premiums - Genetics & Benefits

��2November 2014

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Who are we?

Bayview Glen School

Perennial

Audit Committee


• Formed in 2000 based on customer demand

• 250+ member-owners

• Members are Ontario SMEs w/ 20-200 employees

• Annual growth rate 35%

• 60% blue-collar industries; 40% white collar

• The only benefits co-operative in Canada of its kind

The Beneplan Co-operative

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• On average, 10% of premiums are refunded as patronage dividends

• 80% of members receive dividends

• Other 20% of members have deficits (claims > premiums) absorbed by co-op

• $9 million in distributions since 2000 as of CY2014

• Source of dividends: health, dental, life ins premiums, tax rebates

• Future sources: drug rebates, LTD refunds

Patronage Dividends

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“As an auto-parts supplier, business has been tough. The $30,000 dividend we received in 2009 helped us through payroll.”

Clover Tool Manufacturing

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“Our teachers pay half the premium. We used our $38,000 dividend to subsidize gym memberships for them.”

Bayview Glen School

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Legal Issues around Employee Benefits !

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��8 Photo credit Jesus Municio/ 500px !

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First, understand the philosophy of the underwriters. !

Group benefit contracts are for employees who are actively at work.

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If you want to cover someone who is not actively at work on a full-time, permanent, regular basis…be careful! !

Why is this important? The lack of medical evidence.

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Independent Contractors (tax issues)

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Why not cover part-timers or seasonal employees? To prevent abuse, and therefore premium escalations.

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“I’m going to work just enough to be eligible for the plan…then claim disability while I lay bricks all summer.”

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Case Study: Label Company !- 60 year old, long standing employee - Wanted more than 4 weeks vacation - Controller gave him an ROE on Dec 1st so he can claim EI instead of giving him unpaid vacation - Employee passed away Dec 23rd - Insurer refused to pay the claim - ‘not actively at work’. - Widow sued and won a settlement.

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Takeaway #1: !

- If you want to cover an employee who will not be actively at work, tell your insurer in advance. - Push to get a Letter of Agreement (LOA) in writing from insurer agreeing to cover. - If you can’t get an LOA, don’t promise benefits to the employee in writing.

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Out of Country Coverage !

- Employees must be educated to refuse to give a foreign hospital their credit card # - Potential liability in case the employee is over-charged - Case study: India

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Takeaway #2: !

- Ask your insurer/broker to host a lunch & learn, educating your employees how out-of-country emergency medical insurance works

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Case Study: Refusal of Benefits !- Employee refused all benefits (including Life & LTD). - Employee signed an email stating he agrees to the risks. - Employee passes away 2 years later. - Widow comes forward - says she had no idea. - Widow sues & wins a settlement. Judge: “[Employer] ought to have known that the employee didn't know what he was doing.”

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Life Insurance was Optional…

…HBC learned the hard way to make it mandatory.Source: Dave Crisp, www.balance-and-results.com Blog

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http://www.balance-and-results.com


Takeaway #3: !

- Make participation in Life & LTD program mandatory of employment. - Just like you work for a company that requires uniforms, you can require participation in a benefit plan.

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Late Applicants !In a group insurance plan, there is no medical requirement to join the plan if they join within the eligibility period. !Key dates: - 1 month after their probation is over; - 1 month after they lost equivalent coverage elsewhere (e.x. spouse loses job); - 1 month after they become an eligible dependent (Date of Marriage; 12 months cohabitation; Date of Birth for kids)

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Why does it matter? !

With no barrier to entry, people will choose to join only when they become sick. This is called ‘anti-selection.’ !

This turns a solid insurance plan into a pyramid scheme which eventually runs out of money.

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“Hello, GEICO? I’d like to buy home insurance…”

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Case Study: Late Applicants !- Employee filled out an enrolment form after 3 months probation. - Administrator forgot to enrol them. - 8 months later, they are diagnosed with cancer and want to claim disability. - Insurer requires Health Evidence & Full Medical before approving coverage. - Employee fails the medical exam. - Employee sues the employer and wins a settlement.

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Take-away #4: !- Make sure employees are added to the plan immediately; - If their employment is terminated prematurely, it’s much easier to terminate their coverage than to try to add coverage late; - Make sure employees know to tell you about new babies as soon as they are born; - … new spouses as soon as they are married; - …new spouses as soon as they become common-law (12 months); - …existing spouses as soon as they lose coverage (going from Single to Family).

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Terminating a Sick Employee !

- Never terminate the employment of an employee who is on sick leave. - OK to give an ROE for ‘Sickness’ but not for anything else. - Never terminate their Life / LTD benefits while they are on sick leave!

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What if the Sick Employee refuses to pay their portion of the premium? !

- Employer should keep paying the premium. - Add the premium onto their T4s as a taxable benefit.

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What if they’ve been on sick leave for years? !

- Courts have said it’s reasonable to terminate only Health & Dental after 12-24 months. - Do not terminate Life / LTD.

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Takeaway #5: !

- Do not terminate a sick employee’s employment or pooled benefits. - Ask an employment lawyer about ‘Frustration of Contract.’

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Employment Standards Act on Benefits !

- Terminated employees… - Employees in Ontario & Quebec are entitled to 1 week of benefits extension per year of service, to a max of 8 years.

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Employment Standards Act on Benefits !- Employees on maternity / parental leave are entitled to have their full benefits in-force, as if they are a regular employee. - “What if they are supposed to pay their portion of the premium?” - Ask for post-dated cheques. - If they refuse, send them 3 letters. - Warn them of consequences. - Can terminate benefits after many warnings. - However, we recommend you eating the cost.

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How insurers set premiums. !


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Group benefits are not insurance. !

They are the opposite of insurance.


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Premiums are set in the same way that your hydro bill is calculated. !

Usage == Premiums.

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TLR !

IBNR !

Trend / Inflation !

Broker commissions


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Ontario Trillium Drug Program !

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RAMQ


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Refunds on… !

Life Insurance Long Term Disability Stop-Loss Premiums


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Ask for annual refunds of premiums if claims < premiums. !

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Ask if claims > premiums, can they absorb that risk?


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Retail Sales Tax Rebate


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Drug Rebates from Manufacturers (Reformulary)


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Genetics


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Full Disclosure: !

One of the partners at Beneplan is investing in this industry.


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Insurers will not require genetic tests in order to get covered. However - if it’s part of an existing medical file, which the patient

consents to sharing with the insurer,they will consider the data.

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Thank You !!

Yafa Sakkejha General Manager

[email protected] !

The Beneplan Co-operative 150 Ferrand Drive Suite 500

Toronto Ontario M3C 3E5 1.800.387.1670

beneplan.ca

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beneplan presentation to eo ottawa - legal, premiums & genetics - april 2015

Business

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eo ottawa

legal issues

employee benefits