Group Insurance can be a complex realm and there’s a lot of misconceptions out there! We’re on a mission to set the record straight, so bear with us as we debunk the 8 most common group insurance myths.
Myth #1: “I can’t get insurance with a pre-existing condition.”
This is one of the most common group insurance myths and it’s certainly not so. With group health insurance, Insurers do not request medical evidence in order for an employee to be eligible for coverage. This is one of the many advantages of group insurance. If a pre-existing condition exists, the Insurer does not request this information and is thus not a factor in obtaining group insurance through an employer. An exception to this rule is when an employee is applying as a late applicant.
Individual health insurance can be obtained without providing medical evidence as well, either through conversion of benefits when leaving a job, or by purchasing certain individual plans that do not require medical evidence, such as Green Shield Canada’s (GSC)’s Health Assist™.
Myth #2: “I’m young. I don’t need insurance.”
The assumption in this case being that young people are generally healthy and thus don’t “need” insurance. Let’s break down this group insurance myth in two parts:
“Young people don’t need health insurance.”
Firstly, oral health has been shown to have an effect on a person’s overall health and with a dental plan, employees can maintain good oral health from a young age, when it’s most impactful.
Secondly, accidents can happen to anyone — even a healthy young person. Coverage for antibiotics, hospital stays, emergency travel or medical braces could save an employee thousands of dollars.
And thirdly, employees with dependents gain additional benefits, as their children and spouse would be covered as dependents on the plan.
“Young people don’t need Life Insurance.”
There is a common misconception that the younger a person is, the less likely to die, and therefore the less they need Life Insurance. Though it’s true young people are statistically less likely to die, the idea that this means they need Life Insurance less is actually closer to the reverse in many cases.
If you have debts and dependents — a spouse, children, a mortgage, car payments — then this is the most important time to have Life Insurance coverage. In this case, if you were to pass away, Life Insurance would be paid to your named beneficiary (typically your spouse), leaving your family with a safety net to pay debts and provide a buffer while they figure everything out.
As you get older, your children leave the nest, your mortgage is paid off or much lower, perhaps you’re even retired, the need for a safety net might decrease. Likewise, young, single people with no dependents and minimal debts may not feel they need Life Insurance. It all depends on a person’s lifestyle and needs!
Myth #3: “I can’t have more coverage than what’s offered by my employer.”
This is not true. Individual insurance can always be purchased to supplement employer-provided benefits, including Extended Health Care (EHC), Dental, Life, Accidental Death and Dismemberment (AD&D), Critical Illness Insurance, and more.
Additionally, you may be eligible for Optional coverage through your group benefits plan, allowing you to increase the benefits of certain coverages. For example, if your Life Insurance coverage offers you $50,000, you may wish to increase it to cover more of your debts (mortgage, car payments, lifestyle for your family). In that instance, you could apply for optional coverage to better protect your loved ones in the event you are no longer able to provide an income.
Myth #4: “I have coverage through my spouse. I don’t need two plans.”
Having coverage through a spousal plan in addition to your own can actually allow for fuller and more comprehensive coverage through coordination of benefits. This allows the two plans to work together to provide coverage.
For example, let’s assume you’re having a dental procedure done and your employer’s plan covers 50% of the cost, and your spouse’s plan offers the same coverage. Through coordination, your plan could cover the first 50% of the cost, while your spouse’s plan picks up the other 50%, leaving you with nothing to pay out-of-pocket.
Coverage that comes through a spousal plan also does not provide coverages like Life Insurance, AD&D, Critical Illness, or Disability Insurance.
Coordination of Benefits: Can I Have More Than One Benefit Plan?
Myth #5: “Traditional, fully-insured benefits plans are the best.”
This is one of those group insurance myths that is hard to shake, because it’s no secret that traditional, fully insured benefits plans are what people likely think of when they consider “insurance”. There are many different ways in which to provide benefits coverage for your employees. Fully insured benefits, though very common, are not always the best option.
For example, Administrative Services Only (ASO) plans can actually offer employers some hefty cost-savings under the right circumstances. Under an ASO plan, employers only pay for what is claimed by employees, rather than a set monthly premium.
ASO plans may be viable options for larger, well-established employers with stable claims experience.
[Case Study] How this Not-for-profit Saved Costs Through an ASO Plan
Another option is offering a Health Care Spending Account (HCSA) or Personal Spending Account (PSA). These spending accounts offer cost-containment and predictability and can be fully customized to cover only specific expenses if desired. The tradeoff is that they generally do not offer coverage for high-cost drugs or expensive treatments not covered by the government.
Spending Accounts like this may be viable options for employers looking to control costs while offering some coverage, or as an add-on to existing fully insured benefits.
Myth #6: “I need a minimum number of employees in order to offer any benefits.”
Although most Insurers will have a minimum number of employees required for a fully insured plan, other options exist. For example, Health Care Spending Accounts (HCSA)s and Personal Spending Accounts (PSA)s can provide health and wellness coverage for employees, regardless of the number covered.
Employers may also run into additional barriers with fully insured plans when it comes to a minimum number of employees. Specifically in what we call “family content”, which refers to the number of employees who are related. Typically, this is set to 50%, meaning that no more than 50% of the employees can be considered family members. Though it’s true that this can sometimes be an obstacle for small, family-owned businesses,, HCSAs and PSAs do not have this requirement.
Myth #7: “Benefits cost a lot of money and the costs seem to vary.”
They don’t have to! In case you weren’t tired of us talking about HCSAs, here is one more reason they are great: they provide cost containment! Since employers can set a predetermined allotment per employee, they can pre-calculate the maximum amount of benefits they’ll pay for the year!
Based on the findings from our own block of business and the results of the 2020 Sanofi Canada Health Care Survey, we determined that employees use between 30% – 60% of their total HCSAs allotments. Employers can budget for their maximum benefits and use the 30% — 60% as a guideline for what they might actually be required to pay.
Download the Report: The State of Health Care Spending Accounts
Benefits, whether traditional or not, are also a tax incentive for employers, which sort of reduces the cost of the programs by helping you back a bit more at tax time. Plus, benefits plans are a great tool for attracting and retaining top talent, which offers savings of its own. Retraining employees can be more expensive than offering employee benefits to the already trusted, trained employees that are there.
Lastly, providing benefits to employees is more beneficial for both the employer and the employee than a pay raise is:
- Employees take home significantly less after federal and provincial deductions (only $0.60 in some tax brackets).
- That extra $1.00 an hour will cost you about $1.29 an hour after you pay the government.
- There are no guarantees employees will save money for emergencies, leaving both them and you in a tight spot should the worst happen.
Myth #8. “I don’t need travel insurance when travelling within Canada.”
This is one of those group insurance myths we’ve debunked before, but it still persists, so we’re reiterating it here. Many Canadians believe that since we have health coverage in Canada, we can go wherever we wish in Canada and have the same protection we would get at home.
However, since our coverage is through the provincial or territorial government, not all provinces offer the same coverages, especially for an expensive emergency. This could leave you with thousands in medical bills in the wrong circumstance, such as this woman with a near $13,000 bill for an air ambulance after. For the best protection when travelling, even within Canada, travel insurance is a must.
So there it is — the most common group insurance myths, debunked!
Questions? Please give us a call, we are here to help!
Borrowed from BBD Blog https://www.bbd.ca/blog/group-insurance-myths/, August 24, 2021.