Experts answer your questions
Q: An employee is covered under our benefit plan, and his wife is covered under her company's plan. Who should claim prescription drug expenses for the children?
A: The CLHIA (Canadian Life and Health Insurance Association) stipulates that the parent whose birthday occurs first in the year should claim children’s expense. So if the employee was born August 23 and his wife's birthday is February 7 (the actual years don't matter), the children's expense should first be submitted to his wife's plan.
Q: What is the “Dental Fee Guide”?
A: The Dental Fee guide is the list of procedural codes and associated fees for dental treatment. Each province publishes their own Fee Guide (with the exception of Alberta).
As dental fees are not regulated in Canada, general practitioners and specialists are not obliged to charge the fees listed in their provincial fee guides. While the annual provincial fee guides are provided as a reference, practitioners are free to determine the fees they wish to charge for their services.
An insurance company will use the applicable provincial general practitioners’ fee guide or the actual fee charged by the practitioner, if lower, to calculate reimbursements for dental services. Applicable fee guides may vary by group plan. (i.e. some plans may use the current Fee Guide, and some may employ a previous Fee Guide as a cost saving measure.)
Note: The Alberta Dental Association and College does not publish a suggested fee guide. Each insurer establishes its own reimbursement levels, based on analysis of their book of business.
Q: What is an Non-Evidence Maximum (NEM)?
A: An NEM (Non Evidence Maximum) is the amount of Insurance (usually Life, Critical Illness or LTD) for which an individual will qualify, without needing to provide evidence of good health. The NEM is driven by the size of the group; generally, the more employees, the higher NEM.
Q: What are the tax consequences if the company pays the LTD premium?
A: If the employer pays the LTD premium on behalf of the employee, any LTD benefits that are received are considered taxable income. If the employee pays the premium, any LTD benefits that are received are considered non-taxable income.
Q: Which factors affect premium and renewal rates?
A: Premium and renewal rates are affected by a number of factors. Some of those include:
• The demographics of the company
• The occupations of the employees
• Claims paid
• Premium paid
• Incurred claim levels
• Inflation
• Utilization trends
• Insurance company expense levels
• Performance of the Insurance Company’s “pool” of similar business
Q: Can an employee waive benefits?
A: Generally, in a traditional (Non-Cafeteria) insured benefit plan, an employee can waive health and dental care if they are currently covered by another plan (for example their spouse’s), but they cannot waive LTD, AD&D and Life insurance.
Some insurance companies will allow a 75% pr 80% participation rate; but the employee must choose all benefits or none. This type of arrangement will be more expensive over time, due to adverse selection.
Q: We have a Group RRSP established for our employees and the company contributes 6% of pay. How do I record this on the T4?
A: The company RRSP contribution is considered a taxable benefit to employees, and therefore is reported as part of Box 14, which is titled Employment Earnings. You would enter the RRSP Contribution amount on the T4A in the Other Income box. The employee will receive a tax receipt for the value of the contribution, which can be then deducted against his/her income when filing income taxes.
Q: At our last renewal, our broker was talking about Incurred Claims. What is that?
A: Incurred Claims are frequently used when establishing premiums at the annual renewal. Incurred Claims are those claims whereby someone has incurred a claim (i.e. went to the Dentist) but has not yet submitted the claim to the insurance company. So it is a claim that ultimately will be paid. In their renewal calculations, Insurance Companies estimate the value of these Incurred-but-not-yet-reported claims and add this value to the actual Paid Claims when they are setting premium Rates.
There are a number of factors that go into an Incurred Claim calculation such as benefit design, historical trends, benefit levels, adjudication process and so on.
Q: What is “Life Insurance Conversion”?
A: When an employee leaves your company, he/she has the opportunity to convert their Group Insurance into a Personal Life Insurance Program, without supplying medical evidence. Generally speaking, they must initiate this process within 31 days of losing their coverage under your group plan. It is very important that you, as your plan administrator, inform the departing employee of this opportunity.
Q: How does the management of the provincial health plan affect my benefit program?
A: To control escalating costs of funding public Healthcare, many governments have resorted to cost-cutting strategies such as eliminating services and imposing limits on Healthcare access. Private plan sponsors are accepting these off-loaded costs and have increased their benefit plan coverage or shifted the cost to their employees. This erosion of Provincial Health Care leads to an increase in the cost of private sector plans.
For example, in British Columbia routine eye exams conducted by an optometrist or ophthalmologist on residents of BC aged 19 to 64 are no longer covered by the provincial plan, except in cases of medical necessity. In addition, Coverage for physiotherapists, chiropractors, naturopaths, non-surgical podiatrists and massage therapists are no longer included by the provincial plan, except to residents who qualify for MSP Premium Assistance.
Q: What are “Experience Rated Benefits”?
A: Extended Healthcare (EHC) and Dental benefits may be fully insured and are considered Experience-Rated for premium rate setting purposes. Pricing for these benefits is established based on the ratio of paid claims to paid premium and adjusted for incurred claim reserves, anticipated utilization trends and inflation factors for the upcoming year. When determining the renewal premium rates, the following factors are considered:
• Premiums
• Incurred Claims
• Claims Experience Weighting
• Target Loss Ratios (TLR)
• Incurred Loss Ratios (ILR)
• Credibility Factor
• Utilization Trends
• Inflation
Q: Why do Dental rates seem to increase every year?
A: Over the past 10 years, annual increases to the Dental fee guides have exceeded inflation. This is mainly driven by the increased utilization of services and an aging population resulting in higher use of restorative (filling replacement) and major restorative services. In 2010, the Dental fee guide increase varies by insurance company and geography and is typically between 6% and 11%.
A: The CLHIA (Canadian Life and Health Insurance Association) stipulates that the parent whose birthday occurs first in the year should claim children’s expense. So if the employee was born August 23 and his wife's birthday is February 7 (the actual years don't matter), the children's expense should first be submitted to his wife's plan.
Q: What is the “Dental Fee Guide”?
A: The Dental Fee guide is the list of procedural codes and associated fees for dental treatment. Each province publishes their own Fee Guide (with the exception of Alberta).
As dental fees are not regulated in Canada, general practitioners and specialists are not obliged to charge the fees listed in their provincial fee guides. While the annual provincial fee guides are provided as a reference, practitioners are free to determine the fees they wish to charge for their services.
An insurance company will use the applicable provincial general practitioners’ fee guide or the actual fee charged by the practitioner, if lower, to calculate reimbursements for dental services. Applicable fee guides may vary by group plan. (i.e. some plans may use the current Fee Guide, and some may employ a previous Fee Guide as a cost saving measure.)
Note: The Alberta Dental Association and College does not publish a suggested fee guide. Each insurer establishes its own reimbursement levels, based on analysis of their book of business.
Q: What is an Non-Evidence Maximum (NEM)?
A: An NEM (Non Evidence Maximum) is the amount of Insurance (usually Life, Critical Illness or LTD) for which an individual will qualify, without needing to provide evidence of good health. The NEM is driven by the size of the group; generally, the more employees, the higher NEM.
Q: What are the tax consequences if the company pays the LTD premium?
A: If the employer pays the LTD premium on behalf of the employee, any LTD benefits that are received are considered taxable income. If the employee pays the premium, any LTD benefits that are received are considered non-taxable income.
Q: Which factors affect premium and renewal rates?
A: Premium and renewal rates are affected by a number of factors. Some of those include:
• The demographics of the company
• The occupations of the employees
• Claims paid
• Premium paid
• Incurred claim levels
• Inflation
• Utilization trends
• Insurance company expense levels
• Performance of the Insurance Company’s “pool” of similar business
Q: Can an employee waive benefits?
A: Generally, in a traditional (Non-Cafeteria) insured benefit plan, an employee can waive health and dental care if they are currently covered by another plan (for example their spouse’s), but they cannot waive LTD, AD&D and Life insurance.
Some insurance companies will allow a 75% pr 80% participation rate; but the employee must choose all benefits or none. This type of arrangement will be more expensive over time, due to adverse selection.
Q: We have a Group RRSP established for our employees and the company contributes 6% of pay. How do I record this on the T4?
A: The company RRSP contribution is considered a taxable benefit to employees, and therefore is reported as part of Box 14, which is titled Employment Earnings. You would enter the RRSP Contribution amount on the T4A in the Other Income box. The employee will receive a tax receipt for the value of the contribution, which can be then deducted against his/her income when filing income taxes.
Q: At our last renewal, our broker was talking about Incurred Claims. What is that?
A: Incurred Claims are frequently used when establishing premiums at the annual renewal. Incurred Claims are those claims whereby someone has incurred a claim (i.e. went to the Dentist) but has not yet submitted the claim to the insurance company. So it is a claim that ultimately will be paid. In their renewal calculations, Insurance Companies estimate the value of these Incurred-but-not-yet-reported claims and add this value to the actual Paid Claims when they are setting premium Rates.
There are a number of factors that go into an Incurred Claim calculation such as benefit design, historical trends, benefit levels, adjudication process and so on.
Q: What is “Life Insurance Conversion”?
A: When an employee leaves your company, he/she has the opportunity to convert their Group Insurance into a Personal Life Insurance Program, without supplying medical evidence. Generally speaking, they must initiate this process within 31 days of losing their coverage under your group plan. It is very important that you, as your plan administrator, inform the departing employee of this opportunity.
Q: How does the management of the provincial health plan affect my benefit program?
A: To control escalating costs of funding public Healthcare, many governments have resorted to cost-cutting strategies such as eliminating services and imposing limits on Healthcare access. Private plan sponsors are accepting these off-loaded costs and have increased their benefit plan coverage or shifted the cost to their employees. This erosion of Provincial Health Care leads to an increase in the cost of private sector plans.
For example, in British Columbia routine eye exams conducted by an optometrist or ophthalmologist on residents of BC aged 19 to 64 are no longer covered by the provincial plan, except in cases of medical necessity. In addition, Coverage for physiotherapists, chiropractors, naturopaths, non-surgical podiatrists and massage therapists are no longer included by the provincial plan, except to residents who qualify for MSP Premium Assistance.
Q: What are “Experience Rated Benefits”?
A: Extended Healthcare (EHC) and Dental benefits may be fully insured and are considered Experience-Rated for premium rate setting purposes. Pricing for these benefits is established based on the ratio of paid claims to paid premium and adjusted for incurred claim reserves, anticipated utilization trends and inflation factors for the upcoming year. When determining the renewal premium rates, the following factors are considered:
• Premiums
• Incurred Claims
• Claims Experience Weighting
• Target Loss Ratios (TLR)
• Incurred Loss Ratios (ILR)
• Credibility Factor
• Utilization Trends
• Inflation
Q: Why do Dental rates seem to increase every year?
A: Over the past 10 years, annual increases to the Dental fee guides have exceeded inflation. This is mainly driven by the increased utilization of services and an aging population resulting in higher use of restorative (filling replacement) and major restorative services. In 2010, the Dental fee guide increase varies by insurance company and geography and is typically between 6% and 11%.