Over the last couple of years, we’ve seen a rise in Long-Term Disability (LTD) claims in employee benefits plans. If an employee goes on LTD, you might be wondering what happens to their benefits coverage.
Here’s what happens to an employee’s benefits coverage when they go on LTD.
1. Long Term Disability Claim Waiver of Premium
Insurance carriers typically include a waiver of premium (WOP) in an employee benefits plan. WOP provision provides an employee on LTD with continued Life Insurance, Dependent Life Insurance, and Accidental Death and Dismemberment Insurance (AD&D) and often Critical Illness if it is in the plan. When an employee is on LTD, and thus on WOP, the carrier does not charge premiums for these benefits while on an LTD claim. The benefits that the carrier continues to charge premiums for are the Health & Dental benefits.
For the employee on LTD and WOP, it means that those benefits for which the carrier has waived the premiums for, are locked in for that employee until the LTD benefit terminates at age 65. For example, if an employee on LTD with WOP were to pass away, their beneficiary could make a claim for the life insurance benefits in the plan.
Because every insurance carrier is different, make sure you confirm your carrier’s policy on this. Having this information will help ensure that you aren’t being billed for premiums for benefits under the WOP.
2. Your Long Term Disability Claim Policy as an Employer
Each employer can decide how to handle the Health & Dental benefits for someone on LTD. Here are some things to consider:
- The employee’s claims experience will still come to your plan and possibly have an effect on renewal rate changes. It is possible that someone on LTD requires more drugs, etc which your plan would pay for.
- How do you handle premium payments. If you ask the LTD claimant to cover some or all of the premiums, then you must consider how you will collect those on a regular basis.
- How long do you want to keep someone on LTD on the Health & Dental benefits? Would it be 2 months, 6 months, a year, or longer?
As the employer and owner of your employee benefits plan, we strongly recommend that you create a standard policy for how long you would keep the LTD claimant on your Health & Dental benefits before terminating them from those benefits.
It is important that a policy treats all employees in this situation in the same manner. The policy should be available for all employees to see in an employee handbook, or in your general information about your benefits plan
When you decide to terminate them from the Health & Dental benefits, it is important that you give the employee adequate advance notice of this.
They do have options at that time, such as conversion plans that offer guaranteed acceptance. They also may want to apply to the Sask. Health special support drug program to possibly assist with drug costs.
Conclusion
How an employee’s access to benefits is handled when they are on a long term disability claim ultimately comes down to the employer making a choice and setting their policy. Looking for guidance on how to manage an LTD leave in your organization? We can help! Contact us to discuss what makes the most sense for your employee benefits plan.
