Group benefits are complex, and not always easy to understand. With numerous different benefits providers and options, it’s no wonder that many businesses find it daunting to choose the right plan. Over the years, we’ve discovered there are some common misconceptions about benefits that surface frequently. Working with our clients, we put a high priority on education so that everyone really understands what they’re choosing and why. We wanted to outline some of misconceptions about benefits, to empower you to make the best choices about your plan.
When you renew your plan, you are locked in to that plan with that carrier for another year until the next renewal comes along.
This is simply not true. Any employer providing a benefits plan for their employees has the right to make changes, or to terminate the plan with their carrier at any time. Carriers do not ask clients to sign a document at renewal indicating you will remain with them for a year.
In fact, most carrier contracts will indicate that the business can terminate the plan at any time with 30 days notice.
Employers provide a benefits plan without any cost to the employees.
It is true that some employers choose to provide benefits and pay the full cost, however, the cost sharing of the benefit plan is at the discretion of the employer. There are some lines of benefits that it may make sense for the employee to pay the premiums for in order to make the benefit tax free to them. CRA regulations around taxation differ for each line of benefit and may make sense to split the costs between employer and employee.
Health & Dental benefits are a form of insurance.
Insurance is a form of protection against the risk of loss. Carriers know there will be Health & Dental claims within a group benefits plan. Thus these benefits are ‘experience rated’ which means that each year the carrier looks at the total premium paid for Health benefits versus the total amount they paid back in claims. The carrier will have a break even point – let’s say it is when they return 75% of the premium in claims. If they have returned 90% of the premium in claims, then the Health rates are going to be increased. This is why Health & Dental rates can fluctuate each year.
All group benefit plans are the same
A benefit plan design is determined based on what the employer chooses to provide to his employees. With each new employer a person needs to see what the benefit plan reimbursement levels are. One plan may have reimbursed 100% of basic dental expenses, and the next employer plan may reimburse 80% of basic dental expenses. Employees should review the benefit plan to know what to expect for reimbursements.
The insurance carrier determines the plan design
We have had employees tell us that we should move the plan to Carrier x because their spouse’s plan is with that carrier and they have a better plan, and it costs them less. That’s one of the major misconceptions about benefits. The carrier does not set a plan design. Costs can not be compared because that is based on many factors – number of employees, what the claims experience has been, etc.
Group Insurance provides all the life insurance a person needs
The amount of life insurance provided by your employer’s benefit plan can range from as low as $10,000 to a high of 3 to 5 times annual earnings.
Employees should understand how much life insurance the employer benefit plan does provide as each plan can be different. It would be rare that the employer plan would provide an individual with sufficient life insurance for their family needs.
