March 12, 2013
by Bruce

How Much Is Your Dollar Worth Inside An Employee Benefit Plan?

employee benefit planWhen it comes time to renew your employee benefit plan, an unreasonable increase in premiums might have you wondering whether or not you are better off changing from one experienced price insurance company to another.

What no insurance agent is going to tell you is that this will almost always end up working against you by the second year of the plan. Changing from one experience price employee benefit plan changes nothing – it just makes things worse for you as an employer.

Getting The Truth

employee benefit plans

Falling for the enticing offer of a lower premium from another experience-priced company (what is experience pricing?) only transfers the employee claims from one company to another. If you are paying a lower premium for the employee benefit plan then your premium increase will be higher with the new company.

For example, let’s say you paid a total of $10,000 annual premium for your Extended Health Benefit and had $12,000 in claims. You could be faced with a 30% increase in premiums with your current insurance company simply because they lost money on your plan.

If you moved your employee benefit plan to another company and the annual premium becomes $8,000 while you are still making $12,000 worth of claims, your benefit premium increase could be as high as 50%.

Where they cut upfront, they make up for on the back end later. If it sounds too good to be true, it probably is but how can Canadian employers know what they need to without getting an education in insurance companies?

Is That Really The Deal You Think It Is?

When a competing insurance agent tries to attract your business during renewal time, they will always lead with very low premiums in the first year. What they don’t tell you is that it always leads to a higher premium increase in the second year.

In a previous blog we talked about the target to loss ratio insurance companies work off to gauge their profits and you can be certain that the agent has taken this into consideration when quoting you that low introductory rate.

It’s great to get that cheaper deal the first year but once you start making claims the insurance company will want to recover that lost money as soon as possible and you’re the one that will be paying in years 2, 3, 4 and so on.

How Far Does Your Dollar Go?

employee benefit plan

If you are a small company, a dollar invested in extended health premiums will see a 30% administration fee, a cut for the agent’s commission plus tax and, of course, profit. The average insurance company will only be leaving you with roughly 70 cents from every dollar to go towards claims.

If a new insurance company ends up giving you an incredible discounted rate for the first year, despite the fact you spent more in claims historically, you can guarantee your rates will be skyrocketing the following year.

Solving The Cycle of Outrageous Premium Increases

employee benefit plans

Moving your plan to a pooled benefit program will help stabilize premium increases for companies with higher than normal claims. Keeping your employee benefit plan with an experience priced company reminds me of the famous definition of insanity: doing the same thing every day and expecting a different result.

If any broker or agent tries to convince you to buy solely on price, their only interest is to get you in the door without taking any consideration of the specific needs of your business. They should have more respect for your time then that.

This practice is akin to tactics that internet providers used to employ where you would get an introductory rate that was great for 12 months until it shot up to the regular rates. The main difference here is the agent can’t predict your rate next year, nor should they because they can’t do so without seeing your claims.

Don’t let an agent lure you with price unless they truly understand your business and the way you are making claims. A professional broker will give you an employee benefit plan that works for you and your staff so you can avoid any unpleasant surprises at renewal time.

February 22, 2013
by Bruce

Canadian Sole Proprietors Get The Short End On Health Spending

health spending accountCanadian sole proprietors might not know it yet but they have lost the benefit of the health spending account (otherwise called Health & Welfare Trust).

The ability to use these spending accounts as a vehicle to expense extended medical and dental expenses to your business gross income is coming under scrutiny by CRA when the benefits are for family members or those deemed by CRA for the benefit  of non-arms length employees/persons.

These accounts facilitated by CRA are government-run (for lack of a better term) program that allows individuals to tax deduct medical and dental expenses from their business income using these health spending accounts.

How Did It Work?

When you deposit money into you health spending account it was a tax deductible business expense, to be used specifically for medical and dental expenses.

Unfortunately, Revenue Canada has said this will no longer be allowed for sole proprietors dealing at non-arms length. I can only rationalize CRA’s reasoning is the sole proprietor and the business are the “same” when filing an income tax return.  All sole proprietors who have purchased health spending accounts and  not dealing at arm’s length will come under the scrutiny of CRA and may have future extended health and dental benefits through any health and welfare trusts disallowed.

How Come I Didn’t Know About It?

The companies and advisors offering this service have been notified by Revenue Canada and have subsequently been passing the message along to affected clients.

We have been notified by several companies warning us they will not accept new business after February 1, 2013.

Existing clients may have to complete some additional papers for their carrier to have their claims processed for 2012.  We receive regular updates but there are still some procedures not yet clarified by CRA. Always check with your accountant

What Are My Options?

You might have noticed several major insurance companies have bought extensive TV advertising offering their extended health and dental programs. Their products may have a place in some people’s planning but they do not fit the needs of many sole proprietors or small business owners.

There is a solution for the sole proprietor and small business owner that offers several choices of fully insured plans providing coverage for extended health, dental plans with orthodontics, short and long term disability, etc.  Some more extensive programs designed for the business owner include:

  • Group insurance to replace health spending account
  • Association plans suited for sole proprietors
  • Both options are pooled and will still work with one-person firms and sole proprietors

In my experience, these options seem to work much better than the health spending account anyways. As a sole proprietor, you are not out of options for extended coverage for health and dental. Go here to learn more about benefits that are compatible with one-person firms.

February 13, 2013
by Bruce

Standard Benefit Plans Don’t Understand The Canadian Construction Industry

employee benefit plansThe Canadian construction industry is no picnic. The summers are hot and the winters are cold and long with no consideration of the amount of construction we like to do in this fair country. There is no arguing that the construction industry earns their pay so why aren’t their employee benefit plans better accommodating their needs?

The Problem Their Employee Benefit Plans

A standard benefit plan doesn’t work for the Canadian construction industry because it’s at the mercy of the change in seasons and the availability of work contracts. Some of the issues with current construction industry benefit plans are:employee benefit plans

  • Employers have to pay during the winter season and during low work times
  • Traditional benefit plans don’t consider the needs of the construction industry
  • A construction company should never have the same plan as an accounting firm (yet I’ve personally seen this many times)
  • When the company isn’t making money, the company still pays for benefits

Furthermore, if it’s a 50/50 cost share for your employee benefit plan package, it’s the employer’s responsibility to track down the employee during the winter to get them to pay their share of the premiums. If those employees don’t come back in the springtime, you are footing the bill for his or her health benefits with zero ROI.

Fortunately, there is an option that addresses all these issues and even provides a few additional incentives that work in favour of the employer’s best interests.

Construction Industry Benefit Plans That Make Use Of Every Hour

employee benefit plans

The amount of money you pay for premiums each month is based on the number of hours an employee works. There is a minimum amount of hours required to pay the insurance company and that is generally 150 hours.

With proper employee benefit plans for the construction industry, an employee can bank every hour worked above 150 to use for months where there is a lack of work or a seasonal lay off. By taking hours from the bank to make up the 150-hour requirement, the worker continues to get coverage with these types of employee benefit plans.

Common Misconception: Sometimes I hear that these plans are only available through unions and that is simply not true



January 23, 2013
by Bruce

The Painfully Slow Evolution of Group Benefits (Response)

employee benefit plansAn article was recently published in the Vancouver Sun called The Painfully Slow Evolution of Group Benefits and I wanted to address it here because I have a couple of issues with their approach to the information presented.

There is no question that many employee benefit plans currently being sold in the Canadian marketplace are not meeting the needs of all the employees in the company.

The Problem With Employee Benefit Plans

employee benefit plans

The main issue I had with the commentary in the Vancouver Sun article was that it only focused on the agent marketing system that the major insurance companies have  had in place since they opened for business. All our major insurance companies (SunLife, ManuLife, Great West Life, Empire, Greenshield, etc.) have been providing employees the same product line with different values with a “one plan design fits all” approach for every employee in a company.

For example you have a choice of 80% or 100% reimbursement on prescriptions.  A $300 payment for a chiropractor compared to $700 with another company, with or without a deductible. There are hundreds of components inside an extended medical and dental plan; the value of each component can be manipulated to obtain a lower premium. That is how they have been marketing.

These plans are ‘experienced priced’ and you are buying their product at retail cost.

The real question is why have they not changed their marketing strategy to suit the current market conditions? Here is a partial list of issues:

  • The major insurance companies only educate their marketing agents on “the values” attributed to a chiropractor benefit ($300 up to $700). Rather than educating the agent on the effects of high chiropractor claims of their experience-priced plan at renewal.
  • A car salesman sells the car and the mechanic knows how it works.  A group consultant knows how to sell it and he can tell you how it works.    It almost seems that insurance companies are not interested in educating an agent on how their product works.
  • Lack of infrastructure to support flexibility; agents are unable to market flex designed benefit plans because the insurance companies simply don’t have it in their administration and computer systems to be able to offer it.

Third-Party Administrators (TPA) Can Design Products

When you deal with a third-party administration company, they design the products and handle the monthly premium billing for the insurance company. They design the product needed to suit the variety of demographics within any company.

As a broker, when we design a flex plan, which includes essentially anything we want. We take three of our best plans and put them on one billing statement and create a premium that’s collected on behalf of a major insurance company such as Great West Life or ManuLife, etc.

The Versatility of Flex Plans

As a broker, our TPA handles all the administration including collecting the premium on a flex plan, which is typically three different plan designs, but the insurance company doesn’t care how we design the product, they will simply hold us accountable for billings. Within 60 days the insurance company sends our third-party administration company a bill. At that point, we take the money collected from premiums and send them a cheque.

We send them one cheque but it could be a culmination of 20 plan designs, obviously depending on the clients individual needs.

Employee Benefit Plans Shouldn’t Be Oversimplified

Major insurance companies have little incentive to over-complicate the process by offering infinite options. It makes more sense to package and sell employee benefit plans in a simplified process so agents require less training and employers have less to think about. Any sales and marketing expert will tell you that when you have too many options, you are less likely to close the sale because the client can’t decide what they want.

The major insurance companies prefer not to go through the extra work from additional administration and billings when they could simplify, standardize and have anyone sell it.

The Benefits of Using A Broker

employee benefit planUsing an insurance or benefits broker is similar to using a mortgage broker: you get the expertise and knowledge of an insider without having to pay them. Brokers make a commission off of the plan provided by the insurance company and, in turn, are not biased to any particular insurance company.

A great broker will guide you through the process of finding employee benefit plans from a range of competing insurance companies to get you the best value for your money.

Perhaps the writer of that Vancouver Sun article simply overlooked the option of flex plans and the valuable service a third-party administrator. The benefit is similar to that of using a mortgage broker to buy a home; the broker doesn’t charge an additional fee, the banks pay them. This allows him or her to remain unbiased when finding the best deal for their clients.

Any company purchasing employee benefits needs to do the research before settling on a group plan and enlist the help of a trusted and knowledgeable benefit consultant – they can be worth their weight in gold in the long run.

Unfortunately, over 90% of Canadian employers aren’t even aware they are paying what’s called “experience pricing” and buying their benefit plans at retail prices. Read this article to learn more about the differences between traditional ‘experience priced’ plans and pooled benefits.

January 18, 2013
by Bruce

3 Factors That Drive Up The Cost Of Your Employee Benefit Plan

employee benefit planYou don’t get an employee benefit plan without the intention of actually using it but sometimes certain factors, such as unreasonable billing, can result in denied claims or partial reimbursement.

It’s important for you to know what unknown factors are affecting your employee benefit plan so you can properly educate your employees on how to effectively use it. Excessive claims can result in increased premiums at renewal time so a few simple best practices can save you money when it comes to that time of year.

1. Pharmacy Dispensing Fees

You can include the dispensing fees in your benefit plan so when you get your drug card all you have to do is show it at the pharmacy to have the insurance company pay directly.  You can go to certain pharmacies and the dispensing fee is only a few dollars but other locations charge nearly $15 per medication – a number that adds up quickly with chronic illnesses that require monthly fill-ups.

TIP: Educating your employees about locations that offer discounted dispensing fees can make a big difference upon renewal time because you will have cost the insurance company less money.employee benefit plan

2. Unreasonable Billing For Medications

Similar to the large fluctuation in cost with dispensing fees, medications actually also range in costs between pharmacies. In some cases the cost difference can be as high as $1 per pill – a significant amount for the same product.

Insurance companies may not reimburse expenses that are not “reasonable & customary” so it’s worth knowing which places offer the best prices. A great new tool for BC residents called Pharmacy Compass does exactly that and can be accessed here.

pharmacy compass

3. Excessive Charges For Massage

This is one area of abuse that many employees feel they can easily get away with and tends to be an issue. If the insurance company receives a bill for two hours worth of massages at a health spa, they may want to see a doctor recommendation to ensure it is medically necessary.

If charges are not considered “reasonable & customary”, they could very well be rejected for reimbursement. Massages are great but they aren’t always medically necessary and when they are, they should be within reason. It will be tough to get that spa day bill picked up by the insurance company, regardless of any employee benefit plan.employee benefit plan

In Conclusion

You don’t want to be regularly making claims above the average cost of rates for those services in your area. Be aware of practitioners that may try to take advantage of your benefits coverage and overcharge because they think you won’t notice the difference anyways. Most people tend to be ethical but others…not so much.

It might seem like your employee benefit plan is like free money but when renewal time comes around, you might see those excessive charges come back to bite you.

January 7, 2013
by Bruce

New Online Tool Shows BC Residents Where To Get Cheap Drugs

Pacific Blue Cross has just launched an online tool called Pharmacy Compass to help BC residents find better prices on the same medications at pharmacies near them in seconds. Until now, there was virtually no realistic means for the average person to find out the cost differences of medications between pharmacies, let alone so efficiently as this tool does it.

pharmacy compassThe site is called Pharmacy Compass and you can type in your Drug Identification Number (DIN) to get started, usually found right on the label of your medication.

Right away you will notice the difference between some pharmacies. Prices can be as high as $1 per pill, effectively turning this little online tool into a cost-saving prescription watchdog.

Visit the website here to try it out now. Not only is this great tool free to use, it is likely to save many BC residents a lot of money with little effort.

Canadian Employers Are Making Costly Mistakes

This new Pharmacy Compass online tool is one of many ways to save money on employee benefit plans that Canadian employers need to know about. No employer can find a magic wand that will fix all of these issues overnight, there are several options that are worth considering and implementing. Many effective preventative solutions can be found with the right employee benefit plan such as:

  • Employee benefit planEmployee Assistance Programs (EAP) are a great first step to assisting with employee mental health issues
  • Encouraging physical health maintenance of employees
  • Extended medical coverage
  • Paramedical services (such as chiropractor & physiotherapy)
  • Purchasing a pool priced benefit plan can significantly help avoid high premium renewals due to excess usage
  • Employers can attend training sessions on how to recognize presenteeism

Of course cost must be a major factor in gaining value and ROI from your group plan so it’s important to be discerning when choosing your employee benefit plan. A great resource to read is “The 3 Most Expensive Mistakes Employers Make When Purchasing An Employee Benefit Plan”.

The eBook is available for free instant download here.

December 23, 2012
by Bruce

Happy Holidays!

There is nothing like Christmas time and the holiday season – the city is alive and filled with lights, everyone is filled with good spirits and…well, the food! We want to take this chance to thank everyone who has taken the time to read a blog, comment on a tweet or interact with us at all this year. It’s truly been great getting more involved in the digital world and we are looking forward to another great year with all of you.

A big thanks goes out to all of our incredible clients, staff, colleagues and members in the local business community – we wish you all a wonderful and magical holiday season with your families.

Here’s a little video to lighten the mood and get you in the holiday spirit:


December 21, 2012
by Bruce

5 Positive Signs Your Employee Benefit Plan Is Working For You

employee benefit planWhen it comes time to renew your employee benefit plan, it’s always better to not have any surprises. You can be prepared for your renewal by knowing how a pooled plan works in your favour. By purchasing the right plan for your company you can feel confident that you (and your employees) will be happy at renewal time. Even so, how do you recognize your employees are pleased with the plan and that it is effectively serving its purpose?

1. Employees Are Discussing Claims employee benefit plan

Pay attention when employees need to get off early or take an extended lunch for medical appointments. Often times they might even let you know casually that they are dealing with some medical issues they are getting treatment for. Don’t be upset that employees need time off for medical appointments – they are probably saving you money in the long run. Most importantly, you know that your employee benefit plan is getting put to good use.

employee benefit plan2. Stress Leave Has Been Reduced

An Employee Assistance Program (EAP) provides counseling for stress, marital issues, family crises, etc. Many employees will not converse directly with fellow workers about many of these issues in fear of judgment in the workplace.

You as an employer will notice a positive attitude, increased production, better work habits, fewer sick days when employees take advantage of the EAP program. Medication for stress related conditions is second only to heart related conditions such as blood pressure and cholesterol in annual consumption.

3. WCB Ratesemployee benefit plan

In some provinces, WCB are now covering stress claims calling it “stress in the workplace”. If your rates have increased due to stress related claims in the past and your WCB rates are being reduced, you can feel confident your employee benefit plan is being used.

4. Sick Daysemployee benefit plan

In my office, when an individual has a cold or flu we advise them to stay home because too many others, including clients, can become sick. This stops the bugs from running through the office. We pay the employee for this time. Of course having sick employees in the workplace isn’t good for the employees or the flow of operations but it’s important to be sensitive to the health needs of your staff.

5. Lack of Proper Nutritionemployee benefit plan

The epidemic of obesity is a serious health concern for Canada and although employers can’t (and shouldn’t) control what employees eat, they can control the choices they promote in the workplace.

When buying lunch for your employees, opt for wraps and veggies over pizza and pop. Even supplying a healthy snack in the mornings sometimes can be immediately beneficial as some people might be skipping breakfast before work. Promoting healthy eating and exercise by experimenting with different programs can reduce the usage of prescriptions and other extended medical items. Living longer and healthier life is better when done drug-free.

What’s The Solution?

Policing your employees eating habits and medication usage is not only irrational but illegal. It makes much more sense to provide a solution that supports employees in whatever decisions they make by offering coverage that won’t penalize premiums unfairly for using the plan.

Over 90% of Canadian employers have an employee benefit plan that is experience priced and are not aware of the pooled pricing model that tends to serve smaller businesses much better. For more details on the different pricing models that are not often talked about and the 3 major mistakes most Canadian employers make when choosing an employee benefit plan, click here for a free informative eBook download.

December 11, 2012
by Bruce

5 Things Your Employee Benefits Agent Won’t Tell You

employee benefit planAs a consumer, it’s clearly in your best interest to know as much as you possibly can about the product or service you are buying so you can make the best and most informed decision to obtain the best value for your money.

Certain salespeople of any industry avoid subjects and numbers about their product that would put them at a disadvantage. Many insurance agents want to stay away from the following when selling an employee benefit plan.

Related: Tax Tips To Improve The ROI of Your Employee Benefit Plan

1. Target Loss Ratio (TLR)

employee benefit planThe target loss ratio (TLR) is the insurance companies projected profit point of the extended health and dental benefits of your employee benefit plan. It is the maximum dollar amount of claims paid by the insurance company expressed as a percentage of your premium.

Any amount in excess of the TLR will result in the insurance company losing money and you can expect a premium increase at your annual renewal. When selling an employee benefit plan, one thing many insurance agents would definitely keep their distance from discussing is the target loss ratio of your group plan. Many insurance companies do not disclose it in the quote to the agents – the agent has to ask for it.

Let’s say you spend a dollar in premium for extended health and because you’re a small company. For your size the insurance company wants 30% for administration costs, agent commission, premium tax and a percentage for profit. It is expressed as a 70% TLR. So for every dollar you pay in premium you can only spend 70% on claims, the insurance company keeps the rest. A small company paying $5000 a year in premium can only spend $3500 on health claims. Rarely is that spending limit disclosed to you the consumer.

2. They Are Required To Disclose Commissions

Insurance agents, by law, are supposed to disclose their commissions.  Most agents won’t have an issue disclosing it to you but it’s good to know as a buyer that it’s absolutely within your right to ask.

3. A Great Deal Today Could Mean High Increases Next Year

employee benefit planNot too long ago another insurance agent was trying to sell an employee benefit plan to one of my clients. My client received a much cheaper quote and calls me to say the other guy is going to save him a lot of money. I thanked him for calling and told him I would stop by to speak with him.

During the meeting I explained to him his total annual premium for the extended health care with the new company was only $2000 – definitely a great price. The problem was the TLR was only 60% or $1200. He realized that was not very much as he had just handed me $500 worth of claims for physiotherapy, chiropractic and massage.

I could see he was doing some quick math in his head because he knew other employees were also submitting extended health care claims. He now realized the new product would result in a very high premium increase at renewal and this was not a good deal.

The information that reveals this truth was even on the presentation sheet but was not explained to him or what it meant. Needless to say, he was shocked when he realized how the wool was being pulled over his eyes.

4. They Don’t Know The Market

employee benefit plan

Most insurance agents are not knowledgeable about the advantages of other options, especially when it comes to pooled pricing and the pricing stability it offers to small companies. The average insurance agent only wants to sell you an experienced priced plan because that is all they have available to them. With an experienced plan you could be faced with a significant premium increase as illustrated above.

The plan options available to pooled employee benefit plans are the same as those available to experience priced plans. My experience in benefits is all experience priced plans are the same. They don’t actually know if what they offer is the best value or not because they only sell on price, not the quality of the product and its benefits to your employees.

Some insurance agents will actually mislead you by saying that your extended health benefits and your dental are “somewhat” pooled. That is something that employers need to be very careful about. [Read more about pooled plans here]

5. They Won’t Tell You To Use The Planemployee benefit plan

Many insurance agents will promote their benefit plans to help employers attract and retain employees but what you won’t hear is your benefits agent telling you to use the maintenance portions of your benefit plan. Things like purchasing orthotics, chiropractic and similar services are not claims insurance companies like to see a lot of.

Maintaining the health of your employees without your group plan rates going up is a realistic and valid concern for employers. The point of paying for an employee benefit plan is to receive benefits. That’s why they’re called benefits in the first place!

Related: Stress Taking Its Toll On Canadian Employees

You Shouldn’t Be Afraid To Use Your Plan

You should be concerned if your insurance agent is discouraging you and your employees to use the employee benefit plan and spend money on orthotics, massage, chiropractic, eyeglass and whatever keeps the employee healthy.

This is especially important with anyone in the construction industry. Our bodies are our temple but in construction, they are also the single most important tool for making money.

While we’re discussing this, it’s crucial to know that if you are on experience pricing [like over 90% of Canadian employers], making consistent maintenance claims will inevitably result in your premiums skyrocketing. If you’re not sure what the differences between pooled benefits and experience price plans, be sure to read this article and understand what you are paying for.

December 7, 2012
by Bruce

Educating Employees Can Help Lower Your Employee Benefit Plan Premiums

employee benefit planAs an employer, you invest your hard earned money into an employee benefit plan to help attract, retain and maintain the health of employees. It is unfortunate when concerns arise around abuse due to employees making unnecessary claims that drive up premiums at renewal time. So it’s in your best interest to be proactive rather than reactive.

Related: Tax Tips To Improve The ROI of Your Benefit Plan

What Is Employee Benefit Plan Abuse?

A classic issue is when employees don’t go to a massage therapist but go to a health spa that has massage therapists on staff. Small distinction, significant price difference.

Now if you have an employee that chooses to go to the health spa multiple times on the weekend, that can be considered abuse by the insurance company.

Reasonable & Customary

employee benefit plan

Most of the insurance companies either have a dollar limit per visit or they will have what is they call a “reasonable and customary” charge. This means if your employees are going to a practitioner that charges above the standard rates, the reimbursement amount will be reduced to a more reasonable amount.

If you go for a two-hour massage, they’re going to want to see a doctor’s note to make sure it’s medically necessary. Many insurance companies already want to see a doctor referral for massage therapy because it’s prone to abuse.

The Value of Education

When purchasing an employee benefit plan, you should be dealing with a knowledgeable broker that properly educates you and your employees on details you need to be aware of – especially little when all parties are conscious of their own personal usage habits.

Related: Should Employers Pay Provincial Medical Premiums?

employee benefit planA Line of Defense For Employers

Any employer with fewer than 50 employees should be considering the potential benefits of a pooled plan. 95% of Canadian employers who pay for an employee benefit plan are getting what’s called experience pricing, a model that leaves you subject to being penalized for every claim made through out the year.

Pooled plans aren’t offered by many brokers but can be a valuable asset for any employer that is considering or already paying for an employee benefit plan. Your employee benefit plan would be pooled with a larger group of companies that assist each other through high claim years by leveraging their purchase power with the insurance companies.