8 – GROUP PLAN SPECIFICS

Table of Contents

8.1 Understanding the group

👥 Group insurance underwriting focuses on the characteristics of the group as a whole rather than individual medical underwriting.

💡 Insurers evaluate the group’s overall:

  • Stability
  • Risk profile
  • Demographics
  • Claims potential

📋 These factors help determine:

  • Benefit types offered
  • Premium pricing
  • Waiting periods
  • Eligibility requirements

8.1.1 Makeup of the group

🏢 The composition of the group plays a major role in group insurance underwriting.

💡 Since individual members are usually not fully medically or financially underwritten, insurers rely on the group’s collective characteristics.

📋 Important factors include:

  • Number of members
  • Age mix
  • Gender mix
  • Turnover rate

8.1.1.1 Number of members

👥 The size of the group directly affects the insurer’s ability to predict future claims accurately.

Small groups

⚠️ Small groups (for example, 25 members or fewer) create greater uncertainty for insurers.

📋 Reasons include:

  • Claims experience may fluctuate significantly
  • Past claims may not reflect future claims accurately
  • “Law of large numbers” is less reliable

💡 As a result, smaller groups often face:

  • Higher premiums
  • More conservative pricing

Pooling small groups

🔄 Insurers often combine (“pool”) smaller groups with other similar small groups to improve pricing accuracy.

Large groups

🏢 Large groups spread risk across many individuals.

💡 Advantages include:

  • More predictable claims patterns
  • More reliable historical data
  • More accurate premium pricing

📌 Larger groups generally receive more stable pricing because claims experience tends to follow actuarial expectations more closely.

8.1.1.2 Age/Gender

👨‍🦱👩 Age and gender significantly influence group insurance risk.

Gender considerations

📋 Female-dominated groups may experience:

  • Higher disability claim rates
  • Higher health-related claims

Age considerations

📈 Older employee groups are generally more likely to submit:

  • Drug claims
  • Long-term care claims
  • Disability claims

💡 Younger groups usually generate lower long-term healthcare costs.

Impact on benefits and premiums

⚠️ Age and gender makeup can affect:

  • Premium pricing
  • Benefit flexibility
  • Coverage availability

8.1.1.3 Turnover rate

🔄 Turnover rate measures how many members leave and are replaced within the group each year.

💡 Insurers use turnover rates to estimate future group stability.

Low turnover groups

✅ Groups with low turnover rates (for example, 5%–10% annually) are generally more attractive to insurers.

📋 Benefits of low turnover include:

  • More stable claims experience
  • More accurate pricing
  • Greater underwriting reliability

💡 Insurers can rely more heavily on historical claims data for pricing.

High turnover groups

⚠️ High turnover reduces the value of past claims experience because group membership changes frequently.

📋 Possible consequences include:

  • Higher premiums
  • Longer waiting periods
  • More conservative underwriting

8.1.2 Nature of the business

🏢 The type of business significantly affects the level of insurance risk.

💡 Different occupations expose employees to different:

  • Physical hazards
  • Stress levels
  • Health risks

Higher-risk occupations

⚠️ Businesses involving physical labour may have higher claim rates.

📋 Examples include:

  • Construction
  • Forestry
  • Manufacturing

Lower-risk occupations

💼 Some professional or office-based occupations typically experience lower disability claim rates.

📋 Example:

  • Architects

💡 Lower physical risk often leads to fewer disability claims.

Stress-related risks

⚠️ Some “white collar” occupations may still experience elevated claims because of:

  • Long work hours
  • High stress
  • Mental health strain

8.1.3 Comparative businesses

📊 When claims experience is unavailable or unreliable, insurers compare the group to similar businesses.

💡 This is especially important for:

  • Small groups
  • New group insurance applicants

Purpose of comparative analysis

📋 Insurers use industry experience to estimate:

  • Future claims
  • Benefit costs
  • Appropriate premium levels

Example

🌲 A forestry company applying for group insurance may be compared with other forestry-related groups already insured.

8.1.4 Employee data sheet

📄 Employee enrolment forms and census reports provide insurers with important underwriting information.

💡 This data helps insurers:

  • Estimate future claims
  • Determine eligibility
  • Calculate premiums
  • Assign employee benefit classes

Important employee information collected

📋 Common information includes:

  • Date of birth
  • Gender
  • Occupation
  • Dependents
  • Social Insurance Number (SIN)
  • Salary or earnings

Date of birth

🎂 Date of birth helps determine:

  • Eligibility for benefits
  • Duration of coverage
  • Age-related claim exposure

📌 Example:

  • Long-term disability benefits often end at age 65.

Gender

👨‍🦱👩 Gender helps insurers evaluate:

  • Expected claims patterns
  • Disability risk
  • Health claims trends

Occupation/occupational class

💼 Different employee classes may receive different benefit packages.

📋 Examples include:

  • Executives
  • Office staff
  • Factory workers

💡 Occupational class helps determine:

  • Coverage eligibility
  • Benefit amounts
  • Premium levels

List of dependents

👨‍👩‍👧 Dependent information is required when group plans include:

  • Spousal coverage
  • Children’s coverage

Social Insurance Number (SIN)

🆔 SINs are often required for:

  • Tax reporting
  • Benefit reporting
  • Payroll administration

⚠️ Especially important when premiums or benefits are taxable.

Salary/earnings

💰 Salary information is used to calculate:

  • Disability income replacement benefits
  • Employee classification
  • Benefit limits

📋 Larger groups may offer different benefit levels based on:

  • Job title
  • Salary level

📌 Key Takeaway

Understanding the characteristics of a group is essential for group insurance underwriting.

💡 Insurers carefully analyze:

  • 👥 Group size
  • 👨‍🦱👩 Age and gender mix
  • 🔄 Turnover rate
  • 🏢 Nature of the business
  • 📄 Employee census data

These factors help insurers assess risk, design benefit plans, and determine appropriate premium pricing for group insurance coverage.

8.2 Products and services

🏢 Group insurance plans often provide much more than basic health and disability coverage.

💡 Modern group plans may include:

  • Employee Assistance Programs (EAPs)
  • Administrative support services
  • Claims adjudication
  • Group brokerage services

📋 These services help employers:

  • Attract and retain employees
  • Improve employee well-being
  • Simplify plan administration
  • Enhance workplace productivity

8.2.1 Elements of an Employee Assistance Plan (EAP)

🧠 An Employee Assistance Plan (EAP) provides counselling and support services as part of a group benefits package.

💡 EAPs are designed to help employees manage:

  • Personal challenges
  • Work-related stress
  • Emotional difficulties
  • Family concerns

Purpose of an EAP

📋 EAPs help employers:

  • Improve employee wellness
  • Reduce absenteeism
  • Increase productivity
  • Support employee retention

💡 EAPs are also viewed as a supportive alternative to disciplinary action for employees struggling with personal issues.

Delivery of EAP services

📞 EAP support is commonly provided through:

  • Telephone counselling
  • Face-to-face sessions
  • Third-party counselling providers

⚠️ Most employers use outside providers to ensure:

  • Confidentiality
  • Reduced administration costs

Common EAP limitations

📋 EAP services are often subject to:

  • Annual deductibles
  • Co-insurance provisions
  • Maximum yearly hours
  • Maximum hourly reimbursement limits

Types of EAP services

🛡️ EAPs commonly offer several counselling services for employees and sometimes immediate family members.

Psychological counselling

🧠 Psychological counselling may include:

  • Crisis management hotlines
  • Stress management
  • Mental health counselling
  • Psychological support

💡 Services are usually provided by qualified psychologists or counsellors.

Addiction counselling

🍷 Addiction counselling helps employees cope with:

  • Alcohol dependency
  • Drug addiction
  • Substance abuse issues

📋 Services may include professional rehabilitation counselling.

Marriage counselling

💑 Marriage counselling assists employees dealing with:

  • Marital stress
  • Financial conflict
  • Relationship difficulties
  • Family communication problems

⚖️ Some EAPs also provide access to prepaid legal assistance.

📋 Common legal topics include:

  • Divorce
  • Wills
  • Powers of Attorney (POA)
  • Adoption
  • Debt issues

Employer benefits of EAPs

📈 Although exact statistics vary, employers often benefit through:

  • Reduced absenteeism
  • Improved productivity
  • Better employee morale

Tax treatment of EAP benefits

💰 Employer-paid EAP premiums are generally:

  • ✅ Tax-deductible to the employer

Non-taxable EAP counselling benefits

✅ Counselling services related to the following are generally not taxable to employees:

  • Physical or mental health
  • Family health concerns
  • Retirement counselling
  • Employment placement counselling

Taxable counselling benefits

⚠️ Counselling for legal or financial matters is generally considered:

  • A taxable employee benefit

8.2.2 Group insurer’s services

🏢 Group insurers provide administrative services in addition to insurance coverage.

📋 Common services include:

  • Plan member enrolment
  • Premium billing
  • Claims adjudication

8.2.2.1 Plan member enrolment

📝 Employers are responsible for enrolling employees into the group plan.

💡 In larger organizations, this task is usually handled by:

  • Human Resources (HR)

Qualification (waiting) period

⏳ Many group plans require employees to complete a waiting period before becoming eligible.

📋 Common waiting period:

  • Approximately 3 months

💡 This often matches the employee probationary period.

Non-contributory plans

🏢 In non-contributory plans:

  • Employer pays all premiums
  • Participation is usually mandatory
  • Benefits are generally fixed

Contributory plans

💰 In contributory plans:

  • Employees pay part of the premium
  • Participation may be optional
  • Employees may select different benefit options

Flexible (“cafeteria”) plans

🥗 Flexible benefit plans allow employees to customize coverage selections.

📋 Employees may choose:

  • Additional health benefits
  • Family coverage
  • Enhanced options

Limited enrolment window

📅 Employees are often given a limited period to enroll after becoming eligible.

📋 Common enrolment periods:

  • 30 days
  • 60 days

⚠️ Delayed enrollment may require proof of insurability.

Additional underwriting

🩺 Employees requesting optional or enhanced benefits may need:

  • Medical underwriting
  • Proof of insurability

Role of the advisor or account executive

👨‍💼 Advisors often help:

  • Explain benefit options
  • Assist with enrolment
  • Clarify coverage details

8.2.2.2 Premium billing

💰 The insurer calculates and bills group premiums.

Non-contributory plans

🏢 For non-contributory plans:

  • Employer pays the full premium
  • Insurer sends one monthly bill to the employer

Contributory plans

💳 In contributory plans:

  • Employer pays part of the premium
  • Employees contribute through payroll deductions

📋 Process:

  1. Insurer bills employer
  2. Employer deducts employee contributions from payroll
  3. Employer remits total payment to insurer

8.2.2.3 Claims adjudication

📄 Claims adjudication is one of the insurer’s most important administrative functions.

💡 The insurer reviews claims to determine:

  • Whether coverage applies
  • Amount payable
  • Recipient of benefits

Step 1 — Review claim against the contract

📋 The insurer first checks whether the claimed event is covered under the policy.

⚠️ If not covered, the claim is denied.

Step 2 — Assess claim details

🔍 Insurer evaluates:

  • Nature of the claim
  • Severity of the condition
  • Required supporting evidence

📄 Additional medical or financial documents may be requested.

Step 3 — Approve and pay claim

💰 If approved, benefits may be paid:

  • In a lump sum
  • Periodically (monthly or otherwise)

Ongoing monitoring of periodic claims

🩺 Long-term disability and long-term care claims usually require ongoing review.

📋 Insurers monitor whether the claimant:

  • Still qualifies for benefits
  • Continues meeting policy definitions

8.2.3 Group brokerage services

🤝 Group brokers help businesses obtain and compare group insurance plans.

💡 Brokers usually work through a:

  • General Agency (GA)

Main role of the group broker

📋 The broker typically:

  • Collects group data
  • Reviews claims history
  • Requests quotes from insurers
  • Compares plan designs
  • Makes recommendations

Request for Quote (RFQ)

📄 Brokers submit a Request for Quote (RFQ) to multiple insurers.

📋 Information provided may include:

  • Group demographics
  • Claims experience
  • Desired benefits
  • Negotiable plan features

Broker marketplace expertise

💡 Brokers add value by understanding:

  • Which insurers target certain industries
  • Which insurers offer competitive pricing
  • How insurers pool group risks

Presenting recommendations

📊 After reviewing quotes, the broker presents the most suitable options to the client.

📋 Recommendations consider:

  • Premium cost
  • Benefit design
  • Coverage flexibility

Ongoing liaison role

👨‍💼 Once a plan is selected, the broker acts as a liaison between:

  • The employer/group sponsor
  • The insurance company

💡 This helps simplify communication and plan administration.

📌 Key Takeaway

Group insurance plans provide much more than basic insurance coverage.

💡 Important group services include:

  • 🧠 Employee Assistance Programs (EAPs)
  • 📝 Employee enrolment support
  • 💰 Premium billing administration
  • 📄 Claims adjudication
  • 🤝 Group brokerage services

These services help improve employee well-being, simplify plan administration, and support effective group insurance management.

8.3 Coverage

🛡️ Reviewing and comparing group insurance coverage is one of the most important responsibilities in group benefits planning.

💡 A proper review helps determine:

  • Whether current coverage is adequate
  • If employees are satisfied
  • Whether costs are reasonable
  • If better plan options exist

📋 Group coverage analysis focuses on:

  • Existing plan design
  • Claims experience
  • Satisfaction with the current insurer
  • Proposed new coverage
  • Funding methods
  • Premium contribution structure

8.3.1 Existing coverage

📄 Before recommending changes or a new insurer, the advisor must fully understand the current group plan.

💡 Reviewing existing coverage involves evaluating:

  • Plan design
  • Claims experience
  • Service quality of the current provider

8.3.1.1 Existing plan design

📋 The current plan design serves as the starting point for any coverage review.

⚠️ Advisors must review more than just the type of benefits offered.

Important elements to review

📋 Key areas include:

  • Covered conditions
  • Covered services
  • Benefit limits
  • Definitions
  • Deductibles
  • Co-insurance factors
  • Waiting periods
  • Funding structure

💡 Understanding these details helps determine whether the plan truly meets employee needs.

8.3.1.2 Claims experience

📊 Past claims experience is one of the most important factors affecting:

  • Premium pricing
  • Future renewals
  • Plan design decisions

High claims experience

⚠️ Groups with high claims experience usually face:

  • Higher premiums
  • Stricter plan controls
  • Possible plan redesign

Why claims may be high

💡 High claims may not always mean employees are less healthy.

📋 Plan design itself may encourage higher claims if it includes:

  • Broad coverage
  • Liberal definitions
  • High maximum benefits
  • Minimal deductibles
  • Low co-insurance
  • Short waiting periods

Importance of proactive programs

🧠 Programs such as Employee Assistance Plans (EAPs) may help reduce claims by improving employee wellness and support.

Questions advisors should ask

📋 Important questions include:

  • Is coverage too broad?
  • Are benefit limits unusually high?
  • Are cost-sharing features limited?
  • Are waiting periods appropriate?

8.3.1.3 Satisfaction with current group provider

🤝 Service quality from the current insurer is also extremely important.

📋 Important considerations include:

  • Claims turnaround time
  • Administrative support
  • Communication quality
  • Responsiveness to issues

Why satisfaction matters

⚠️ Poor service may justify changing insurers even if pricing is competitive.

💡 The advisor should carefully review concerns raised by:

  • The employer
  • Plan administrators
  • Employees

8.3.2 Proposed new coverage

🔄 Changing group insurers should never be based on price alone.

⚠️ A lower premium may reflect:

  • Better plan efficiency
    or
  • Reduced coverage quality

💡 Advisors must compare value, not just cost.

8.3.2.1 New plan design

📄 Two plans may appear similar at first glance but differ significantly in actual coverage.

💡 Advisors must compare plans carefully across multiple categories.

Disability benefits

🩺 Important disability plan comparisons include:

  • Definition of disability
  • Waiting periods
  • Short-Term Disability (STD) benefit periods
  • Long-Term Disability (LTD) benefit periods
  • Percentage of income covered
  • Rehabilitation services
  • Retraining support

Extended health benefits

💊 Extended health comparisons include:

  • Services covered
  • Benefit maximums
  • Coverage flexibility

Drug benefits

💉 Drug coverage should be reviewed carefully.

📋 Important comparisons include:

  • Deductibles
  • Co-insurance levels
  • Covered medications
  • Brand-name vs generic coverage
  • Pay-direct vs reimbursement systems

Vision care

👓 Vision care comparisons include:

  • Maximum benefits
  • Frequency of claims allowed
  • Covered products and services

Dental benefits

🦷 Dental coverage comparisons include:

  • Deductibles
  • Co-insurance percentages
  • Covered procedures
  • Annual or lifetime maximums

Long-term care (LTC)

🏥 LTC plan comparisons include:

  • Waiting periods
  • Maximum benefits
  • Covered services

Critical illness (CI)

❤️ CI plan comparisons include:

  • Amount of coverage
  • Covered conditions
  • Definitions of illnesses

⚠️ Definitions are extremely important because benefits are only payable if the exact contract definition is met.

Employee Assistance Plan (EAP)

🧠 EAP comparisons include:

  • Whether the EAP is included
  • Types of services offered
  • Maximum benefits available

Importance of value comparison

💡 A proper comparison evaluates:

  • Coverage quality
  • Benefit flexibility
  • Claims support
  • Long-term value

—not simply the lowest premium.

8.3.3 Funding formulas

💰 Group insurance plans can be funded using different structures depending on:

  • Who assumes the claims risk
  • How premiums are calculated
  • Whether refunds are possible

📋 Three common funding methods include:

  • Non-refund accounting
  • Refund accounting
  • Administrative Services Only (ASO)

8.3.3.1 Non-refund accounting

🏢 Non-refund accounting is the traditional fully insured group insurance arrangement.

💡 Under this structure:

  • Insurer assumes all claims risk
  • Premiums are based on expected claims

If claims exceed expectations

⚠️ The insurer absorbs the excess claims cost.

📌 Employer has no additional liability during the contract period.

If claims are lower than expected

💰 The insurer keeps the excess premium.

⚠️ No refund is provided to the employer.

Renewal impact

📈 Poor claims experience may still lead to:

  • Higher future premiums at renewal

8.3.3.2 Refund accounting

💵 Refund accounting allows employers to share in favorable claims experience.

💡 Also called:

  • Retention accounting

How it works

📋 If claims are lower than expected:

  • Employer may receive a partial refund

If claims are higher than expected

⚠️ Insurer may recover losses through:

  • Higher renewal premiums

Participating concept

📌 Refund accounting operates somewhat like participating insurance because the employer may benefit from good claims experience.

8.3.3.3 Administrative Services Only (ASO)

📄 Under an ASO plan, the insurer provides administration only.

⚠️ The employer assumes the financial risk of paying claims.

Insurer’s role in ASO

📋 Insurer handles:

  • Recordkeeping
  • Claims adjudication
  • Pricing
  • Administration
  • Benefit payments processing

Employer’s role in ASO

💰 Employer funds all actual claims costs directly.

Suitable organizations

🏢 ASO plans are usually best suited for:

  • Very large employers
  • Organizations with strong cash flow
  • Businesses able to absorb fluctuating claims costs

8.3.4 Responsibility for premium payment

💳 Group plans may be structured as:

  • Non-contributory
  • Contributory

8.3.4.1 Non-contributory

🏢 In a non-contributory plan:

  • Employer pays all premiums

📋 Common characteristics:

  • Employee participation usually mandatory
  • Often requires 100% eligible employee participation

💡 These plans provide equal coverage to all eligible employees.

8.3.4.2 Contributory

💰 In a contributory plan:

  • Employees pay part or all of the premiums

📋 Common characteristics:

  • Participation often optional
  • Minimum participation percentage usually required

Advantages of contributory plans

💡 Contributory plans often provide employees with:

  • Greater flexibility
  • Optional coverage choices
  • Customizable benefits

⚠️ Some base coverages may still remain mandatory.

Association group plans

👥 Association plans are typically fully contributory because:

  • The association usually does not subsidize premiums
  • Coverage is offered mainly as a member service

📌 Key Takeaway

Group coverage analysis requires careful evaluation of:

  • 📄 Existing coverage
  • 📊 Claims experience
  • 🤝 Service quality
  • 🔄 Proposed plan design
  • 💰 Funding methods
  • 💳 Premium contribution structures

💡 Effective comparisons focus on overall value, employee protection, and long-term sustainability—not simply the lowest premium price.

8.4 Costs

💰 The cost of a group insurance plan depends on many factors related to:

  • 👥 Group demographics
  • 🏢 Nature of the business
  • 📊 Claims experience
  • 🛡️ Benefits offered
  • 📈 Inflation
  • ⚖️ Funding structure

💡 Insurers analyze these factors carefully to determine premium rates and future renewal pricing.

8.4.1 Premium rates

📋 Group insurance premiums are influenced by several major factors.

👥 Makeup of the group

The characteristics of the group itself significantly affect premium pricing.

📋 Important factors include:

  • Number of members
  • Average age
  • Gender mix
  • Employee turnover rate

Small groups

⚠️ Smaller groups (typically 25 lives or fewer) often face:

  • Less predictable claims patterns
  • Higher premium rates

💡 Claims experience in small groups may not closely follow actuarial averages.

Age and gender impact

👨‍🦱👩 Older groups and certain gender mixes may produce:

  • Higher disability claims
  • Increased health-related claims

📈 This usually increases premiums.

🏢 Nature of the business

Different industries create different levels of insurance risk.

📋 High-risk occupations may lead to:

  • Higher disability claims
  • Higher medical claims
  • Increased premiums

Examples of higher-risk industries

⚠️ Examples include:

  • Construction
  • Forestry
  • Manufacturing

🛡️ Group benefits offered

💡 Premiums increase as coverage becomes broader.

📋 Examples include:

  • Higher disability benefits
  • Broader drug coverage
  • Larger dental maximums
  • Lower deductibles

⚠️ Premium increases are not always proportional to increased coverage.

📈 Inflation

💊 Inflation affects healthcare costs over time.

📋 Rising costs may include:

  • Prescription drugs
  • Medical services
  • Professional healthcare fees

💡 Even with stable claims frequency, inflation can increase renewal premiums.

📊 Past claims experience

Claims history is one of the most important pricing factors.

💡 Insurers use past claims to estimate future claims costs.

Common premium rating methods

📋 Group plans are commonly priced using:

  • Manual rating
  • Experience rating
  • Blended rating

8.4.1.1 Manual rating

📄 Manual rating is used when a group has:

  • No previous claims history
    or
  • Insufficient experience data

How manual rating works

💡 Premiums are based on:

  • Similar groups
  • Same industry sector
  • Comparable size and demographics

📌 Also called:

  • Pooled pricing

Best used for

📋 Commonly used for:

  • New group plans
  • Small groups
  • Groups without prior coverage

8.4.1.2 Experience rating

📊 Experience rating uses the group’s own past claims experience to set premiums.

Important assumptions

💡 Experience rating works best when:

  • The group is large
  • Employee turnover is low
  • Claims history is stable

📌 Past claims are viewed as a predictor of future claims.

Impact on premiums

⚠️ High claims experience generally results in:

  • Higher renewal premiums

💡 Favorable claims experience may improve pricing.

8.4.1.3 Blended rating

⚖️ Blended rating combines:

  • Manual rating
    and
  • Experience rating

Why blended rating is used

💡 Most groups do not rely entirely on one pricing method.

📋 Insurers combine:

  • Industry averages
  • Actual group claims experience

to produce more balanced pricing.

Weighting of each method

📊 The amount of influence given to claims experience depends on how reliable the experience is considered to be.

8.4.1.4 Credibility

📈 Credibility measures how reliable the group’s claims experience is for predicting future claims.

⚠️ Credibility is not a pricing method itself.

High credibility groups

✅ Groups with high credibility usually have:

  • Large membership
  • Stable employee base
  • Low turnover
  • Long claims history

💡 Their own claims experience heavily influences pricing.

Low credibility groups

⚠️ Groups with low credibility usually have:

  • Small membership
  • High turnover
  • Limited claims history

💡 Insurers rely more heavily on manual rating for these groups.

No credibility

📄 Groups with no prior coverage have:

  • Zero credibility

📌 Pricing is based entirely on manual rating.

8.4.2 Taxation and group plan registration

💰 Group plans also involve important tax considerations.

📋 Major areas include:

  • Employee payment of LTD premiums
  • ESDC registration for STD plans
  • Provincial premium tax

8.4.2.1 Employee payment of long-term disability premium

🩺 Tax treatment of disability benefits depends largely on who pays the premiums.

Employer pays 100% of LTD premiums

🏢 If the employer pays all premiums:

  • ✅ Premiums are tax-deductible for employer
  • ⚠️ Disability benefits become taxable to employee

Employee pays 100% of LTD premiums

👤 If the employee pays all premiums:

  • ❌ Premiums are not tax-deductible
  • ✅ Disability benefits are received tax-free

Shared premium arrangements

💳 If employer and employee share premiums:

  • Part of benefits may be taxable
  • Part may be tax-free

💡 The tax-free portion generally reflects the employee-paid share.

Common group plan structure

📋 Many contributory plans structure LTD premiums so that:

  • Employee pays the LTD portion directly

💡 This helps ensure LTD benefits remain tax-free if disability occurs.

8.4.2.2 Registration of short-term disability plan with Employment and Social Development Canada (ESDC)

🏛️ Employment Insurance (EI) provides short-term sickness benefits.

📋 Standard EI sickness benefits include:

  • Up to 26 weeks of benefits
  • After a 1-week waiting period

Why registration matters

💡 If an employer’s short-term disability (STD) plan provides benefits equal to or better than EI:

  • Employer may qualify for reduced EI premiums

Requirement

📄 The STD plan must be registered with:

  • Employment and Social Development Canada (ESDC)

Reason for premium reduction

📌 EI acts as a second payer when adequate group STD coverage exists.

💡 Strong group coverage reduces EI’s financial exposure.

8.4.2.3 Group premium tax

💰 Provincial premium tax applies to group A&S insurance premiums.

📋 Important points:

  • Applies to personal and business group plans
  • Usually ranges between 2% and 3.48%
  • Applies regardless of who pays premiums

How premium tax appears

💡 Premium tax is generally included within:

  • Total quoted premium

⚠️ It is usually not shown separately.

8.4.3 Claims experience and other product cost drivers

📊 Anticipated claims remain the largest factor affecting group insurance costs.

💡 However, plan design features can strongly influence:

  • Frequency of claims
  • Severity of claims

Deductibles and co-insurance

💳 Deductibles and co-insurance help reduce unnecessary claims.

How they work

📋 Plan members pay part of the expense through:

  • Deductibles
  • Co-insurance percentages

💡 When members share costs, they may become more selective about using benefits.

Waiting periods for disability claims

⏳ Longer waiting periods reduce costs by eliminating many short-term disability claims.

💡 This lowers:

  • Claims payments
  • Administrative expenses

Drug coverage restrictions

💊 Drug costs can be controlled by limiting:

  • Brand-name drugs
  • Expensive specialty drugs
  • Non-prescription medications

Contributory plan impact

⚠️ Contributory plans may sometimes increase claims frequency.

💡 Employees contributing toward coverage may feel more entitled to use benefits.

Importance of plan design

📋 Insurers carefully analyze all plan design elements when pricing group insurance coverage.

💡 Small adjustments to deductibles, waiting periods, or coverage limits can significantly affect premium costs.

📌 Key Takeaway

Group insurance costs are influenced by:

  • 👥 Group demographics
  • 📊 Claims experience
  • 🏢 Industry risk
  • 🛡️ Benefit design
  • 📈 Inflation
  • ⚖️ Funding and tax structure

💡 Effective plan design balances:

  • Employee protection
  • Cost control
  • Long-term sustainability
  • Predictable premium pricing

Careful management of claims drivers helps keep group insurance plans affordable and sustainable over time.

8.5 Claims administration

📄 Claims administration is the responsibility of the group insurer.

💡 The insurer manages the claim process from:

  • First notification of claim
    to
  • Final payment of benefits

⚠️ Proper claims administration helps ensure:

  • Accurate claim assessment
  • Timely payments
  • Fair adjudication
  • Compliance with policy terms

Main steps in claims administration

📋 The group claims process generally involves:

  1. 📞 Notification of claim
  2. ✅ Verification of coverage
  3. ⚖️ Claims adjudication
  4. 💰 Payment of benefits
  5. 🤝 Communication with plan members and sponsors

Step 1 — Notification of claim

📄 The insurer must first receive notice of the claim.

💡 Claims are usually submitted using:

  • Insurer-provided claim forms
  • Supporting medical documents

Common proof of claim documents

📋 Examples include:

  • Physician’s statement
  • Medical reports
  • Receipts
  • Treatment records

⚠️ Incomplete documentation may delay the claims process.

Step 2 — Verification of coverage

🛡️ Before approving a claim, the insurer must verify:

  • The group plan is still active
  • The claimant is eligible under the plan

Checking plan membership

👥 The insurer confirms that the claimant:

  • Is an active member of the group plan
  • Meets eligibility requirements

Verification of covered services

📋 The insurer must also determine whether the claimed item or service is covered.

Example — Drug claims

💊 For prescription drug claims, the insurer may verify:

  • Whether the drug qualifies under the plan
  • Whether only generic drugs are covered
  • Whether brand-name drugs are eligible

⚠️ Coverage rules vary by plan design.

Step 3 — Claims adjudication

⚖️ Claims adjudication is one of the most important parts of claims administration.

💡 During adjudication, the insurer reviews:

  • Policy provisions
  • Medical evidence
  • Coverage limits
  • Exclusions and conditions

Purpose of adjudication

📋 The insurer determines:

  • Whether the claim qualifies
  • Amount payable
  • Type of payment

Possible outcomes

📌 The claim may be:

  • ✅ Approved in full
  • ⚠️ Approved partially
  • ❌ Denied

Step 4 — Payment of benefits

💰 If the claim is approved, the insurer arranges payment.

📋 Payments may be made:

  • As a lump sum
    or
  • On a periodic basis (such as monthly disability benefits)

Types of periodic payments

📄 Periodic payments are common for:

  • Disability insurance
  • Long-term care claims

Lump-sum payments

💵 Lump-sum payments are common for:

  • Critical illness insurance
  • Certain reimbursement claims

Communication responsibilities

🤝 Communication during the claims process depends on the size of the group plan.

Large group plans

🏢 In large groups, communication is generally handled by:

  • Insurance company representatives
    or
  • Jointly by the insurer and plan sponsor

Small group plans

👥 In smaller groups (commonly 25 members or fewer), the advisor or agent may play a more active role.

📋 The agent may help explain:

  • Claims procedures
  • Required documentation
  • Insurer requirements
  • Benefit processes

💡 This personalized support can help simplify the claims experience for plan members.

Importance of efficient claims administration

⚠️ Poor claims administration may lead to:

  • Delayed benefits
  • Employee dissatisfaction
  • Increased complaints
  • Administrative confusion

💡 Effective claims administration improves:

  • Employee confidence
  • Plan satisfaction
  • Trust in the insurer and employer

📌 Key Takeaway

Claims administration is a structured process managed primarily by the group insurer.

💡 Key steps include:

  • 📄 Receiving claims documentation
  • 🛡️ Verifying coverage eligibility
  • ⚖️ Adjudicating claims
  • 💰 Paying approved benefits
  • 🤝 Communicating with members and sponsors

Efficient claims administration helps ensure group plan members receive timely and accurate benefits when they need them most.

8.6 Co-ordination of benefits

🔄 Most group insurance plans that provide accident and sickness or extended health coverage contain a:

📄 Co-ordination of Benefits (COB) clause

💡 COB rules determine:

  • Which insurance plan pays first
  • Which plan pays second
  • How much each insurer is responsible for

⚠️ COB prevents duplicate reimbursement of the same expense when a person is covered under more than one group plan.

Purpose of co-ordination of benefits (COB)

🛡️ Co-ordination of benefits helps:

  • Prevent overpayment of claims
  • Control insurance costs
  • Ensure fair sharing of claim expenses between insurers

💡 A claimant cannot normally profit from a medical expense by collecting more than the actual amount spent.

Common situations where COB applies

👨‍👩‍👧 COB commonly applies when an individual is covered by:

  • Their own employer’s group plan
    and
  • A spouse’s group plan through family coverage

Basic COB rules

📋 The basic co-ordination rules are relatively straightforward.

Rule 1 — Primary insured’s plan pays first

👤 The group plan where the claimant is covered as the:

  • Primary insured

becomes the:

✅ First payer

Rule 2 — Spouse’s plan pays second

💍 If expenses are not fully covered by the first payer:

  • The spouse’s group plan becomes the:

✅ Second payer

Rule 3 — Second payer calculation

📄 The full expense amount is submitted to the second insurer.

💡 The second insurer then pays the lesser of:

  • What it would have paid as first payer
    OR
  • The unpaid balance remaining after the first payer’s reimbursement

Example of co-ordination of benefits

💊 Example:

  • Total prescription expense = $1,000
  • First insurer reimburses = $700

📄 The claim is then submitted to the second insurer.

💡 The second insurer will pay the lesser of:

  • Its normal payable amount
    OR
  • The remaining unpaid $300 balance

⚠️ Total reimbursement cannot exceed the actual expense incurred.

Claims involving dependent children

👶 Special COB rules apply to dependent children covered under both parents’ plans.

Birthday rule

🎂 The plan of the parent whose birthday occurs earliest in the calendar year becomes the:

✅ First payer

Important clarification

⚠️ The rule considers only:

  • Month and day of birth

📌 Age of the parent does not matter.

Example

📋 Example:

  • Parent A birthday = March 10
  • Parent B birthday = September 25

💡 Parent A’s insurance plan pays first because March comes earlier in the calendar year.

Importance of COB rules

💡 Co-ordination of benefits helps insurers:

  • Avoid duplicate payments
  • Share claim costs fairly
  • Keep group premiums more affordable

Key advantages for plan members

🛡️ COB may also help insured individuals reduce out-of-pocket expenses because:

  • Two plans can work together to reimburse eligible costs

📋 This is especially useful for:

  • Prescription drugs
  • Dental expenses
  • Vision care
  • Extended health services

Important limitations

⚠️ Even with multiple plans:

  • Total reimbursement cannot exceed actual eligible expenses

📌 COB is designed to coordinate coverage—not create profit for the claimant.

📌 Key Takeaway

Co-ordination of Benefits (COB) rules determine how multiple group insurance plans share claim payments.

💡 Key COB principles include:

  • 👤 Primary insured’s plan pays first
  • 💍 Spouse’s plan pays second
  • 👶 Children’s claims follow the birthday rule
  • 💰 Total reimbursement cannot exceed actual expenses

Proper co-ordination helps control costs while maximizing eligible reimbursement for insured individuals.

8.7 Agent’s service role

🤝 An agent’s responsibilities continue long after a group insurance plan is implemented.

💡 Ongoing service helps ensure that:

  • Coverage remains appropriate
  • Client concerns are addressed quickly
  • Group plans stay competitive
  • Strong client relationships are maintained

📋 Effective service also helps agents:

  • Build trust
  • Improve client retention
  • Generate referrals
  • Identify future opportunities

8.7.1 Ongoing awareness of client situation and needs

🔄 Group insurance needs can change significantly over time.

📋 Changes may result from:

  • Business growth
  • Employee turnover
  • Financial challenges
  • Changing workforce demographics
  • New benefit expectations

💡 Agents should stay informed about both:

  • New insurance market offerings
  • Changes affecting their clients

Importance of regular client contact

📞 Maintaining periodic communication helps strengthen the advisor-client relationship.

💡 A structured follow-up plan benefits both:

  • The client
  • The agent

Benefits of ongoing contact

📋 Regular contact allows the agent to:

  • Anticipate client concerns
  • Identify dissatisfaction early
  • Review changing insurance needs
  • Recommend plan improvements
  • Discuss market alternatives

Acting as a communication bridge

🤝 The agent often acts as a:

📄 Conduit between the client and the insurance company

💡 This helps:

  • Resolve issues quickly
  • Improve communication
  • Prevent misunderstandings

Renewal review process

📅 Agents should ideally contact the client:

  • Approximately 90 days before the annual renewal date

Purpose of pre-renewal review

📋 The review helps determine whether:

  • Current coverage remains suitable
  • Plan modifications are needed
  • Alternative insurers should be considered

Shopping the group plan

💰 If the client wishes to explore alternatives, the agent may:

  • Solicit quotes from other insurers
  • Compare benefits and pricing
  • Provide recommendations

💡 This helps ensure the client continues receiving competitive and appropriate coverage.

Importance of proactive service

⚠️ Waiting for the client to raise concerns may result in:

  • Dissatisfaction
  • Loss of coverage opportunities
  • Increased risk of losing the client

💡 Proactive service demonstrates professionalism and commitment.

8.7.2 Documentation of service provided

📝 Proper documentation is one of the most important parts of professional insurance service.

💡 Detailed records help protect:

  • The client
  • The agent
  • The insurance company

What should be documented

📋 Agents should document:

  • Date of contact
  • Topics discussed
  • Meetings held
  • Advice provided
  • Actions taken
  • Resolution details

Client-initiated contact

📞 If the client contacts the agent requesting service, the agent should record:

  • When the contact occurred
  • What concerns were discussed
  • What actions were taken

Agent-initiated contact

👨‍💼 The same level of documentation is important when:

  • The agent initiates communication
    or
  • The insurer initiates communication

Special attention to complaints and concerns

⚠️ Agents should carefully document any situation involving:

  • Client dissatisfaction
  • Product concerns
  • Service complaints

💡 Detailed notes may become extremely important later.

Retaining written communications

📂 Agents should keep copies of all written records, including:

  • Quotes
  • Emails
  • Letters
  • Plan comparisons
  • Client correspondence

Phone conversation records

📞 Important phone discussions should also be documented in writing.

💡 Notes should include:

  • Date and time
  • People involved
  • Key discussion points
  • Follow-up actions

Why documentation matters

⚖️ Good documentation may become critical if:

  • A claim dispute arises
  • Legal action occurs
  • Regulatory reviews take place

💡 Accurate records help establish:

  • What advice was given
  • What actions were taken
  • Whether service obligations were fulfilled

Benefits of strong recordkeeping

📋 Proper documentation helps:

  • Improve client service
  • Reduce misunderstandings
  • Protect against liability
  • Support compliance requirements

📌 Key Takeaway

An agent’s service role extends far beyond selling a group insurance plan.

💡 Effective ongoing service includes:

  • 🔄 Monitoring client needs
  • 📞 Maintaining regular communication
  • 💰 Reviewing renewal options
  • 🤝 Acting as a liaison with insurers
  • 📝 Carefully documenting all interactions

Strong service and detailed documentation help build lasting client relationships and protect all parties involved in the group insurance process.

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