Why do I have to sign up for benefits?
I do not need this coverage!
I am already covered under my partner’s plan!
My other employer covers me!
If you have ever heard an employee say something similar, please raise your hand.
Wow! I see a lot of hands!
This can sometimes result in an awkward moment and may even lead you to question why an employee is required to enroll in a plan that they feel they do not need.
To begin to answer these questions, we must first look at the basis of Group Benefits. A Group Benefits plan is intended to offer extensive coverage to all employees within a certain class or designation, at a reasonable cost. Group benefits tend to be less costly than personal insurance – this can be considered as a ‘bulk discount’ of sorts. Another huge advantage of Group Benefits is that the employees and their family members are not required to provide evidence of good health, before coverage is put into place. The only requirements would be full-time employment, a probationary period (usually 3 to 6 months), and submission of your enrolment form within a certain time frame (within 1 month of the effective date of the employee’s coverage).
The employee/employer is paying a monthly premium, of course, but it is the Insurance Company who is assuming the financial risk of paying out potentially large claims (eg. Life insurance; an extended Long-term disability; Out-of-Country medical emergency; costly medication, etc..), especially when the Insurer does not know whether the employees have a history of good, great or poor health.
One of the trade-offs, for the Insurer to assume this financial risk is the guarantee that they can expect the bulk of employees within a company to be enrolled and premiums are being paid on their behalf. For example, a company with 50 employees may have Life insurance coverage of $50,000 per person. If the Insurer can count on the fact that all 50 employees must enrol, and premiums are being paid accordingly, then that is a much more acceptable risk than if only 30 employees chose to enrol. If many employees are choosing not to enrol, then really it can no longer be considered as a true “group” plan, and the Insurer may reserve the right to terminate the plan.
This mandatory enrolment is referred to as a “mandatory plan”, oddly enough!
Most group plans are designated as mandatory. This designation would especially be applied to small to medium sized employers (1 to 50 members).
The other option would be for Insurers to increase their rates drastically, to compensate for the fact that they cannot guarantee most employees will be enrolled – – and if this were to happen, then again, it defeats one of the main purposes of the existence of group insurance (relatively low costs!).
Now of course, there are exceptions to most rules.
If the employee is paying for a portion of the monthly premium, and they absolutely insist that they do not want the coverage, then they cannot be forced to pay.
Though, you would still want to suggest that it is in their best interest to enrol due to the reasons we’ve already covered (no health evidence needed; high coverage vs. low cost).
But if an employee is still insistent on waiving all benefits, there is a form that they can complete (please contact us, if this should every occur).
This benefit-waiver form would have to be signed and dated by the employee and by their spouse, as a precaution to protect the employer from liability should something unfortunate occur to an employee or a dependent.
That said, there would still be a minimum overall requirement for the percentage of employees within your company, who must be enrolled. This figure ranges from 85% to 95%, depending on the Insurer and the size of the employer.
We mention this percentage only because this could lead to an issue for an employer with, say, 20 employees who has already allowed 2 employees to waive all benefits. If the minimum enrolment were 90% (for example), then this employer would not be able to allow a 3rd employee to waive all benefits. The 3rd employee may question why others were allowed to waive, and not them.
If the employer is paying for 100% of the premium, then there should be no issues. Who wouldn’t want “free” benefits!
But if the employees pay for a portion of the premium, we suggest that the benefits be offered as a highly advantageous requirement of employment.
After all… they are called “benefits”, for a reason!