Are You Protected From Long Term Health Costs?

Most companies have stop loss insurance to protect themselves from catastrophic drug claims. Or they have implemented a drug formulary (Generic, Mandatory Generic, Therapeutic Substitution, Step Therapy Formularies, etc.) to ensure all lines of medication have been attempted before covering the cost of a high priced drug. But what have you implemented within your corporate policy to protect your bottom line from long term health care claims from a disabled employee?

Imagine you hire a young, energetic, and enthusiastic employee- let’s call her Jennifer. Jennifer is 25 years young when you hire her and you see a lot of potential, she might even be your next VP of Operations. She does her job tremendously well and generates a lot of revenue for you. One morning you walk in your office and find out Jennifer has been in a car accident. You’re blindsided by the news and react the way any normal human being would- you are concerned for her well-being and want to make sure you do everything you can to help her recover… Or Do You?

Let’s take a step back as a business owner and evaluate this situation. Are you really willing to cover her (and her dependents) health and dental claims until she reaches age 65? 

  1. Jennifer is only 25 years young and hasn’t even put a full year of service in with your company. How long should you be willing to cover her health and dental benefits?

It is fair to assume that disabled employees will have a greater need for health coverage than active employees. Conversely, your company has a greater need for active employees than disabled employees.

You want to help Jennifer recover but you do not want to jeopardize the benefits package you provide your active employees.   And if Jennifer is not going to be returning to work is it your responsibility to cover her medical cost for the rest of her life?

2.    Who do you want to spend your money on?

Although Jennifer showed promise of becoming a key employee within your company her accident has paralysed her and she will not be returning to work.  Are you willing to cover her health and dental claims to age 65? What if she has a family? Are you willing to cover their eligible claims as well?

Will the financial burden of Jennifer’s claims ultimately impact your company’s ability to provide a competitive program at an affordable price for active employees?

If you are like most business owners, you are confused and not sure how to proceed. The human being within you wants to continue coverage. The business owner within you knows that covering health claims for disabled employee’s is not a profitable business model.  So what do you do?

Under the terms and conditions of a standard group insurance contract an employer is able to continue health and dental coverage for disabled employees. Thus, if your company has an endless supply of cash you can continue to cover the disabled employee and their eligible dependents up to the standard termination age of the plan. For the rest of us we have an important decision to make.

At what point do you remove health and dental coverage?

Benefits should be continued for a minimum of 1 year from the date of disability. In Ontario, The Worker’s Safety Insurance Board (WSIB) states that an employer must continue payment of benefits for one (1) year while employee is receiving WSIB benefits. It would be considered discriminatory if benefits are continued for employees receiving WSIB benefits but not continued for employees receiving long term disability (LTD) benefits. Therefore, benefits should be continued for a minimum of one (1) year whether on WSIB or LTD.

However, we typically see benefits continued for two (2) years. This period coincides with the two year own occupation definition found in most LTD contracts. If an employee continues to qualify for LTD past the two  (2) year own occupation stage it is most likely this employee will never return to work. This would be an acceptable stage to eliminate health and dental coverage.

To limit your company’s liability and to protect you from long-term health care costs from a disabled employee, Jones DesLauriers Blevins Insurance Group Inc. strongly recommends you implement a corporate policy addressing the continuation of health and dental benefits for disabled employees. Establishing a policy prior to an employee being disabled will fulfill your corporate responsibility in a manner that is fair to everyone. If you currently have disabled employee’s it may be best to grandfather their coverage and implement a policy for all future disability claims. Please contact us to help you structure a policy that is right for you.

 

 

 

 

Robert Jones
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Robert understands and appreciates the value and energy each employee brings to a company. With this in mind, he can share these skills with our clients, to help develop benefit plans that match an organizations' corporate culture and philosophy.