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May 2013 Bulletin

News from The Benefit Specialists Corp.

From: The Benefit Specialists Corp. <sean.murray@telus.net>
Subject: News from The Benefit Specialists Corp.
Reply: sean.murray@telus.net

Dear sean,

 

We hope you enjoy the May 2013 edition of our bulletin.  Please feel free to

contact us if you ever have any questions or concerns, we are here to help!


 The Benefit Specialists Corp. Newsletter

 


    

                                                                      May 2013


In This Issue
 
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The Benefit Specialists Corp. are independent brokers who are licensed to provide you with a group benefit plan. We are not salaried employees of the insurance company you are with. We work for you and want to ensure that you are happy with your provider. We are here to help you and if you are not happy with your provider, we hope that you continue to work with us to provide alternate options, i.e plan design changes or going to market to prepare a plan audit.

 

 

How are your Renewal Premiums Calculated?

 

Your group insurance policies rates are built with 2 separate and distinct methods:

 

  1. Pooled Benefits - Pooled benefits based on demographic and market factors - Life, Accidental Death and Dismemberment, and Long Term Disability.
  2. Experience Rated Benefits - Experience benefits are based on your company's usage or claims rate - Short Term Disability, Health and Dental benefits.

 

Pooled Benefits:

The experience of your plan is an important factor in determining your premium rates. However, for some benefits, even a single claim can have a significant impact on costs. For those benefits, premiums and claims are "pooled" to establish an average, more stable premium rate.

 

Life Insurance

 

The cost of life insurance for your group is directly affected by the size of your company, the demographic make-up of your employees, and an aging population.

 

Company Size:

 Generally speaking, larger groups, as administrative costs are lower achieve greater economies of scale. This lowers the cost of insurance and the premium you pay.

 

Demographics:

 The age and gender of your group also has a direct impact on your life insurance rates. As your group gets older, the likelihood of death among your employees increases, and thus a higher premium must be charged. In addition, the ratio of males to females will also play a role in determining premium rates for your group.

 

Aging Population:

 Besides the demographics of your group, Canada's aging working population places upward pressure on the pricing of most benefit lines, and in particular the pricing of life insurance.

 

Disability Insurance

 

Like life insurance, the cost for disability insurance is affected by a number of factors, including the size of your group, the demographic make-up of your employees, and an aging population. In addition, disability insurance premiums are also affected by incidence rates, reserves, and Canada Pension Plan offsets.

 

Incidence:

 The rate at which people become disabled - or incidence rate is a key factor that affects disability pricing. The pricing of disability benefits will fluctuate up or down depending on the number of employees in the "pool" of insured group clients who are disabled. Over the last few years, incidence rates have increased. The rise in incidence rates is, in part, the result of a greater number of claims being made for mental and nervous disabilities such as depression and stress leaves.

Reserves:

Disability reserves are the amount of money that must be set aside in order to pay for claims of a long-term nature. Consider, for a moment, two factors that affect reserves and, therefore, the pricing of the long-term disability benefit.

 

  • Interest Rates - In the case of a disability, the duration of a claim can be long enough to make interest rates a factor. When interest rates increase, less premium is needed to stock the reserves. Falling interest rates have the opposite effect.
  • Termination Rates - The termination rate is the rate at which employees are no longer considered disabled. When termination rates decrease (meaning more employees stay disabled for prolonged periods), greater reserves are required to pay for benefits. This is why managed disability claims adjudication is so important.

 

Integration And Offsets:

Most group plans have a CPP / QPP offset or other integration clauses. This means that any long-term disability benefits paid to an employee are reduced by any benefits the employee receives from other sources. If CPP / QPP benefits do not increase over time (assuming inflation), a greater percentage of the total disability benefit is paid by your private plan.

 

Experience Rated Benefits

 

Healthcare, dental care, vision and short-term disability are experience-rated benefits. An experience-rated benefit is:

  • Characterized by a high volume of claims and low to moderate dollar claim amounts.
  • Provides a good opportunity for you to directly control the costs of your plan.

 

The only way to ensure future claims of your employees are adequately funded is to apply these trend factors to your group plan at renewal. The largest impact on health plans is the cost of medication - it represents 71% of all health claims and 89% of all claims incidence incurred.

 

Experience:

Your claims experience is determined by comparing the premium you have paid to the claims that have been submitted and approved. Incurred claims include those claims actually paid out plus reserves (required by law).

 

Paid Claims:

Claims that have been submitted and approved by the insurance company, and paid out, or reimbursed, for services covered. This category represents the dollar amount paid back to the insured for claims.

 

Reserves:

It is necessary to establish a reserve requirement in order to ensure that funding is available to pay for claims that were incurred, but not submitted. The ratio of claims incurred to premium is then compared to the target loss ratio, the ratio at which the insurance company has covered both claims and the cost of administering your policy.

 

Credibility:

The extent to which the experience of your group determines your renewal rates depends on the number of employees covered under the plan and the number of years of experience there is to evaluate. This is known as the credibility of your experience. Generally speaking, the larger the size of the group and the greater the number of years of experience there is to evaluate, the higher your credibility. Smaller groups have a lower credibility factor since it is more difficult to predict claiming patterns from year to year.

Demographics:

The age of your employees and the ratio of males to females are two demographic factors that will affect your health and dental rates. As with life and disability insurance, the size of your group will also have an impact on the premium you pay.

 

Health and Dental Trend Factors

 

To ensure that premium will accurately reflect future claims, renewals attempt to predict the cost of today's claims at tomorrow's prices. Some trends we look at are:

* Overall utilization

* Inflation

* Offloading from the government plans.

 

Utilization and Demographic Trends

While drug prices have remained steady, it should be noted that demographics have an enormous impact on utilization. Health care costs tend to be fairly steady until age 50, at which point they rise steeply with age.

 

Dental Care Trends

 

Utilization:

Like healthcare, an aging workforce and the overall impact of aging on claims affect dental care utilization. The average cost per dental service and the average number of dental services covered both tends to be higher for those over

 

Fee Guides And Inflation:

Your dental plan is designed to reimburse dental procedures based on provincial dental fee guides, prepared by provincial dental associations. While a dentist can charge more, most insurers reimburse procedures based on the provincial fee guide. Fee guides are reviewed annually and increases are usually absorbed by employer-sponsored plans. Although fee guides vary by province, most provincial dental associations increase their fees 2 to 2.5% annually. Approximately 10% of procedures are not subject to fee guide maximums and therefore are completely inflationary. As well more and more dentists are charging up to the maximum allowed by the fee guide.

 

 

age 35. The inclusion of dependants also increases the utilization of dental services per employee. During the child-rearing years (25 to 45), the average covered amount rapidly increases. As plan member's age, they also tend to require major dental services more often for themselves.
BeneCo PHSP Reminder
Source: Custom Care

 

Although we have not had any notable changes to PHSP guidelines in the last year, we want you to be aware of the types of items that come to our attention most commonly.

 

First of all, you must be an employee of the registered company to be eligible to participate in their PHSP.  That means that you must be drawing some T4 income (CRA considers dividends "unearned income") and then your spending limit needs to be a maximum of 20% of your salary.  Each employee can then spend up to their limit on eligible medical and dental costs for themselves and their dependants.
  
As an employer, you must offer some level of benefit to all full-time employees (those who work 24 hours per week or more).  Past cases where employers set up a plan for themselves and provided no benefits for employees resulted in fines, penalties and interest charges from CRA.  New employees must be added after their probation period by sending a completed copy of the Beneco enrolment.
  
Only eligible expenses may be claimed for reimbursement.  The list is long - in general any product or service offered or referred by a Licensed Medical Practitioner (Doctor) is allowable.  For a complete list click here.  Over-the-counter medications and supplements are not eligible to be claimed.
  
You must send in your claim with original receipts (showing paid in full) within one year of incurring the expense to be eligible for reimbursement.
  
Cosmetic procedures, unless accompanied by a Doctor's note explaining the medical necessity of such, are not allowable.
  
GST/HST is only applicable to the 10% admin fee attached to each claim.  Please usethis link to go to our on-line claims form calculator when putting your claim together.
The information contained in this bulletin is for general information purposes only. The articles published in this bulletin have been collected by The Benefit Specialists Corp. (TBSC) and we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability or availability with respect to the information, products, services, or related graphics contained.  Any reliance you place on such information is therefore strictly at your own risk.  In no event will we be liable for any loss or damage including without limitation, indirect or consequential loss or damage, or any loss or damage whatsoever arising from loss of data or profits out of, or in connection with, the use of the information contained in this bulletin.  Through this bulletin you are able to link to other websites which are not under the control of TBSC.  We have no control over the nature, content and availability of those sites. The inclusion of any links does not necessarily imply a recommendation or endorse the views expressed within them.
Sean Murray
The Benefit Specialists Corp.
sean.murray@beneco.ca
(403) 547-5236

This email was sent to sean.murray@telus.net by sean.murray@telus.net |  
The Benefit Specialists Corp. | 339 Tuscany Estates Rise NW | Calgary | Alberta | T3L 0C6 | Canada