the financial advisor guide to employee benefits self

Employee Benefit Plans

Self-Study Course # 3

Employee Benefit Plans SSC #3 Pro-Seminars Limited – All rights reserved © 03/18

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EMPLOYEE BENEFIT PLANS

In this self-study course, the student will learn about the following:

• Introduction and history of Employee Benefit plans

• Demographics of our changing aging marketplace when it comes to Employee Benefit plans.

• How Canadians view Health Insurance and how plans are changing to keep up with the changing requirement of the employee

• The traditional distribution sources for Employee Benefit plans

• Description and types of different types of Employee Benefit plans and the taxation of Employee Benefit pans

• What benefits are included in an Employee Benefit plan

• The five fundamental principles of Employee Benefit Plans.

• General Provisions of a Master Contract

• A review of the factors that affect a Group renewal premium and how the premiums are arrived at.

• Corporate and Government Benefits

• Understanding how CPP, EI and WSIB can complement a benefit package.

• PHSP / Health Care Spending Accounts – Are they the way of the future?

• Employee Assistance Plans

• Group Critical Illness Insurance - The Cost of Living with a Critical Illness • What illnesses will critical illness insurance cover?

• Best Doctors and more…

AN INTRODUCTION AND HISTORY OF EMPLOYEE BENEFITS (GROUP INSURANCE BENEFITS)

Even though Group Insurance benefits (also known as Employee Benefits) have been in existence since 1920, there have been substantial gains, to the point where today they are more significant than individual insurance. Employee benefits do however, have limitations that make it clear that it is to be regarded as an add on and not to be relied on as the main foundation of any individual’s financial security.

Many businesses, industries and associations are concerned with holding on to their employees. Although Employee benefits can be considered an expense to many companies, the employees look at it as a fringe benefit. Currently where job vacancies are very competitive, many applicants want to find out more about benefits before they accept a position with the company.

Although a Company does not have to be incorporated to have Employee benefits, there are many benefits of incorporating a business for the opportunity to obtain tax advantaged Employee benefits.


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The benefits provided could cover the many formats of Employee benefits to plans that provide individual retirement accounts or traditional Registered Pension Plans and a host of other plans.

The health-care system in Canada ensures that virtually everyone living here has access to medical services in any part of the country. You likely have a provincial health card that gets you into doctors' visits, hospitals, covers various blood tests, X-rays, and other medical procedures. As lauded as the Canadian system is, it doesn't cover everything. With a few exceptions, provincial plans don't cover dental care or pay for medications received outside of a hospital. These plans also won't pay for glasses or contact lenses. That's why many of us turn to private plans purchased by our employers or, increasingly, to individual private health-care plans.

Unlike the emergency health insurance, you may consider buying when you go out of the country on vacation, regular individual health insurance is designed for the day-to-day troubles, surgeries, and treatments that, while routine, can add up to big bills. Responding in part to the changing workforce where more people are working on short-term contracts or for themselves, insurers are offering a variety of health-care packages to cover the needs of individuals and their families.

What started as a basic plan has become a virtual buffet of services where consumers can choose which benefits they want and need. If you work for a company that offers health-care but not dental-care benefits, for instance, you can purchase your own dental benefits.

If you have prescription needs but can't afford a full package, choose a basic health plan including a drug plan, and skip the dental or vision portions.

If you have a growing family and want as much coverage as possible, order the works. There are also some packages designed for health-care catastrophes that would pay much more than the regular plans for serious illnesses that would result in substantial drug or therapy charges.

The choices are improving, and, for some people, the cost of health insurance can be used as a tax deduction.

Of course, wanting insurance and getting it are two different things. Insurers will have you think that everything is simple. One brochure insists you can enroll in a plan in five easy steps and in less than 10 minutes.

Well, maybe it's that simple if you are young, in excellent health, want very basic service, and have no interest in the details.

For the rest of us, it makes more sense to pick up the phone and ask questions. Lots of them.


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You won't want to be sorting out misunderstandings when you are sick. Take care of it before you sign up and keep notes, so you will remember your understanding of what you bought.

Health insurance plans usually provide coverage for serious diseases that by their very nature can be unpredictable and catastrophic.

Medical treatment can be extremely expensive, and a purchased individual health insurance plan can help relieve tension to some extent. This is not say that health insurance plans do not cover routine check-ups and common ailments. The point is that even if companies provide group insurance plans, it is better to safeguard yourself for the future.

Most plans provide limited coverage and if you decide to opt for the ones with greater benefits, the cost factor might become an issue.

This is a situation that calls for utmost discretion and it is for you to perform the balancing act between cost and coverage- you cannot go beyond the budget, but good health too is of utmost importance.

Most companies provide group dental insurance coverage to their employees as a major perk to keep their employees happy. Because of the large number of employees, the insurance companies can provide greater coverage at reduced rates. People with group dental insurance plans do not require additional individual dental coverage.

This is not so with health insurance. Even if the company provides medical coverage, buying individual health insurance is a safer option that will prove beneficial in the long run.

For many reasons, millions of Canadians are without an employer group health plan, and therefore vulnerable to health care costs not covered by their Government Health Insurance Plans so supplemental health care coverage should concern them.

Corporate and Government Benefits can cover your client’s needs in the following areas:

• Health Benefits

• Disability Benefits

• Retirement Benefits


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For this course, we will only deal with the first two.

Throughout this course, we will look at the flexibility of different Employee Benefit Plans, as well as how the Government Plans complement or sometimes integrate into Corporate Employee Benefit Programs to provide a comprehensive and wide-ranging support system for employers and employees in Canada.

We will study such Employee benefits as Life & Accidental Death & Dismemberment, Health, Dental, Short Term Disability (Weekly Indemnity), Long Term Disability (LTD), Employee Assistance, Group Critical Illness and Best Doctors.

We will also cover Health Spending Accounts, Health & Welfare Trusts, Cost Plus, Administrative Services Only (ASO), and Individual Health & Dental plans.

In the Beginning…

While employer medical and dental plans were originally designed to be supplementary to the publicly funded government plan, because of the federal and provincial cut backs in healthcare services employers and private insurers across this country companies have had to alter and redesign their medical and dental plans to keep up with emerging trends of higher claims and new cost realities. In an age where publicly covered services continue to be reduced, we are likely to see corporations in Canada share continue to increase in the coming years.

In the midst of these economic pressures on the current healthcare system, employees are demanding better company medical and dental benefit plans. While the traditional corporate employee medical and dental benefit plans in Canada provide coverage for semi-private hospital rooms, prescription drugs, dental, chiropractors, physiotherapists, vision care, extended health coverage and travel medical insurance, employees are asking for more options than ever before.

Opinions on what to add are largely influenced by age and experience - items like teeth whitening can compete with orthotics. Older employees want expanded drug coverage, while younger workers are concerned about their deductibles.

The end result is employees want choice and employers want/need to contain their costs.

The vast majority of Canadian small and mid-sized businesses offer medical and dental benefits to their workforces by utilizing insurance carriers.

With the consolidation frenzy of the last decade, the number of insurance carriers has dwindled to make the Canadian players more globally competitive. This new,


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streamlined landscape has been good for the carriers, but not for the small and medium sized Canadian business, which have been underserved by the carriers focused on delivering shareholder value with big premium clients which are $500,000 or more in annual premiums.

The increasing pressures on the current healthcare system, the consolidation of the insurance industry and the growing employee demand for more flexible and expanded coverage is having the greatest impact on the small and medium-sized Canadian business.

With health and dental care costs escalating, small and medium sized employers are facing uncontrollable and unpredictable costs to their businesses to provide these benefits. Employers have tried to curtail these costs by introducing annual limits, co-insurance, deductibles and exclusions to their medical and dental plans.

Canadians and Health Insurance

There are more than 150 life and health insurers operating in Canada (including 37 foreign-owned life insurers) providing a competitive Canadian marketplace with a wide range of financial security products for businesses and individuals. These products include Employee benefits and individual plans that provide life and health insurance protection and retirement savings solutions to ensure the financial security of over 28 million Canadians.

When it comes to Health insurance, Government programs cover basic physician and hospital expenses for all Canadians and provide financial assistance to Canadians who are unable to work because of disability or illness. The majority of Canadians are also protected through extended health care (Ext. health), disability and other insurance provided by insurers.

During 2017, 25 million Canadians were covered under Extended Health plans with over $27.5 billion spent on premiums.

Most health insurance is purchased through group plans provided by employers, unions or professional associations. Canadians may also supplement government and group protection with individual plans.

The industry pays out 86% of health insurance premiums as benefits to policyholders (this includes funds set aside for future benefits on disability and other longer-term contracts), 8% for operating costs and 3% in federal and provincial taxes. The remaining 3% is the average profit margin.

Insured health benefit plans played an essential role in providing protection against financial loss for millions of Canadians


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The Aging Landscape and Health Insurance in Canada Canada’s population is aging. Statistics Canada reports that over 15% of our population at the last census was over 65; it was 7.6% in 1960. For the first time there are more people aged 65 and older than there are children aged 0-14 years. Based on population projections the share of Canadians 65 and older will continue to rise and that by 2024 they will account for 20.1% of the population. By 2036 seniors are expected to make up 25% of the population. People aged 85 years and over make up the fastest growing age group in Canada — this portion of the population grew by 127% between 1993 and 2013.

And Statistics Canada projects, based on a medium-growth scenario, there will be over 62,000 Canadians aged 100 and older by 2063. However, the quantity of years will be meaningless without a corresponding improvement in quality to complement it. An “age-friendly” system must aim to create a continuum that reduces dependency and enhances care as much as possible.

Key points from the previous information

• As Canadians are living longer, we will have long-term health care needs

• Health insurance responds to these needs, without threatening personal savings, assets and financial security

• Health insurance provides the flexibility to deal with individual needs as they arise

Are traditional benefits good enough?

Employees Needs Are Changing

Employers usually aren’t excited about making significant changes to benefits plan designs because they require a large amount of effort, planning and communication, as well as financial investment.

Yet it’s important to understand that meeting the demands of a workforce ranging from those fresh out of school to those working well past the typical retirement age requires more than a traditional Employee benefits approach.

With so much generational diversity in the workplace, employers need to evaluate how well their existing benefits plan meets the needs of workers in the early, mid- and late career stages, considering how a broader range of voluntary services and choices could better address multiple generational needs, improve health and enhance member engagement.

Here’s a brief description of the career stages and what employees in these stages may be looking for.


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Employees early career needs: Employees new to the workforce may not yet have experienced health-related costs other than those associated with minor injuries or short-term illnesses. Their interest in benefits may be less focused on long-term risk issues and more on current lifestyle needs. One insurance company survey indicates younger employees tend to spend less time reviewing their benefits (30% spend less than 15 minutes), so there is a challenge in even getting new employees engaged with their plan.

Earning entry-level incomes and perhaps carrying student debt, this group may not be that concerned about managing day-to-day health expenses such as vision care and dental work.

These employees may be less attracted to traditional benefits packages and look more favourably on healthcare spending accounts (HCSAs), as well as lower-premium, less-comprehensive coverage options and the ability to trade some benefits for cash or vacation.

A 2012 employee benefit plan member survey also suggests a preference for personalized or voluntary benefits. For example, rather than spending benefit dollars on prescription medications, younger workers may want benefits supporting personal health and wellness, such as reduced-cost gym memberships or on-site facilities for fitness and health promotion.

In the early stages of a career, employees want to develop their skills through training, mentoring and professional development. This is also the beginning stage of financial planning.

Employees may benefit from counselling on how to pay off debt and save for future expenses such as home ownership or travel. While generally healthier than their older colleagues, these employees also report higher levels of perceived stress, so supporting mental health through peer or employee and family assistance programs (EFAPs) may be a priority.

Employees mid-career needs: Depending on their income level, mid-career employees may have a tough time balancing career and family needs. This age group may be caring for not only their children but also their aging parents. Hefty mortgages and family expenses may create financial pressures, driving greater interest in benefits for dependents, as well as disability and/or critical illness insurance to provide risk protection against income loss. Typical core health benefits are best aligned with these employees’ needs, but employers can also help address their financial concerns through voluntary benefits providing discounts on purchases such as home and auto insurance.


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Since the onset of chronic diseases such as mental illness, diabetes and arthritis is more likely at this stage of life, mid-career employees may benefit most from workplace health and wellness programs. These programs help identify early stages of chronic disease and offer resources to maintain good health or improve health status. Non-traditional benefits such as easy access to online health resources, time off to care for a sick child or parent, flexible work arrangements and healthy take-out meals available in the company cafeteria can help time-starved employees better balance home and work life.

Mid-career is also when many people start thinking about what they’ll need in the future and what their retirement will look like.

These days, with dwindling access to retiree benefits for private sector non-unionized plans, employees may want access to advice to understand what their future benefits needs may be and how this will impact their retirement savings plans. They will also want to explore options for rolling over health benefits in retirement and adding insurance coverage for critical illness and long-term care.

Employees late career needs: Older employees are more likely than other age groups to have at least one chronic disease and be on at least one chronic disease medication—perhaps an expensive biologic. While health issues may force some to retire earlier than planned, the high cost of medications and other healthcare needs may encourage others to stay in the workforce longer.

These employees are often more focused on saving money for retirement— and may need help doing so—but they don’t necessarily factor health costs into their planning. If they don’t have retiree health benefits through their company, they may be surprised to discover there is less public protection than they thought for expensive prescription drugs, mobility aids, home care and long-term care. Retirement planning and counselling should include education on how to manage potential health costs.

With a higher prevalence of chronic illness, older employees would benefit from services to detect risk factors and manage chronic diseases. They may also want help navigating the complexities of private and public healthcare to access resources in a timely way. Also, they may need support for episodic absences due to ill health or caring for a sick spouse. This group may no longer be as concerned about dependents and may show interest in more personalized benefits such as massage, physiotherapy and travel insurance.

Considering the various options:

Plan sponsors have a variety of ways to determine whether their current benefits do enough to meet employee needs and help with attraction and retention.


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Employee feedback, surveys and industry research—as well as analysis of claims patterns, employee choices in benefits selection, and public and private programs—can help employers assess which benefits are relevant and have perceived value in the workplace.

As well as looking at current needs, it’s important for employers to project how those needs and employee behaviour might change in the next few years. Most companies continue to offer fixed or traditional benefits plans because they are simpler, easier to communicate to employees, allow greater economies of scale and spread of risk, and have comparatively lower administration costs.

Yet flexible benefits plans—whether they’re set up as optional components in a traditional plan, as an HCSA or as a modular plan allowing choice between different packages—can be tailored to meet the diverse needs of a multigenerational workforce.

Portable voluntary or personal benefits are another possible solution for going beyond traditional offerings to expand the range of benefits. Fully funded by employees, voluntary benefits have the potential to better meet employee needs without adding costs for the employer or having to negotiate a change in benefits that may be part of a collective agreement. Through agreements between employers and service providers, employees can access services and products at lower prices than what they’d get on their own. Plus, benefits can often be purchased through payroll deduction without individual underwriting, making it easy for employees.

Yet despite these advantages, most employers have not yet embraced voluntary benefits. A 2011 LIMRA report, The Building Blocks of the Canadian Employee Benefits: Employer Perspective, found while more than 60% of employers were familiar with the concept, only 39% of that group actually offered voluntary benefits to their employees—even though nearly half agreed personal products provide a way to offer a wider array of benefits to employees.

The International Foundation of Employee Benefit Plans’ 2011 Employee Benefits Survey says 47% of Canadian organizations (both public and private) offer some type of voluntary benefit, most commonly life insurance (90%), accident insurance (43%) and critical illness or cancer insurance (39%). Voluntary critical illness is growing in popularity, but the employee-pay-all portion of a benefits plan could include a lot more generationally relevant options: insurance covering everything from accidents, travel, automobiles and homes, to pets and long-term care. Enhanced coverage for typical core needs (e.g., dental, disability, health, vision, life) could also be offered as voluntary benefits.

Employee benefits plans could include other relevant services and resources as well, such as training or educational programs, credit counselling, childcare,


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referral services for eldercare, financial planning, health and wellness programs, and flexible work arrangements tailored to different age groups.

Communications between Employer and Employee should remain open

Regardless of the benefits available through the plan, today, there are more options to communicate with members of all generations to help them understand and take advantage of their benefits. Technology advancements have increased the potential to have more interactions with members across more channels (e.g., web, mobile, social). And employees of all generations—particularly younger workers—have increased expectations for simple communications, 24-7 multi-channel access and personalized contact.

By recognizing different communication preferences and life stage needs, employers can help ensure employees appreciate the options their plan offers. Examples might include a proactive, simple welcome program to ensure new employees get set up; multi-channel (paper-, digital- and phone-based) options for purchasing or taking advantage of voluntary products or services; or face-to-face or webinar education on key topics.

Even if plan sponsors aren’t considering significant changes in plan design over the next few years, an evolved communication approach and a host of benefits options outside of traditional benefits can enhance engagement, promote staff development and encourage retention of key employees. And that’s an outcome workers of all generations will value.

ALL PLANS ARE NOT THE SAME All health plans are not created equal. And there's no rule of thumb for which ones are good and which ones aren't. The best plan for one person may not work at all for another. The best plan for you will depend on just what kind of health care you need, whether you have family members and what their needs are, and a few other personal factors.

Features and options vary widely among types of plans more so than among companies providing the plans. Where things vary among companies is usually cost - depending on your personal circumstances, some companies' rates may be less than others.

But you don't need to be an expert, or even spend a lot of time, to figure out which plan type is best for your needs. Understanding which type of plan offers the things you want should make a decision pretty easy.

AN OVERVIEW OF HOW EMPLOYEE BENEFITS ARE CHANGING


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Around the globe, sweeping changes are transforming the design and shape of your organization’s Employee benefits plan. Total annual benefits costs per employee continue to outpace both workers’ earnings and inflation, while new legislation and regulations add layers of complexity and additional expense. On top of all that, a shortage of critical talent is adding pressure to offer competitive benefits that will attract key employees.

As a new year begins, many organizations are considering their strategies for benefits plan management in 2018 and beyond. Faced with the challenge of balancing employee needs and wants with changing workplaces and escalating plan costs, employers should prepare for a number of issues in the near future.

Here are seven trends to watch in the coming years as listed in a major Health Benefits publication

1. Personalized benefits experience:

Increasing workplace diversity, a multigenerational workforce and a more personalized consumer experience have led to a desire for the same experience in the employee health and benefits space as well.

With large amounts of data available, plan members and sponsors can expect a more integrated approach from their providers to create more personalized insight and support around their benefits plans. For example, an employee’s past claims history can provide guidance in decision-making around flexible plan options, and providers can use that data to send push notifications to members to ensure they stay compliant with their treatment and coach them on healthy behaviour. The information can also help them make wise buying decisions as they look to purchase products and services.

It’s also possible to integrate work perk programs by sending deals to plan members for products and services based on past purchasing behaviour. There will be a further unbundling of services as flexible plans become even more customizable to a plan member’s unique needs.

With considerations such as privacy and consent, it’s a trend that will be more than a year in the making, but we’re already starting to see a more personalized experience emerging for plan members.

2. Financial wellness:

The concept has recently received more attention around how it connects with physical and psychological health. Financial wellness will continue to emerge as an important health consideration, with plan sponsors looking to support employees through accessible tools and programs.


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While options such as budgeting support and debt management tools have been available to employees through employee assistance programs for some time, they’ll increasingly come to the forefront for employees or be highlighted as part of a company’s wellness offering.

We’re also starting to see more organizations provide new financial supports for employees. For example, in October, Benefits Canada reported on a pilot program launched by Great-West Life Assurance Co. to assist employees in the repayment of student loans without having to sacrifice saving for retirement. Existing programs will add those types of options, along with group registered education savings plans and help with childcare costs. Expect to see more options emerging for excess credits in flexible plans that tie to financial wellness as well.

3. Mental health:

Though mental health is hardly a new trend, it’s likely to stay at the top of employers’ agendas for a while. Mental-health claims continue to drive absenteeism, disability and drug costs, both as a primary diagnosis and as a co-morbid condition alongside chronic health issues. We’ve certainly seen a bigger focus in the past few years on increasing awareness about the prevalence of mental health, as well as efforts to address stigma. Those efforts will continue in the future.

The twist we’ve started to see here is a move towards a more tactical application through the provision of training for people leaders. As employers continue to adapt the national standard of Canada for psychological health and safety in the workplace to their own companies, we’ve recently seen a move towards mental-health first aid training, which will continue to cascade through organizations.

We’ll also see a greater emphasis on equipping managers with the tools to effectively accommodate employees living with mental-health issues to help them either stay at work or have a positive return after an absence. Concurrently, however, access to timely and appropriate mental-health care in Canada remains a challenge for many people. In response, a number of pilot projects launched by providers in 2017 offered digital modalities and alternative access to care or treatment. We can anticipate that to be an area of growth in the coming year.

4. Medical marijuana:

While the topic certainly isn’t a new trend, it will be a prevalent theme this year as employers try to determine how they’ll deal with medical marijuana, both in scope and eligibility in benefits plans and as a workplace health and safety consideration.

http://www.benefitscanada.com/news/great-west-life-pilots-program-to-provide-retirement-matches-for-student-debt-repayment-105356


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5. High-cost drugs:

Plan sponsors are expressing increasing concern about the effect of high-cost drugs on their benefits plans as new medications with high price tags continue to common the market. The price of those drugs is creating tension among all payers — hospitals, public programs and private plans — as they struggle with the extremely high costs.

The current environment is creating the context for an overdue conversation by plan sponsors about plan management and looking critically at cost containment strategies.

6. Post-retirement benefits:

Employers will continue to divest from company-sponsored, post-retirement programs, directing their employees instead to continue to work on a part-time or contract basis or move towards an individual retirement plan.

Retiree exchanges and increased individual options offered by insurers are gaining momentum in this space, as employers look to help employees secure benefits after they retire without necessarily funding them. The marketplace is also creating a more personalized and customizable experience for retirees, who can choose a plan that addresses their claims needs and supports their retirement plans.

7. Cost shifting:

As plans continue to cost more, employers are considering the viability of their historical approach to benefits design, as well as new costs for supplies and services offloaded by public programs onto private plans.

As we’ve seen for some time with pensions, we’re likely to see more plan sponsors adopting a defined contribution approach to their share of plan costs. We’re also likely to see an increase in out-of-pocket costs for members through cost-sharing arrangements, the addition of or changes to co-insurance or caps on reimbursement levels and fees. Employers can use that as an opportunity to drive both a greater employee appreciation for the true cost of benefits, as well as engage their workers as active participants in plan sustainability.

A number of these themes are a continuation of an evolution we’ve already started to see in the recent past, but the way they’ll play out in the near future will be a bit different. As new practices and solutions emerge, organizations will be in a better position to deliver an improved plan member experience.


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WHAT ARE THE ADVANTAGES OF EMPLOYEE BENEFIT PLANS? To the Employer

1. Increase Your Appeal

The acquisition of skilled and dedicated workers will help create a strong foundation for your business. To bring these individuals on board, it helps to have some tangible benefits that differentiate your business from the masses. Rather than offering the bare minimum, give your employees benefits like paid vacations and holidays, health plans, and retirement plans to make your business more attractive. A survey by McKinsey Quarterly showed that attracting and retaining talent was the biggest reason that companies offered Employee benefits.

Offering solid benefits also demonstrates that you believe in your company enough to invest in your employees, and proves that you’re stable, which can help you acquire A-list talent.

2. Minimize Your Turnover Rate

It’s difficult for a business to make serious progress when employees are constantly coming and going. When this happens, it’s hard to establish a veteran team of experts, and the overall talent level will lack. Fortunately, offering benefits packages is often enough to make employees stick around for the long run. By investing in your employees, it shows that you have their best interests in mind and value their job performance. This can help you build a tight-knit team of professionals that will stay for years.

3. Better Morale

Another advantage of offering benefits is the boosting of employee morale. By understanding and addressing the needs of your workforce, it’s likely that employees will be dedicated and take their jobs more seriously. Showing that you care about your workers is a natural way to increase their loyalty and often to get their best work in return. Nothing can put a damper on productivity quicker than a bad attitude. By providing adequate benefits, you can help keep your employees happy.

4. Healthier Employees

Assuming you offer some type of health/dental plan and sick leave, your workforce should be in relatively good health. If your employees have solid health insurance plans in place, there is a better likelihood that they will have


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regular checkups and take preventative medical steps, which should help in ensuring they don’t take many sick days. . By offering sick leave, workers who are sick and may be contagious won’t infect others. The end result should be a healthier workforce.

5. Better Job Performance

By offering benefits, you give employees more of a reason to care about your company and remain loyal. As a result, they should be willing to work harder, which can lead to greater productivity and higher quality. According to Insurance Quotes, 57 percent of private employers offer more than the legally required benefits. For this reason, providing benefits can put you above 43 percent of competitors who don’t offer extra benefits.

While offering Employee benefits may cost a bit more initially, the long-term advantages can greatly outweigh those costs and contribute to your overall success.

Your business will be poised to acquire true professionals who are in it for the long haul. This will help create a stable workforce and position your business as an industry

• Employers can pay a substantial amount of the cost.

• Employer premiums are tax deductible.

• Attracts and helps to maintain valuable employees, therefore reduces the high cost of turnover.

• Can be used to meet the competition when looking at employees who already have Employee Benefits.

• Provides the employer with a sense of moral obligation when dealing with families of deceased or disabled employees.

• Provides employees with a sense of security, therefore loyalty and productivity are increased.

• Employee Benefits plans are flexible when it comes to implementing, administration and changes in personnel.

• An unincorporated owner of a business can be included for coverage, even though these premiums would not be deductible.

To the Employee

• No evidence of health is required, depending on the size of the company insured.

• Employers paid premiums are not a taxable benefit.

• There is an added amount of financial security in the event of death, disability, and out of country expenses for the employees and their dependents.


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• Employees have the right to convert the Life Benefit to a private insurance plan.

• On termination, the Group Life remains in force for 31 days without charge.

• Group Contracts do not contain a suicide clause.

WHAT ARE THE PERCEIVED CONS OF EMPLOYEE BENEFITS?

1. They cost money

The average plan of Employee benefits today is nearly equal to the amount paid out in salary. This is a level of expense that must be effectively managed, especially since many employees don’t see a benefit as part of their income package.

2. There may be few choices available to certain employers

Small businesses are especially limited in the type of Employee benefits they may be able to offer.

This is because better benefits, especially retirement or pension plans, typically have higher administrative costs that the small business may not be able to afford.

3. The costs of benefits are not static

This is especially true for employers who are providing comprehensive health insurance benefits.

The rise in cost of health insurance has been steady and rapid, which means benefits are either cut or more costs are paid for to maintain the current benefit package.

4. There can be issues with legal compliance

Certain benefits must be provided to employees in a specific way. In order to make sure a business is compliance with these stipulations, legal fees must be paid out to verify that everything is being provided legally. It’s another added cost that many employees don’t realize exists as a way to provide them with the benefits they need.

5. Mistakes in Employee benefits can lead to litigation

If a business makes a mistake in providing an employee with a promised benefit, then there is a good chance that they might sue. There might also be regulatory


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fines involved with such a mistake, plus there will be additional legal fees to pay in addition to the cost of the benefit which will still need to be provided.

6. Even great benefit packages can be seen as “not enough”

There will always be some employees who feel like they are overworked and underpaid, no matter how good the benefit package happens to be.

In the pros and cons of Employee benefits, the goal is often to attract and retain the best possible employees in the local job market. Good benefits are seen as a way to inspire higher levels of employee loyalty. If the costs of those benefits can be managed, then it can be a good thing to provide even if they are not legally mandated in every jurisdiction.

THE TRADITIONAL DISTRIBUTION SOURCES FOR EMPLOYEE BENEFITS ARE: Employer Groups The Employer groups are the main source of groups and the Employer/Employee Group Benefits are the most stable in the industry. There could be one company or family of companies with the Master Contract being issued to the Employer or Head Office that would cover all the employees in the firm.

Trade Associations Group Benefits provided for Trade Associations are based on the fact that while they may have many different employers, all the employees are engaged in similar occupations such as building supply companies or automobile dealerships.

Unions (Health and Welfare Benefits) Unions often provide Group Benefits for their “actively at work” members who may work for many different employers or group of employers. As long as the member is working, the Union Benefits are funded by a system known as “Bank Hours” meaning a contribution (pennies per hour) paid for by the employer. When the employee is laid off, the surplus in their “Bank” will carry their health benefits for an indeterminate length of time.

Professional Associations & Affinity Groups


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An insurance policy purchased through an organization that buys insurance for members in order to achieve a lower premium per member. In order to avoid adverse selection, associated groups are not formed exclusively to purchase insurance, but rather add it as a benefit of membership.

Examples of some of these organizations might be professionals such as Doctors, Dentists, Lawyers, Architects etc. who are often too small to purchase Employee benefits individually by office, but when banded together with other professional offices can constitute a very large group.

There are also Associations such as the Canadian Automobile Club, Sports organizations, automotive dealers, musician associations, dance companies, retail associations etc. that offer insurance to their members.

All other Employee Benefits Plans have two parties contributing or “employer pay all” plans. The hybrid of Employee benefits is a cross between true group and grouped individual coverage, known as Association Group Insurance.

The main difference is that the Association arranges for Group Coverage for its members and the individual member pays all the premiums. The master contract exists between the Association and the Insurer. The individual member receives a certificate that details coverage. Participation is up to the individual member and so participation may be somewhat lower than true group.

Due to the nature of Associations, the individual member has less control and input into what the coverage will be and the changes that can be made to the plan without their input. Individual insurance is a superior product in most ways except for cost.

Advantages of Association & Affinity Plans:

• Provides for more economical coverage that would otherwise be available.

• Allow for mass purchase and group discounting.

• Arranged by the Association and only requires payment to activate.

• Provides for larger amounts of Life Insurance on younger lives, when more coverage is necessary.

• Certificate issued, showing coverage.

• Right to convert Life Insurance within 60 days of termination.

Disadvantages of Association Plans:

• Coverage reduces in later years and the premiums can be increased without notice, plan amendments, restrictions or termination without input of member.

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• Restrictive clauses, lower maximums and can contain a two-year suicide clause.

• The Association holds the Master policy. There is lack of control by the member, subject to adverse experience due to other association members.

Many Insurance carriers break these groups down into size bands:

• Large Group - 200 to 20,000 lives plus.

• Standard Group - 25 to 200 lives plus,

• Small Groups - 3 – 25 lives.

Medical evidence is usually required for any group of 10 lives or under.

FUNDAMENTAL PRINCIPLES OF EMPLOYEE BENEFITS Employee Benefits exist for the benefit of the complete group and therefore the individual member is not required to submit medical information, depending on size of the insured company.

There are five fundamental principles of Employee Benefits, which are required:

1. The employee must be actively at work If the employee is on disability leave, their coverage will not be effective until they return to work. This guarantees the principles that all employees can be insured.

2. Non-discriminatory Insurance Schedule

No one employee can pick or choose the type or size of their individual coverage. The Master Contract exists between the employer and the Insurance Company and details with the type and amount of coverage.

The only choice that the employee has, if membership is not a condition of

employment, is whether to join or not. There generally is a waiting period of between 30 and 90 days.

3. Deductions at source

Employee’s contributions are source deducted and then combined with the employer’s share so that one cheque is remitted.


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4. Mandatory Employer Contribution Usually the employer will pay one half of the premium billed each month, but sometimes they may pay a larger percentage. If they pay 100%, this is known as a Non-contributor Plan.

5. Spreading the Risk

To ensure that the risk is spread over the entire employee group, each group size has a minimum enrolment. Small plans with 10 lives or less may demand 100% participation and may request a health statement. A medium size plan of 50 employees or more might require 85% and a large plan would require 75% participation.

WHAT ARE THE FACTORS THAT DRIVE THE PREMIUM FOR AN EMPLOYEE BENEFIT PLAN?

1. Premium Rates Premium Rates are set based on number of employees, age, sex and amount of insurance. The price is charged at a monthly rate per thousand of coverage (i.e. .18 per $1000 of coverage). All members therefore will pay the same amount per month regardless of age or sex.

The premium required may also have been adjusted in part to claim experience or occupations that are more hazardous as well as gender bias.

The premiums are generally adjusted each year according to experience. If the policy is participating, the adjustment may be in the form of a dividend and in a non-participating policy will take the form of an increase or decrease in rate.

2. Experience Basis At the Anniversary of the plan, the past years claims are compared to the amount of premium charged. This is known as “the experience” and the plan is experience rated. The Insurer will wish to retain a small percentage of the premium charged i.e. 26%, and therefore if claims were higher that 74%, the premiums will be increased so as to guarantee next year’s percentage.

At the same time, anticipated increased costs from health care providers are factored into the renewal premium. This anticipated cost is known as “Trend or Inflation”.

3. Pooled Basis It is common practice for a carrier to place all their small group cases in a common “pool”. Premiums and claims are accounted on a pooled basis and the rates rise or fall based on the claims vs. the premiums paid. It is not unusual for larger groups to have the Life Insurance, AD & D and LTD benefits also pooled. In this way, one large claim will not adversely affect


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next year’s rates.

4. Retention Basis The insurer may on the other hand indicate how much they wish to retain at the start of the year. This is used for administrative costs, commissions, taxes and reserves. The claims will be the unknown factor. The refund or reduction of rate will depend on the claims and retention costs. In effect, this transfers the risk element to the employer. Retention Basis is generally used for larger groups.

5. Target-loss Ratio The ratio of the expected amount of claims divided by the anticipated premiums for the next year gives the Insurance Company their profit margins. It is even more of a concern to the employer, as this figure drives their premium.

6. Inflation The increase in the cost of the expenses the Insurance Company covers on a group plan, such as the rising cost of prescriptions.

7. Utilization This represents how often an insured certificate holder has used any benefit of the plan.

The number of claims per year per certificate usually measures utilization. Inflation and utilization are blended to provide an average figure.

8. Natural Aging This is the portion of a rate increase that results simply because each certificate holder has aged by one year since the last renewal.

9. Composition Change The change in rates caused by actually insuring different employees. The variables, which affect the change, are age, sex, dependent status and earnings of the employee. For example, a single male age 22 and earning $28,000 replacing a married female, aged 53 and earning $48,000 will have a downward effect on the group rates.

BENEFITS THAT THE INSURED EMPLOYEE OR THEIR DEPENDENTS WILL USE AT SOME POINT IN THEIR LIVES

Life insurance Benefit schedules must not discriminate between employees but a different schedule can apply to any different class of employees.


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The three main factors that affect the amount of insurance are:

1. Earnings Level 2. Position, or 3. Flat Amount

Often the life insurance can be 1, 2 or 3 times earnings. The contract will usually contain a non-evidence limit and a maximum amount that the Insurance Company will issue as well as a minimum amount e.g. 10,000 minimum – 250,000 maximum.

A description of the terms from this section of the Master Contract:

Annual Salary

Refers to the Schedule of Benefits with respect to each Insured Employee, the regular annual fixed gross remuneration or its annual equivalent they receive from the Policyowner, but will not include, overtime pay, commissions, overrides, bonuses, allowances, dividends or any form of remuneration which is not predetermined.

Basic Benefit

This is the amount of Basic Life as indicated on the Schedule of Benefits for the Employee Life Insurance Benefit.

Death Benefit

The Employee Life Insurance Benefit will be the Basic Benefit. Upon suitable proof of death of the Insured Employee, the Company will pay the amount of Employee Life Insurance to the named beneficiary.

If no beneficiary is designated, or if the beneficiary predeceased the Insured Employee the death benefit will be payable to the estate of the Insured Employee.

Conversion The employee, by law, has the right to convert without evidence of insurability, their Group Life Benefit within the following parameters:

• Application must be made and premium paid within 31 days of termination of

contract or employment.


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• Conversion may be to any plan offered by the Carrier including Term Insurance, Whole Life or other regular plan or it may be a special “conversion” contract.

• The employee cannot convert an amount in excess of the level of coverage they enjoyed under the plan. Premium is based on their attained age.

Conversion Notes: Full Life coverage is continued for 31 days, without charge after termination of employment or at termination of the entire contract. The Converted Policy will be dated 31 days from termination.

If the Contract is terminated or replaced, it usually stipulates: All employees who have been insured five years or more may convert up to a pre-determined amount, minus and amount for which the employee will become eligible under any group policy being issued or reinstated within 31 days after the date of termination.

Beneficiary Designation The same beneficiary designations apply to Group Life Benefits as to individual contracts. An irrevocable beneficiary can be designated on the Group Life Benefit.

Survivor Benefits The Contract may contain a benefit that is equal to 25% of the deceased employee’s salary plus an extra percentage for each dependent child. Remarriage generally will eliminate the benefit.

Taxation The employer’s contributions are an expense deduction and the employee receives them as a taxable benefit. The employee cannot deduct this contribution.

Waiver of Premium and Disability

In the event of a total disability, before retirement, the group life premiums will be waived. They will Re-commence upon recovery.

Some contracts include a benefit whereby the premiums are waived and the face amount is paid out in equal annual installments over a period i.e. five years. In


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the event of recovery, the installments paid will reduce the amount of the Group Life Benefit.

Extension of Life Benefits in Retirement The cost of the full life benefit would be prohibitive if carried from date of retirement until death, so, if offered, the coverage may be modified in any of a couple of ways:

1. Benefit continued at a reduced 50% level with a maximum amount e.g. 10,000. Premium maybe required from the retired employee. The employer may pay the premium or a single premium.

2. Continue the coverage with an annually reducing benefit for the first five

years of retirement. Variation of this method would leave a residual benefit of $2000 for life.

Creditor Group Insurance Traditionally, creditor insurance came about as a means for lenders, in particular banks, to add extra security to their loans, whether they be mortgage loans, vehicle loans or just general consumer loans.

The banks were looking for ways to guard against sudden default on a loan, due to events such as death or disability of the borrower. They also wanted a simplified issue process, that didn’t involve an insurance agent or require special licensing. Enter, Group Creditor Life and Health Insurance.

There were three key features that made creditor insurance attractive to lenders:

Creditor Insurance is group insurance, where the lender is the group policyholder and group sponsor. Hence lenders do not require a licensed agent to offer the insurance. They are deemed to be enrolling members in a group plan.

The insurance proceeds can only be paid to the lender to reduce or extinguish the loan. This allows lenders to have direct security on their loans. There is no need to get in line as a creditor to the estate, and no need to wait for the foreclosure or sale of the collateral property.

Creditor Insurance is usually simplified issue, or even guaranteed issue, which lends itself to a very easy enrolment process.

Many feel that, even at a low price, loan repayment insurance is an unnecessary addition to their monthly loan payment.


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The "it could never happen to me" attitude is understandable when your health is good and you're in the prime of your life, but the statistics on death and disability add a different perspective.

Often overlooked, creditor insurance is one of your most convenient and sensible insurance options. It can allow you to protect your family and dependents from the worry of handling debt, if your income were not available to make the payments.

For example, mortgage life insurance offers a very straightforward but valuable benefit. If you are insured, your mortgage will be paid off for you (up to a set amount) when you pass away. This means that you never have to worry that your family will be burdened with your mortgage in the event of such a tragedy. Insurance is provided for each borrower of funds on a group basis, up to a certain maximum. The premium charged is a flat rate per $100 borrowed on outstanding indebtedness.

Creditor Insurance Limitations In addition to the other hazards involved with replacing of life insurance contracts, the following hazards, risks and uncertainties are added when individual life insurance is replaced with group creditor insurance.

Group creditor insurance coverage normally decreases as you pay off the loan or mortgage but the premiums you have to pay often remain the same or even increase over time.

Normally you cannot continue with the same group creditor insurance coverage if you decide to re-finance the mortgage or the loan with another lender.

If your health or insurability deteriorates it may not be as easy to shop the market for the best loan rate and to keep the insurance, you run the risk of your lender getting this information and this, in turn, may affect your ability to renew or continue with the loan itself.

If the policy expires before you do...they profit. If you expire while the policy is still in force, the institution is usually the beneficiary.

You will rarely, if ever, get a fair opportunity to fully examine the policy contract. (Normally all you receive is a single certificate, which is subject to the Master Policy, which, of course, you do not normally get).

You have less regulatory protection since the regulators rarely, if ever, require that the creditor complete a comparison disclosure form when they replace individual insurance with their group creditor insurance. The fact of the matter is, the group creditor life insurance may be cancelled with little or no notice to you.


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Many financial banking institutions now offer Credit Balance Insurance that is intended for all eligible credit card holders. This covers the balance of any current transactions and usually covers an individual’s credit card payment in the case of:

• Death;

• Loss of use or dismemberment;

• Disability;

• Loss of employment;

• First diagnosis of a critical illness.

• Or any combination of the above.

The most common complaints of Creditor Insurance are:

1. It’s too expensive; 2. Level premium should mean level benefit, not decreasing benefit; 3. It’s not flexible, since the benefit only goes to the creditor; 4. The post claim underwriting means that I am not guaranteed a benefit

payout if I make a claim.

Let’s take a look at each of these complaints, and see if they can be explained away.

Myth #1 – Too Expensive

A common myth is that creditor insurance is “too” expensive. But what is “too” expensive? Is milk too expensive at the corner store, versus the supermarket? Yes, but do some people still buy it there? Yes, why? Because it’s convenient.

How about a more sizable purchase like a home? Some people might argue that renting is “too” expensive relative to buying. Then why don’t we all buy? Well, for some people, it’s the discomfort of a huge mortgage. For others, it’s the lack of good credit. For others, it’s just more convenient to rent (e.g. not responsible for maintenance).

Now, let’s look at the purchase of insurance. Indeed, creditor insurance can be more expensive than preferred term, or even standard term, under most circumstances. But what does it take to get that better rate? A lot of shopping around? Back and forth sessions with the insurance agent, the nurse and the doctors? An extended time period of uncertainty?

All of the above weigh on the consumer’s decision, and many consumers attach a high “cost” to those activities. There is a cost for convenience, and creditor insurance is often the most convenient product for someone just looking to cover only a specific debt.


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Also, for coverage on small loans, such as car loans, one typically can’t get access to insurance on such a small amount, especially with regard to disability insurance.

Myth #2 – Level Premium should mean Level Benefit

I often hear people say, “My creditor insurance benefit is decreasing, but my premium stays the same. That’s just wrong!” What they do not understand is that the premium they are being charged, already takes into account that the benefit is decreasing. If the benefit had been level, then the premiums would have been almost double.

A very big misconception is that the pattern of premiums should track the pattern of benefit. But mismatching of premiums and benefits is not uncommon at all. Take a look at a level benefit universal life policy with YRT premiums. The benefit stays level but the premium goes up year after year!

Myth #3 – Creditor as the Beneficiary makes it Inflexible

The fact that insurance benefits only accrue to the creditor, makes people think that creditor insurance is inferior relative to term insurance. However, this feature actually creates a flexibility that is not otherwise available.

Most disability income insurance plans have built-in offsets. If you are disabled, and claim on your individual or group disability policy, one of the first things the insurer will do, is to check for offsetting benefits (e.g. social security, WSIB, spousal plans, etc.). Any benefits you receive will be deducted from the benefit you would have otherwise received. Guess what insurance benefits are not included in the offset calculation? You guessed it – Creditor Insurance.

Thus, creditor insurance offers a flexible way to isolate certain debt obligations, insure them fully, and still have the full benefits of your other disability insurance without corresponding reductions.

Also, the fact that the creditor is the named beneficiary means that the lender does not have to wait in line to make a claim on the estate. Creditor insurance provides a secured creditor situation for the lender. This can also allow the lender to offer better borrowing rates to the borrower, since the insurance can lower the default rate.

Myth #4 – Post Claim Underwriting is a Scam

The dreaded pre-existing condition clause has made its way through various news “exposés” on more than one occasion. These one-sided narrations tell the


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tale of how unsuspecting customers bought the creditor insurance thinking they were covered for conditions from which they were already suffering, and how the nasty insurance companies maliciously denied their claims.

They also claim that the car dealer or loan officer who sold them the insurance, didn’t explain everything to them. While this may have actually happened on occasion, these are isolated incidents. But more importantly, are people not responsible for their own actions? Does caveat emptor apply to everything else except insurance?

Just about every creditor insurance application and certificate clearly states that there are exclusions, and that the buyer should carefully read the list of exclusions before purchasing. In fact, the buyer signs right below the disclaimer that states the buyer did indeed read everything before signing.

In the end, many of these “misled” claimants turn out to be people who thought they could walk in sick, buy the insurance, and claim tomorrow.

Post claim underwriting is not meant to scam the insured, but to provide a simple and streamlined way to apply for the insurance. Also, most coverages only exclude the pre-existing condition for one year, so if one is indeed ill but survives for a year, then coverage is still available for that condition.

What the Banks don’t want you to know about Creditor Mortgage Life Insurance

Did you know the following facts about mortgage and creditor insurance offered through banks and trust companies?

1. They are “age banded” and your rates may increase as you enter the higher age bands. The premium that the bank quotes you may be valid for only one year.

2. These insurance programs do not offer contractually guaranteed rates. The insurer may increase their rates at any time without consultation.

3. The program can be cancelled with thirty days’ notice, potentially leaving you without mortgage life or critical illness insurance coverage.

4. Coverage terminates if you move your mortgage to another lending institution.

5. Creditor mortgage coverage does not leave you the option of taking the death benefit in a lump sum cash payment and continuing to pay the mortgage, which may be advantageous in a rate-increasing environment.

6. It also does not allow you the option of retaining the insurance coverage once your mortgage is paid off.

7. Unlike an individual Term Life Insurance policy, creditor mortgage coverage is not a legal contract that can only be terminated by you.

8. If a spouse dies prematurely, the other spouse may no longer be insured.


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9. When a mortgage is retired early through a bank or trust company, a penalty is assessed. This penalty generally equals approximately three months interest. This penalty cannot be insured as part of the “creditor mortgage” coverage offered by banks and trust companies. However, it can be insured as part of an individual term insurance policy.

10. Under creditor life coverage people with health issues are not offered coverage. Generally, if any of the health questions are answered “yes” on the creditor’s application, coverage is automatically denied – and no additional underwriting takes place. Individual policies applications offer investigation into the history and current status of the health condition and, in many cases, coverage can be obtained at a slightly higher than normal premium.

The advantages of an Individual Term Life insurance policy bought to cover a mortgage are:

1. Premium remains consistent and guaranteed for the term of your policy. 2. Coverage will never decline even as you pay down your mortgage. 3. You can choose who the beneficiaries of your policy are. 4. In the event of a premature death, your beneficiaries can either pay off the

mortgage right away or invest the money - it’s their choice. 5. You can keep the coverage even after you pay off your mortgage or move

to another lender. 6. Only you can cancel the policy - not the bank that holds your insurance. 7. The insurance company does a full underwriting before the policy is

issued, not at time of claim. 8. If one spouse dies prematurely, under a combined plan the other spouse

is still insured.

Conclusion

Creditor insurance can get a bad rap. There are many features which appear to be disadvantageous, but they are all there for a reason, as explained above. Creditor insurance fills the void, where the average consumer can get quick and easy access to life and health insurance coverage, without the hassles of traditional agent-sold insurance. Very often, creditor insurance is the only means by which a consumer can get a small amount of insurance for a short period of time, and this may be all that they require. It also provides a means to potentially secure better borrowing rates from their lender. So the next time someone complains to you about creditor insurance, perhaps you can help enlighten them with some of the concepts described above.


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ACCIDENTAL DEATH AND DISMEMBERMENT (AD &D) An AD & D benefit is usually included as part of the life benefit. The principle sum, payable in the event of an accidental death, quite often matches the amount of Life Insurance.

Most AD&D benefits cover for Loss of Use, and not just death. Usually there is a period before a loss of speech or hearing will be paid to the Insured. This time is 12 months with many Insurance Companies.

The coverage detail lists numerous dismemberment’s each with its own percentage loss of the principle sum.

An example of some AD&D that could be payable:

• Loss of life, or

• Loss of both hands, or

• Loss of both feet, or

• Loss of sight of both eyes, or

• Loss of one hand or one foot and sight of one eye, or

• Loss of speech and hearing in both ears, or

• Loss of Use of upper and lower limbs (Quadriplegia)

A benefit equal to three quarters the Amount Insured for the:

• Loss of one arm or one leg, or

• Loss of Use of both arms, or

• Loss of Use of both legs (Paraplegia)

A benefit equal to one half the Amount Insured for the:

• Loss of one hand only, or

• Loss on one foot only, or

• Loss of sight in one eye only, or

• Loss of speech or hearing in both ears, or

• Loss of Use of upper and lower limbs of one side of body (Hemiplegia)

A benefit equal to one quarter the Amount Insured for the:

• Loss of thumb and index finger on the same hand, or

• Loss of hearing in one ear.


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Loss This term refers to hands or feet that have been severed at or above the wrist or ankle joint; with respect to eyes, entire and irrecoverable loss of the sight beyond remedy by surgical or other means; with respect to arms and legs, complete severance at or above the elbow or knee joints etc.

Loss of Use With respect to arms, hands, legs and feet, total loss of the ability to perform each action and service that the arm, hand, leg or foot was able to perform before the accident occurred. It must be entire and irrecoverable.

DEPENDANT LIFE Most group policies offer a Dependent Life option to the employees. As an example, it could be $10,000 of the spouse and $5,000 for children who are dependent of the Insured Employee. This benefit is a small extra to help take care of some of the final expenses of the dependent at death. The cost for this benefit is usually very low.

EXCLUSIONS OF AD&D The benefits of this feature will not apply if the Insured Employee’s death, Loss of Use or Loss results from one of the following:

• Suicide or intentionally self-inflicted injury.

• While in the process of committing a criminal offence.

• Service in the military OR driving while intoxicated.

GROUP DISABILITY PLANS Disability is insured against, with two compatible benefits, either of which can stand-alone. In addition, there are the Canada Pension Plan and Employment Insurance Benefits (formerly Unemployment Insurance Commission Sick Benefit) that will help cover the uninsured member of a group plan. These will be discussed later in the course. WEEKLY INDEMNITY (REFERRED TO AS WI OR SHORT-TERM DISABILITY) STD has become the standard alternative to the Unemployment Insurance Commission’s (EI) short-term disability benefit, which commenced July 1, 1971.

Short-term disability plans can be set up in many different formats.


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It is important during a fact find to find out what the Employer has in mind, and how their disability goals can be complimented with this product.

The STD Plan, to replace Employment Insurance (EI) must provide benefits that are the equivalent to the minimum EI benefits or better in order to qualify for an Employer discount on their EI premiums.

The typical Weekly Indemnity Plan therefore has the following benefits: Waiting Period

• 0 days Accident

• 7 days Sickness

Benefit Maximum of 70% of pre-disability income (66.7% standard) to a dollar maximum per week, if the benefit is taxable, a lesser amount if the benefit is non-taxable. This benefit would match the EI benefit of 17 weeks.

Both the waiting period and benefit period can be adjusted depending on the plan.

Weekly indemnity can be written on a non-occupational basis, if Workers Compensation Benefits are provided, thereby reducing the premium required.

It is also beneficial for an advisor to know how the government Employment Insurance (EI) Benefit works in co-ordination with Employee Benefit Plans.

LONG TERM DISABILITY (LTD) Long Term Disability is a plan designed to replace the income of the most serious and prolonged disabilities of the employee. It is designed to complement and enhance the disability income when weekly indemnity ceases, or the EI Disability stops.

• Waiting Period: 120 days

• Benefit: 66.7% (although 50 – 75% is common in some instances).

• Benefit Period: to age 65

In order to be familiar with Long Term Disability terminology, you should know the meaning of the following, so that you can explain LTD properly.

Injury Accidental bodily injury sustained by the Insured Employee.


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Sickness This term refers to any sickness or disease of the Insured Employee, providing that it is not excluded elsewhere in the Provisions of the contract.

Indexed Pre-Disability Earnings This income is taken from the average of:

• Earnings, if the Long Term Disability is taxable or,

• Take home Pay if the Long Term Disability benefit is non-taxable.

Elimination Period The initial period of continuous Total Disability of an Insured Employee during which no Long-Term Disability Benefit is payable. Elimination periods can fluctuate and are referred to in the Schedule of Benefits that are found at the beginning of a contract. Many long-term Disability provisions will include reference to the payment of Long Term Disability Benefits, Recurrent Disability, Rehabilitation, Exclusions and Reduction of Coverage’s.

It is also interesting to note that definitions will differ within the Insurance industry.

Another compliment to Disability plans within an Employee Benefit Program is the Canada Pension Disability plan. We have included some useful updated information for you later in the course.

Premium Payment and Income Tax for Group Disability plans The basic rules for Group Disability Plans are:

• If the employee pays the premiums, the benefit received is tax-free.

• If the employer contributes any amount towards the premium, the benefit is taxable.

GROUP LONG-TERM CARE PLANS The Health Care Crisis and Your Future Canadians like to assume most of their health care needs will be looked after with little direct financial strain. But times are changing. With government cutbacks, insured health services are diminishing and there may be some nasty shocks in the years to come.


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Even under optimistic scenarios, provincial health plans won't cover all the options you need to consider if you develop a long-term illness or suffer a disability.

Long-Term Care insurance allows you to take control of your future needs, with the freedom to receive personal attention from care-givers in the comfort of your own home or to select a private care facility. A Long-Term Care plan can protect you against a drain on your financial resources and a strain on your family.

Potential Consequences of Not Planning Ahead It's not easy to pay the difference between what provincial health plans cover and what people requiring long-term attention truly deserve. Think for a moment about how you would finance care in a private facility, with costs that can easily climb beyond $3,000 a month per person. Try to imagine how you would pay for home care services, which could end up costing even more.

This is something to consider in your long-range financial planning to avoid facing unpleasant alternatives.

Without proper long-term care planning your group clients employees may be forced to:

• Deplete their savings.

• Sell their house.

• Rely on their children to support them.

• Severely lower their standard of living.

• Let the government make their care decisions.

INDIVIDUAL HEALTH & DENTAL COVERAGES It doesn’t matter if you choose Blue Cross, Manulife, Green Shield or one of the other insurance companies Individual Insurance coverage’s as the core products are going to be the same. Of course, premiums and coverage’s will vary from supplier to supplier.

With many of the carriers, you can add:

1. Travel Insurance 2. Visitors to Canada Insurance 3. Best Doctors Insurance 4. Critical Illness Insurance

Some of the Medical Assistance Services Available:


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1. Emergency response in any major language. 2. Referral to an appropriate physician, clinic or hospital. 3. Confirmation of coverage with the hospital or physician. 4. Guarantee or arrangement of payment to the hospital or physician. 5. Assistance in contacting immediate family members, business partners or

family physician. 6. Supervision of medical treatment and keeping the immediate family

members informed. 7. Arrangement of transportation of an immediate family member to the

patient's bedside. 8. Arrangement for transportation to identify the deceased. 9. Arrangement for transportation home of the patient, if medically

permissible.

Non-Medical Assistance Services Available:

1. Arrangement for local care of dependent children. 2. Coordination of the return home travel for dependent children if you are

hospitalized. 3. Transmission of urgent messages to family members or business

partners. 4. Assistance in the event of loss of passports or airline tickets. 5. Referral to legal counsel in the event of a serious accident. 6. Coordination of claims processing and negotiation of health care provider

discounts. 7. Provision of pre-departure information concerning visas and vaccines.

EXTENDED HEALTH CARE OR MAJOR MEDICAL PLANS

Extended Health Care benefits, also referred to as Major Medical Benefits, are designed to supplement existing provincial hospital and Medical insurance plans. The benefit provides for reimbursement of expenses and services not covered by existing Government plans.

Extended Health Care Benefit is a benefit that picks up where Provincial Hospital Benefit Plans leave off. It provides an extension for some benefits and provides other benefits not available through the Government Plans. The benefits vary from Province to Province, but the core benefits are consistent.

Before we look at the different coverage’s under this part of an Employee Benefits plan, we have included some definitions of terms that play a major role when referring to this section of the plan.

Medical Care Means the necessary services; supplies or treatment provided or ordered in the


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treatment of Sickness or injury and, with the exception of Dental Benefits for Accidents and Vision Care, Medical Care must be ordered by a Physician in the treatment of the Sickness or injury.

Eligible Expense Refers to any charge for Medical Care actually incurred by a Person who is insured while the coverage is in effect. This care must be a covered benefit, and has to be of a reasonable and customary charge not in excess of the maximum amount that is shown for such benefit.

Emergency This sudden, unexpected occurrence requires immediate medical attention. This also refers to non-elective relief of severe pain, suffering or disease, which cannot be delayed until the Insured Person returns to their home province.

Participating Pharmacy (Preferred Provider) This Pharmacy has a valid agreement in force to be able to accept pay-direct drug claims.

Generic Drugs and Medicine This may or may not be referred to under the drug portion of the plan. Generic Drugs refer to the lowest cost drugs and medicines that contain the same amount of the same active ingredients in the same dosage form as directed by the Physician’s prescription.

Dispensing Fee The profession has for a long time abused this area. Dispensing fees vary from location to location. Fees are charged by a pharmacist for the preparation and dispensing of drugs that are covered under the plan. Many Insurance Companies will offer many options when it comes to this area. The thing to remember here is that the sooner the Insurance Company has to pay for the drugs, the higher the premiums to the Employer will be for the drug coverage benefit.

Drug Card Much like a credit card, it is an identification card issued by a third party company that is used to participate in a pay-direct drug reimbursement program.


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Deductible Amount This amount must be paid before the Insurance Company will pay any Health Benefit. There may also be a family deductible amount that has to be satisfied during a specific period.

Coinsurance Amount This is the amount or percentage of any eligible expense which are payable by the Company in excess of any deductible amount.

All Insurance Companies will offer other benefits when looking at the Health Benefit component of an Employee Benefit package. There may be reference to Extension of Benefits, Survivor Benefits, Limitations and Exclusions.

Extended Health Care benefits can be divided into several categories which include:

• Hospital coverage • Drug coverage • Medical supplies and equipment • Paramedical services • Out-of-province coverage • Other health care benefits

The plan may include a deductible (e.g. $25 for employees with single coverage, $50 for employees with family coverage, or $5 per prescription drug), a coinsurance factor (e.g. 80% reimbursement for prescription drugs), and maximums (e.g. $500 per calendar year for physiotherapy). It is common to have a different coinsurance factor for difference benefits. For instance, hospital and out-of-province coverage are frequently reimbursed at 100% as claims for these benefits can be substantial and present a significant financial burden to employees. However, other Extended Health Care Benefits are often reimbursed at a lower level.

Extended Health Care plans can provide coverage for any eligible medical expense listed under Section 118.2(2) of the Income Tax Act. Coverage typically includes the following:

Hospital Benefit

Most of the basic hospital and surgical expenses incurred during a period of hospital confinement, including accommodation at the ward level, services of physicians and surgeons, diagnostic procedures, and drugs, are covered by provincial health insurance plans. The hospital benefit enables insured


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individuals to obtain preferred accommodation (if available) at a semi-private or private level.

Semi-private or private hospital component

This refers to the Insurance Company reimbursing the difference between the Hospital’s ward and semi-private rates. Insurance Companies usually has no limitations on the number of days of confinement. The insured’s Physician in consultation with the Hospital dictates this

Drug Coverage

Prescription drugs account for the largest item of an employer's total costs for a health care plan, typically accounting for 60-80% of the claims.

There are three common methods of designing a drug plan:

1. Prescription only drug plans which only provide coverage for drugs and medicines which require a written prescription from a physician or dentist. Over-the-counter drugs are not reimbursed even if prescribed by a physician as these medications do not require a prescription.

2. Prescribed drug plans cover all prescribed medications including over-the-counter drugs. A prescribed drug plan is more expensive than a prescription only plan due to the increased scope of coverage.

3. Hybrid drug plans cover all drugs requiring a prescription and certain prescribed drugs that do not legally require a prescription. Different drug formularies are available which list specific drugs and medicines covered under a drug plan. The formulary can be very comprehensive and include almost all prescription drugs (and some prescribed medications) or more restrictive and exclude drugs of a particular therapeutic class.

There are two basic methods of reimbursing drug claims:

1. Reimbursement plans, where the person insured pays the pharmacist for the drugs and submits the bill to the insurer for reimbursement.

2. Pay direct drug plans, where the person insured presents a drug insurance card to the pharmacist who, in turn, bills the insurer directly. With a pay direct drug plan, several cost containment features are available which can not be incorporated into a reimbursement plan. These


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include a dispensing fee cap which limits the reimbursement of the pharmacy dispensing fee to a certain level and many of the drug formularies which generally require claims adjudication at the point of purchase (e.g. the pharmacy).

Drug component Again, this is one of the most widely used areas on any group plan. The drugs covered can be Generic, or Name Brand, as specified by the Physician. Any drugs prescribed have to be recognized as being effective in the treatment of the sickness or injury being treated and cannot be excessive.

These drugs and medicines can also include:

• Insulin supplies (i.e. Needles, syringes and diagnostic tests), but will not include any swabs and rubbing alcohol,

• All injectables including serums, vaccines and injectables vitamins, and

• Extemporaneous Compounds prepared by a pharmacist.

Exclusions

• Any drug medication that may be purchased without a prescription (i.e. over the counter products, whether they have a prescription or not).

• Fertility Drugs (unless specifically spelled out in the Master Policy).

• Anabolic steroids.

• Items deemed cosmetic.

• Vitamins (except injectables).

• Patent medicines

• First aid and surgical supplies.

• Atomizers and vaporizers.

• Salt and sugar substitutes.

• Infant formula, dietary foods and aids.

• Contact lens care products.

• Diagnostic aids and laboratory tests.

• Contraceptives other than oral.

• Lozenges, mouthwash, toothpaste and cosmetics.

• Non-medicated shampoos, skin cleaners, skin protectors, emollients and soaps.

• Anti –smoking agents, unless specified otherwise.

• Any benefit covered by any government plan.

Medical Supplies and Equipment

Reimbursement for supplies and the rental of or purchase of durable medical equipment including:


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• Hospital beds, wheel chairs, canes, crutches, walkers and trusses • Prostheses, braces for back, neck, arm or leg • Oxygen and oxygen supplies • Colostomy apparatus and supplies • Ileostomy apparatus and supplies • Insulin syringes • Orthopaedic shoes and orthotics • Support hose and compression stockings • Kidney dialysis equipment • Hearing aids

Medical Supplies and Appliances The Insurance Company may, at its option provide for the rental or purchase of some or all of the following durable equipment. Many of the coverage’s below will have either a lifetime or one time ceiling on dollar amount of reimbursement from the Insurance Company. This depends on each individual corporate Employee Benefit plan.

Some benefits with limitations are:

• Aerosol equipment, mist tents and nebulizers for cystic fibrosis, acute emphysema, chronic obstructive bronchitis or chronic asthma.

• Artificial eyes including the repair and replacement of.

• Bed rails braces with rigid supports.

• Diabetic monitoring and administration equipment.

• Breast prosthesis.

• Wheelchairs.

Insurance Companies will not usually cover the maintenance of any durable equipment.

Depending on the type of coverages offered by the Employee Benefit plan, the following supplies and devices may also be covered:

• Casts, canes, crutches and walkers.

• Cervical collars, Burn garments orthopedic shoes.

• Oxygen and oxygen supplies but not usually containers.

• Splints, excluding any dental splints.

• Support hose, stump socks.

• Urethral catheters.

Paramedical Services

This section of an Employee Benefit Plan covers the following professionals when they provide service while not confined to a Hospital.


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Usually there are maximums, while any payment will not begin until any Government Health Insurance Plan has paid their portion.

This benefit covers charges, including x-rays, of the following paramedical practitioners:

• Chiropractor, osteopath, naturopath, podiatrist, acupuncturist, masseur, speech therapist, psychologist, psychoanalyst (Quebec only), and physiotherapist.

Reimbursement is subject to an annual maximum (commonly $500 per practitioner per calendar year). Reimbursement is based on the "reasonable and customary" charges for the insured's province of residence. Most services require a physician's referral.

Out-of-Province Emergency Medical

This benefit provides coverage for out-of-province emergency medical expenses for an insured person who is traveling outside his or her province of residence. The benefit typically covers a period of up to 60 days of continuous travel. Covered expenses normally include:

• Hospital room and board • Hospital out-patient services • Services and supplies • Diagnosis and treatment by a physician • Ambulance

The above services are also usually covered on a referral basis when the services are not available in the insured's province of residence. Reimbursement for referred services usually requires the prior approval of the insurer and is usually subject to lower maximums than claims resulting from an emergency.

Travel Assistance

Travel assistance provides employees with worldwide multi-lingual assistance, 24 hours a day, every day. This includes:

• Help locating an appropriate medical facility • Interpretation assistance • Medical referral • On-site hospital payment • Medical transportation • Return of dependent children or traveling companion plus other

transportation services


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• Help replacing lost documents including passports, visas, and travel tickets

• Communication with insured's home doctor, family and/or employer

OTHER HEALTH CARE BENEFITS

Other medical expenses typically covered under an Extended Health Care plan include the following:

Private Duty Nursing

When an Insured person requires the services of a private duty nurse in their home, and if the home is not an institution, payment will be made. The services must be made on the recommendation of a physician.

Usually a maximum amount is eligible to be paid out. Coverage typically ranges from $5,000 to $25,000 per calendar year for the services of any of the following:

• Registered Graduate Nurse (RN)

• Registered Nursing Assistant (RNA)

• Certified Nursing Assistant (CNA)

• Licensed Practical Nurse (LPN)

The above individuals must be registered with the appropriate provincial registry or the out of province equivalent, but cannot be related to the Insured person. There must be a recommendation of a Physician that pertains to the nature of the sickness or injury being treated. Homemaking or companion duties will not be covered.

Accidental Dental

This coverage provides for the reimbursement of dental expenses incurred as a result of an accidental injury, external to the mouth.

Convalescent Hospital Care

Provides coverage in excess of the ward rate plus user fees for active treatment or convalescent care provided by a nursing home. The maximum amount eligible for reimbursement is typically $20 per day for up to 180 days of continuous confinement.

Ambulance Service


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This is standard coverage with all carriers. Supplements government-sponsored benefit programs by covering charges in excess of the amount payable under the provincial health insurance plan for ambulances including an air ambulance.

The Insurance Company will pay for local transportation by a licensed ambulance to and from a Hospital that is qualified to render the necessary Emergency Medical Care. The benefit would also cover any air ambulance or commercial airfare if it were deemed necessary to provide transportation to the nearest Hospital if the Insured person cannot be transported otherwise.

Vision Care (Optional)

Vision care coverage is an optional benefit and not a standard feature of most benefit plans. This benefit provides coverage for eye examinations, eyeglasses and contact lenses.

Vision Care Benefits include the following as eligible expenses when prescribed or performed by a licensed optometrist, ophthalmologist or optician

Safety glasses and prescription sunglasses are normally excluded. A typical plan provides coverage of $200 for a period of 24 consecutive months.

Eye examinations are also usually covered up to one examination per year per dependent child and one examination every two years for adults. (Coverage for eye exams is available only in those provinces where provincial plans do not cover eye exams.)

DENTAL CARE

Dental Care is statistically the most used benefit and can be remembered by the following acrostic:

P Preventative Care

E Endodontist

M Major Restoration

O Orthodontics

There are some definitions that you should be familiar with. They are very general in nature, but you should be able to explain them to the Employer or their Employee’s when called upon to do so. You should know the differences of each.


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Terms to remember:

• Dentist or Oral Surgeon

• Dental Assistant

• Fee Guide

• Periodontal Services

• Endodontist Services

• Orthodontic Services

Both Health and Dental care may have a deductible such as $25/$50 and/or a Co-Insurance factor (20/80%). Deductibles are applied against the first claims of the calendar year until satisfied.

Co-insurance is applied against each claim. They both result in lower premiums being charged for the benefit.

The Dental Benefit could have a maximum amount that can be charged for each calendar year by each insured member and their dependent’s (e.g. $1,500) and sometimes a different maximum for different levels of care.

Survivor Benefits Many plans provide for continuing survivor benefits for the dependents in the event of the death of the Insured person. It is not uncommon for the length of time to differ among Insurance Companies.

Who Pays the Premiums? Non-Contributory

Plans that are employer “pay all” are said to have the following advantages:

• Employees enjoy the fact that they do not contribute to the plan cost and lower paid employees can participate in the same level of care as the more highly paid employees.

• The plan has lower administration costs, is easy to install and maintain.

• All employees are automatically covered, thereby eliminating missed coverage or uninsured employee death or disability.

• Premiums are tax deductible for the employer, but are a taxable benefit to the employee. If the employee reimburses the employer for their portion of the premiums, the premium ceases to be a taxable gain.

Disadvantages The employer bears the maximum cost, which may limit how comprehensive the plan may be. The employee must take into income the premium paid on their behalf (Taxable Benefit).


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Benefits received as payments under Weekly Indemnity or LTD is taxable to the employee.

Contributory Plans When an employee contributes a portion of the premium it allows for more overall premium that should result in a more overall comprehensive plan.

Employees have a greater degree of “ownership” when they pay part of the cost.

Helps to eliminate excessive claims (creating high experience ratios), thereby resulting in lower renewal increases.

Notes to Contributions: Since employer payment of disability premium (all or part) results in a taxable benefit when received, it is advisable to designate the employee’s contribution to pay disability premiums. If the contribution will not cover the entire disability premium, the LTD portion should be paid before the Weekly Indemnity portion.

GROUP CRITICAL ILLNESS INSURANCE

A company can include Group Critical Illness Insurance to plan members and their dependants in their base benefits plan and offer an option to purchase additional coverage for themselves and their spouse.

When a critical illness claim is approved, a lump sum benefit is paid. Coverage can be structured as either a flat amount or a multiple of the plan member’s salary.

The Facts It's a fact that one out of every three Canadians will contract a life-altering illness during his or her lifetime. And with today's advances in medical science, the chances of survival are greater than ever.

But will your finances survive? Few of us are prepared for the financial burdens that can threaten both our lifestyle and our security. Convalescence, private nursing costs, reduction or permanent loss of income, a change of profession, child care, medical income, medical equipment or home refitting, mortgage and other debt payments. In addition, even relocation of your home to a new locale or climate may be in order as a result of any illness.

Some real statistics Heart disease


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In Canada, the leading causes of premature death were ischemic, or coronary, heart disease, lung cancer and stroke. Ischemic heart disease, in which less blood and oxygen reaches the heart due to narrowed arteries, was the leading cause of premature death in most regions around the world, with the exception of low-income countries, where lower respiratory infections were the main culprit.

Examples of cardiovascular diseases include heart disease and cerebrovascular disease. These two diseases are the second and third most common causes of death in Canada after cancer. High blood pressure is a chronic condition that can increase a person's risk for cardiovascular disease.

How many Canadians live with heart disease?

• According to the most recent data from 2012/13, about 2.4 million (8.5%) Canadian adults aged 20 years and older live with diagnosed ischemic heart disease, including 578,000 (2.1%) with a history of a heart attack.

• About 669,600 (3.6%) Canadian adults aged 40 years and older live with diagnosed heart failure.

How many Canadians are newly diagnosed with heart disease each year?

• About 158,700 (6.1 per 1,000) Canadian adults aged 20 years and older received a new diagnosis of ischemic heart disease. Specifically, about 63,200 (2.3 per 1,000) adults had a first heart attack.

• Approximately 92,900 (5.2 per 1,000) Canadian adults aged 40 years and older received a new diagnosis of heart failure.

Life threatening cancer

• An estimated 206,200 new cases of cancer and 80,800 deaths from cancer will occur in Canada in 2017.

• Half of all new cases will be lung, colorectal, breast and prostate cancers.

• About 1 in 2 Canadians will develop cancer in their lifetimes and 1 in 4 will die of the disease.

• 60% of Canadians diagnosed with cancer will survive at least 5 years after their diagnosis.

• At the beginning of 2009, there were about 810,000 Canadians living with a cancer that had been diagnosed in the previous 10 years.

Stroke

• Stroke is the leading cause of adult disability in Canada and the third leading cause of death. Every year, nearly 14,000 Canadians die from stroke.

• Every year in Canada, there are over 50,000 new strokes—that’s one stroke every 10 minutes.


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• About 426,000 Canadians are living with the effects of stroke. • Canadians spend a total of three million days in hospital because of stroke

every year. • Stroke costs the Canadian economy more than $3.6 billion a year in

physician services, hospital costs, lost wages, and decrease productivity.

Multiple Sclerosis

Researchers reported that the prevalence of MS in Canada is expected to increase from 4051 to 4794 cases in 100,000 people between 2011-2031. This roughly translates into an estimated 98,000 people living with the disabling effects of MS in 2011 to a projected increase to 133,000 people in 2031.

In 2011, an individual with MS spent approximately $17,000 for health care costs over the year compared to approximately $2,500 spent by people without MS. Based on this information, the projected cost to the health care sector from MS is expected to be $2 billion by 2031. Additionally, total out-of-pocket costs for people living with MS in Canada in 2011 was $125 million, a number that is expected to increase to $170 million by 2031.

The Cost of Living with a Critical Illness The impact of surviving a critical illness goes beyond the physical and emotional consequences. Consider some of the new expenses you might face if you were to survive a debilitating stroke.

LIFESTYLE ADAPTATION

EXPENSES

Home Care Companion: $100 per 8 hour shift Nurse: $240 per 8 hour shift

Wheelchair Non-Motorized: $275 - $775 Motorized: $3,500 - $5,600

Walker No-Wheels: $120 - 200 Wheels: $220 - $600


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TRANSPORTATION EXPENSES

Motorized Scooter

$1,400 - $6,000

Chauffeur $50 per hour

Van Conversion (assumes already own a minivan)

Electric lift: $2,690 Automatic door opener: $900 Hand controls: $600 Remote for hand controls: $625 Power seat base: $2,000 Raised roof: $3,500 Van doors raised: $2,000 Wheelchair tie down: $50 Total: $12,365

HOME CONVERSION

EXPENSES

Exterior Access

Ramp leading to house: $50 per square foot Landing at end of ramp: $15 per square foot Porch lift: $4,500

Bathroom Toilet, shower, sink: $8,000 - $15,000 Grab bars: $100 per bar

Doors All doorways: $800 per unit Patio doors: $2,000 Automatic front door: $2,200

Stairs Lift for straight stairway: $3,500 Lift for circular stairway: $13,000 Elevator: $15,000 - $25,000

Additions

Wheelchair needs 5 foot turning radius (most homes are not built to provide this): $100 - $150 per foot

Many people who survive critical illnesses face serious financial constraints as they attempt to recover. Now there is a solution that takes away the financial strain of surviving a critical illness.

Fundamentally, critical illness coverage is about helping to ensure you have the financial resources to sustain you during a critical illness. By obtaining such coverage on a group basis, however, you can enjoy additional benefits.

Foremost is the ability to receive coverage without medical underwriting. The average age of the employees may present barriers to their obtaining coverage on an individual basis.

For an individual, a medical assessment may preclude or restrict coverage, or incur a higher premium. On a group basis, however, coverage is guaranteed and provided at a premium at least 20 per cent below that of an individual policy.


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As a bonus, group coverage is portable. Employees who leave your firm may continue their coverage - and retain the group-discounted premium - up to age 75.

Critical illness is a valuable complement to a company's existing disability insurance coverage.

Critical illness policies provide a lump-sum, non-taxable benefit 30 days after diagnosis of one of 16 major illnesses covered under the plan. Disability insurance only pays a percentage of your current income and requires proof of inability to work.

A lump-sum payment can help a person cope - physically, financially and emotionally - with a major illness. Beyond reducing stress and anxiety, critical illness coverage can help to pay for treatments not covered by or readily available through the public health-care system.

Group CI Insurance like individual CI can:

• Pay for out-of-country or experimental treatments,

• Cover mortgage or loan payments, address workspace and/or living modifications,

• Cover a recovery vacation.

What Illnesses Will Critical Illness Insurance cover?

CI insurance will provide a lump sum benefit just 30 days after the diagnosis of one of the following critical illnesses:

The following list is by no means complete, as Insurance companies are constantly adding new illnesses to their CI portfolio

• Alzheimer’s • Loss of Speech

• Blindness • Major Organ Transplant


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• Coma • Motor Neuron Disease (ALS or Lou Gehrig's Disease)

• Coronary Artery Bypass Surgery • Multiple Sclerosis

• Deafness • Paralysis

• Diabetes (insulin-dependent) • Parkinson’s

• Heart Attack • Severe burns

• Kidney Failure • Stroke

• Loss of Limbs • Occupational HIV

• Life Threatening Cancer

You choose the level of coverage that meets your needs. Should you contract a critical illness; the lump sum payment will help you maintain your lifestyle and your financial health.

Critical Illness benefits for your corporate clients:

• Provide financial assistance to a valued workforce at a reasonable cost.

• Foster good employer-employee relations.

• Contributions are treated as a low-cost, tax-deductible business expense.

Benefits for your corporate clients’ employees:

• Reassurance of a capital lump sum payment if serious illness should strike.

• Protection against the most commonly suffered critical illnesses (cancer, stroke, heart attack and kidney failure etc.).

• Help and support during rehabilitation.

• Cash to help clear debts or cover household bills.

Employee Assistance and Wellness Program

There has been a tremendous increase in demand for services provided by Employee Assistance Programs (EAPs). In fact, this field has grown so rapidly that today most firms are looking at providing Employee and Family Assistance and Wellness Programs.

There are a number of companies offering EAPs. Traditionally it has been insurance carriers that came up with plan designs to provide different services. However, a number of companies are currently directly specializing in providing services in this field.


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EAPs will usually provide services in dealing with:

• critical illnesses and disability counseling

• retirement planning

• alcohol and drug abuse and psychological disorders

• financial or legal problems

• relocation

• sexual harassment

• divorce

• and more

Perhaps the most important feature of an EAP is confidentiality. Under the new Privacy Information Act this program provides an ideal solution for any employer who wants to keep employees productive and satisfied in the workplace.

Many insurers will provide assistance in getting professional advice to select the right Employee and Family Assistance Program for employees.

ANOTHER EMPLOYEE BENEFIT ADD ON Many employee benefit plans are now carrying some form of an additional add on medical referral system. There are a few operating in the Canadian marketplace today.

Best Doctors Best Doctors® was founded in 1989 by renowned professors of medicine affiliated with Harvard Medical School and by a 16-year survivor of a serious illness.

This unique partnership of medical expertise and patient insight created a company committed to providing services to help people with serious medical conditions.

Today, Best Doctors® is the world leader in connecting people with the best medical care.

Using its renowned database of over 50,000 doctors recognized as the best by top specialists, Best Doctors® provides immediate access to the best medical knowledge and peace of mind to millions of people around the world. Best Doctors® services are available worldwide, serving more than 10 million lives in 30 countries.

Through access to top-ranked hospitals, the latest technologies, opinions of world-class specialists and personal care management, Best Doctors® can help people make informed decisions about your healthcare when it matters most.


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Best Doctors can help the employee:

• Have an expert take another look at the employee’s diagnosis, without the employee having to leave home.

• Identify an appropriate treatment.

• Support the employee with information to make the right choices.

Best Doctors does not replace your relationship with your current physician and health plan. Rather, they offer additional resources, education and support to you and your treating doctor. Best Doctors services are included as part of your benefits plan and it’s strictly confidential.

Membership is sponsored by the employer or health plan.

The Right Expertise is Available An employee can harness the expertise of the exclusive Best Doctors database, bringing the clinical knowledge of world class experts to the problems of people with serious illnesses.

They provide specific diagnosis and treatment recommendations. The employees enjoy valuable insights from top experts and constant guidance and support from Best Doctors dedicated nurses – without leaving home.

The Right Outcome Best Doctors works with the patient’s treating doctor to ensure that recommendations are implemented. By making sure that employees get the right care, Best Doctors reduces complications and helps avoid ineffective treatments:

• Treatment modified 61% of the time.

• Diagnosis changed 22% of the time.

• 67.3% of members avoided one or more invasive surgical procedures.

• $287,567 average reduction of inappropriate medical costs on catastrophic cases.

• $69,200 average savings on rehabilitation expenses on catastrophic cases.

What types of services does Best Doctors offer?

Best Doctors provides a unique combination of information and access to the best medical care to members faced with a serious illness or injury. Services include a comprehensive review of a patient’s medical records to reaffirm or


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redefine the original diagnosis and to recommend treatment protocols, as well as access to the most qualified specialists and facilities worldwide.

How does Best Doctors determine who “the best” are?

Best Doctors believes that physicians are the most qualified to evaluate the experience and skill sets of other physicians. The Best Doctors survey asks physicians, “If you or a loved one needed a doctor in your specialty, to which you would refer them?” The responses form the basis of the Best Doctors global database, which is consistently recognized by doctors, patients and the public for its quality

The Best Doctors medical experts are chosen from the exclusive database of over 53,000 world leading physicians in more than 450 specialties and sub-specialties in more than 40 countries. These are physicians whose clinical excellence places them among the 5% of the best and most respected specialists in their area., integrity and independence.

Some of the services that Best Doctors® provide InterConsultation™ An in-depth review of the member's medical files to assist in the development and confirmation of the diagnosis and to help develop a treatment plan. Members and their physicians will have access to the latest technologies and opinions of world class specialists.

With a fast and detailed turnaround of results, the InterConsultation process can reduce potentially serious complications that can result from a misdiagnosis and help the member's treating physician determine the proper course of action.

FindBestDoc™ A customized search across a constantly updated global database of over 50,000 specialists who are best qualified to meet the member's specific medical needs. Members will have access to a Personal Advocate, who will work with physicians affiliated with the world's leading medical institutions, to help explain their options and determine the best care provider for the member's specific condition.

FindBestCare® While the member is receiving medical care, Best Doctors will review the necessary information provided by the medical specialists involved and will continually monitor the treatment process to help ensure the member's medical priorities are met.


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If the member travels away from home to receive treatment, Best Doctors will assist with reservations and accommodations for the member and family. This can help reduce the stress of receiving the care the member needs while away from home.

Best Doctors 360°®

We can help you get the information you need for a variety of health topics, giving you peace of mind that you’re making well-informed decisions about your health care.

Whether your condition is simple or complex, Best Doctors will provide you with a variety of tools and resources when you’re facing medical uncertainty. These include condition-specific website links, articles and contact information for groups and facilities that can assist you with your medical needs.

Elite Diagnostic Imaging ServiceTM

In many provinces, wait times for non-urgent scans can take months, impacting pain and disability or intensifying symptoms. When Elite Diagnostic Imaging Service is included in your Best Doctors membership1, we can reduce your wait time for an MRI or CT scan so that you and your treating physician can quickly move forward with diagnosis and treatment.

Eligibility may vary. Please check your coverage to see which services are available to you.

Ask the ExpertTM

Sometimes, a 15-minute visit with your doctor is not enough time to get all your questions answered. If you still have questions, our Ask the Expert service can help. When Ask the Expert is included with your Best Doctors membership, a leading physician who specializes in your condition will provide written answers to your questions.

Medical Records eSummaryTM

With our Medical Records eSummary service, Best Doctors collects up to three years1 of your medical history and conveniently stores it on a secure USB flash drive that you can take anywhere. A medical expert will also review your records and provide you with a Health Alert Summary, bringing any potential health concerns to your attention.

Oncology Insight with WatsonTM


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With Oncology Insight, members receive an in-depth medical review from a world-renowned expert oncologist. That Best Doctors oncologist is equipped with Watson™ technology’s cognitive platform that provides insights from large amounts of structured and unstructured data with a machine that has been trained with millions of peer-reviewed sources and is continually updated with new literature

Best Doctors Global Medical Care™

This provides customizable employee insurance that includes access to the world’s best medical care.

Your employees can choose to receive care from top physicians anywhere in the world and have access to our global network of over 53,000 leading specialists.

Global Medical Care™ complements provincial, critical illness and employer insurance plans to provide more health care options.

Coverage options range from $500,000 to $5 million. Including access to advanced treatment and care, MRIs and CT scans and prescription drugs that are part of a treatment plan.

What medical conditions are covered? Best Doctors services are available for the following Medical Condition(s): AIDS, Alzheimer’s disease, Blindness, Benign Brain Tumor, Cancer, Cardiovascular Conditions, Coma, Deafness, Kidney Failure, Loss of Speech, Multiple Sclerosis, Major Organ Transplant, Major Trauma, Motor Neuron Disease, Parkinson’s disease, Paralysis, Severe Burns, and Stroke.

ADMINISTRATIVE SERVICES ONLY BENEFITS (ASO) An arrangement whereby an insurer agrees to provide services to a self-insured entity, such as providing printed claim forms, and processing and auditing claims. The insurer does not assume any insurance risk under an ASO arrangement.

An ASO plan enables large employers to assume the costs of their health insurance, dental care and short-term disability insurance benefits. These benefits can even include insurance that limits the employer’s liability in the event that one or more exceptional disasters strike the company.

An Administrative Services Only (ASO) Plan is basically a self-funded insurance plan. The employer is totally liable for all financial and legal aspects of the


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Employee benefits plan. In other words there is no insurance element under these plans.

Employers recognize the high degree of risk associated with "true" ASO plans. This is the very reason that most employers would use a combination plan that would eliminate the "risk" part of the group benefit plan. Specifically, Life Insurance, AD&D, Dependent Life and Long Term Disability would be insured using one of the insurance carriers.

The so-called "experienced" benefits including Extended Health Care, Dental Care and Short Term Disability would be covered using ASO. Please note that ASO plans would not include Out of Province/Country Insurance.

Plan Administration and Adjudication Typically it is the insurer, Third Party Administrator and/or broker who can administer and adjudicate the benefit plan.

Liability or Risk There is no insurance element in these types of plans and therefore it is the employer bearing full liability for claims incurred under the plan and any claims litigation that could result from it.

In case of an insured plan any legal liability would be directed against the insurer; in the case of an ASO plan any lawsuit would be directed against the employer.

Advantages of ASO Introduction of an ASO plan may present the employer with substantial savings. First of all there is no premium tax charged on the ASO part of the premium. The employer would also save the "risk" charge ranging typically at 0.5% to 2%. Further, because there is no liability to the insurance company upon plan termination, the so-called Incurred But Not Reported (IBNR) reserve is eliminated.

Stop-Loss Arrangement Insurance carriers offer Stop-Loss Insurance as a protection against unfunded financial liability that employers would be faced with when using ASO plans. Claims that would be in excess of the agreed limit (stop-loss) would become the responsibility of the insurer. The use of a Stop-Loss provision however does not change the self-funded principle/status of an ASO Plan.

Conclusion


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Group Benefit plans that include ASO are growing in popularity given the fact that health and dental premiums are constantly rising.

COST PLUS PROGRAMS Cost plus is a claims payment service used by an employer to reimburse an employee for claims not covered under their current benefit plan. Rather than amend a plan for an uncovered claim, the plan administrator pays for the "Cost" of the claim "Plus" an administrative fee.

In simple terms, Cost Plus is merely a claims payment facility used by a plan sponsor to reimburse an employee for claims not covered under the terms of their current benefit plan. Traditionally, Cost Plus is used, as an executive perk on an as needed, claim-by-claim basis. As an example, an executive of the company spends $4,000 for major dental work, and their current plan covers major dental at 50% to an annual maximum of $1,500. Therefore, a $4,000 claim will be submitted and the insurer will pay only $1,500, forcing the executive to pay the dentist the remaining $2,500.

Rather than amend the plan to cover this particular claim, the plan administrator can opt, to have the balance of the claim paid on a Cost Plus basis.

In turn the insurer will invoice the company for the cost of the claim, administration (typically 10% - 15%) and applicable taxes. Once paid, the insurer will issue a reimbursement check to the claimant.

As is the case with group insurance premium, the Company’s expenditure for the Cost Plus claim is an eligible business expense. Furthermore, the executive would receive the additional $2,500 on a tax-free basis, allowing for 100% coverage of the claim.

Assuming the executive’s marginal tax rate is 50%, the Company would have to expend $5,000 plus any applicable payroll taxes to provide enough after tax dollars to the executive to pay the claim. Through the use of Cost Plus facilities, the Company’s expenditure can be reduced to $2,500 plus a 10% -15% administration fee and any applicable taxes.

Cost Plus programs cover the following:

• Practitioners (fees for services), Acupuncturist, Chiropodist (podiatrist), Chiropractor, Christian Science practitioner, Naturopath, Nurse, Occupational therapist, Optometrist, Osteopath, Physiotherapist, Practical nurse, Psychoanalyst, Psychologist Speech therapist

• All dental expenses including preventive, diagnostic, restorative, orthodontic, and therapeutic care


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• Meals and lodging in an alcoholism or drug addiction treatment centre

• Care in a special school, institution, or other place for a mentally or physically handicapped individual

• Institutional care Full-time attendants or care in a nursing home (for confinement to bed or wheelchair)

• Payments to a licensed private hospital Semi-private, preferred, or private accommodation expenses in hospital

• Devices and Supplies Artificial eye(s) or limb(s), Crutches

• Equipment, including a replacement part, designed exclusively for use by an individual who is suffering from a chronic respiratory ailment, to assist breathing, but not including an air conditioner, humidifier, dehumidifier, or air cleaner

• Device or equipment designed to pace or monitor the heart of an individual who suffers from heart disease

• Devices designed to assist a disabled individual in walking, Close captioning devices, devices designed to attach to infants diagnosed as prone to Sudden Infant Death Syndrome (SIDS) to sound an alarm if the infant stops breathing, Device designed to enable diabetics to measure blood sugar levels

• Drugs, medications, or other preparations or substances prescribed by a medical practitioner or dentist

• Electronic speech synthesizer that enables a mute individual to communicate by use of a portable keyboard

• External breast prosthesis for use following a mastectomy

• Hearing aids, Hospital bed, including attachments included in a prescription

• Ileostomy or colostomy pads, Insulin, Iron lung, Kidney machine, Laryngeal speaking aids, Limb braces

• Mechanical device or equipment designed to help an individual enter or leave a bathtub/shower, or to get on/off a toilet

• Needles or syringes, Optical scanner or similar device designed for use by blind individuals to help them read print

• Orthopedic shoes or boots, or a shoe/boot insert made in accordance with a prescription to overcome a physical disability

• Oxygen tent or equipment, Power-operated lift for use exclusively by disabled individuals to allow them access to different levels of a building, to help them enter a vehicle or to place wheelchairs in/on a vehicle

• Spinal braces, Teletypewriter or similar device, indicator that enables a deaf or mute individual to receive telephone calls

• Walkers and wheelchairs, Wig made to order for an individual who has suffered abnormal hair loss as a result of disease, medical treatment, or an accident

• Other Expenses such as ambulance fees for transportation, Cosmetic surgery, Cost of arranging and having a bone marrow or organ transplant, Cost of medical services and supplies outside of the province of


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residence, Electrolysis or hair removal performed by a licensed technician, Hearing expenses including hearing aids and hearing-ear dogs, Laboratory, radiological, or other diagnostic procedures or services, Modifications to a home for persons confined to a wheelchair

• Preventive diagnostic, laboratory, and radiological procedures, Heart transplant, Vision expenses including eyeglasses, contact lenses, and seeing-eye dogs, Transportation expenses to receive medical care, Weight-loss or stop-smoking program prescribed by a doctor for a specific ailment

As you can see, this list is extensive.

HEALTH CARE SPENDING ACCOUNTS (HSCAs) These accounts are also known as Health Spending Accounts (HCAs)

Spending accounts can sometimes be the answer to situations where an employer wants to give employees increased involvement and more choice in their benefits while also limiting its financial responsibility.

A health care spending account is a simple, tax-effective way to provide health and dental benefits flexibly. Through a Health Care Spending Account, employees can use pre-tax dollars to pay for expenses that would normally represent an out-of-pocket expense (except Quebec as contributions to all benefits are included in the employee's income for tax purposes).

The Mechanics of Health Care Spending Accounts

Health Care Spending Accounts that are provided on a stand-alone basis are funded entirely by the employer. Each member of a class receives an equal allocation of funds from the employer.

Health Care Spending Accounts which form part of a flexible benefits plan can be funded by both employer and employee contributions. Employee contributions are funded by "flex credits" rather than direct deposits. In the latter case, employee contributions would have to be deducted from payroll on an after-tax basis, thus eliminating any tax advantage of having a HCSA.

The employee and their covered dependents use the HCSA to reimburse eligible medical expenses not covered by the employee or the spouse's plan.

The HCSA balance is reduced by the amount of each reimbursement. Payments continue to be made until the account balance is zero.

At the end of the year, any unused balance in the account can be carried over for one year, but unused funds in the account for more than two years are forfeited


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to the employer. Alternatively, unclaimed expenses for a given year can be carried forward for a year. However, a plan cannot include both a carry-over of the account balance and unclaimed expenses. Unlike the Cost-Plus programs that are used at the Company’s discretion, a Health Spending Account is a Company paid annual allowance to be used at the employee’s discretion.

A Health Spending account is simply an allowance that is given to employees to supplement their current benefit plan, to cover items that are not covered or partially covered under the existing plan. These allowances cannot be subjectively based; rather they must be established by pre-determined criteria such as a pre-defined calculation or formula created by the employer.

Formulas can be a simplistic as a flat amount or determined by such factors as class, single / family, years of service or percentage of payroll, just to name a few.

Based on these limits, a monthly rate will be established for invoicing purposes, to ensure complete funding of the Company’s Limited Cost Plus commitments.

Health Care Spending Account (HCSA) is growing in popularity with both employers and employees. Unlike traditional group insurance plans that offer little or no flexibility HCSAs are considered to be the ultimate in flexibility that benefits programs can offer.

Setting up a Health Care Spending Account Like other employer sponsored benefit plans; a Health Care Spending Account must resemble a true form of insurance in that some element of insurance risk must be incorporated into the account. In addition, a Health Care Spending Account must be structured like a Private Health Services Plan in order to meet the requirements of Canada Revenue Agency (CRA).

A Private Health Services Plan must:

• Be the undertaking of one person that is used,

• To reimburse another person,

• For an agreed consideration,

• From a loss or liability in respect of an event, that is not certain to happen.

As with Health and Welfare Trusts there is no formal registration procedure for a flex program and no requirements that the plan documents be submitted to Canada Revenue Agency (CRA) for approval prior to implementation. Tax rules require that benefits plans be implemented and administered in accordance with


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written document, typically in the form of a benefit guide that specifies certain information. Employees must have access to this document.

Depending on the particular benefit and how it is paid for, it may result in a taxable benefit to the employee or a non-taxable benefit. As long as the Health Care Spending Account meets the requirements of the private health services plan (as previously defined by CRA) then employer contributions are excluded from employee’s income and it can retain preferential tax status as an insurance plan.

Health Care Spending Accounts do not trigger EI or CPP premium/contributions and if employee already paying maximum, offering a Health Care Spending Account will not reduce cost to organization. Health Care Spending Accounts do not earn interest.

If the employer is thinking of offering a Health Care Spending Account in house, they need to be aware that the new federal privacy legislation will place heavy obligations on in-house staff to keep health information private & confidential.

For this reason, it may be advantageous to seek the assistance of a third party administrator to assist you in implementing your Health Care Spending Account.

Funding a Health Care Spending Account According to Canada Revenue Agency (CRA), if a Health Care Spending Account is offered as a stand-alone item in a traditional plan that offers no other element of choice making, it must be funded through direct employer contributions. Health Care Spending Accounts within a full choice-making flexible benefit program, can be funded by both employer and employee contributions. As part of a full flexible benefit plan, employees fund their Health Care Spending Account with unused flex credits from their flexible benefit plan. Revenue Canada views flexible credits as employer benefit premiums, not employee earnings.

About Employee Funding If employees supplement their Health Care Spending Account by making payroll contributions, it defeats the purpose of the Health Care Spending Account with respect to purchasing power. This is because payroll deductions are subtracted from an employee’s pay cheque after tax has been deducted from income.

For example, if an employee wishes to have $240 in payroll deductions deposited into the Health Care Spending Account, the $240 in after-tax money, in reality represents $400 that the employee had to earn, assuming a 40% tax bracket.


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If employees are funding their Health Care Spending Account through flex credits,

They must decide once annually how many credits they will allocate to their account.

The employer must consider if a limit should be imposed on the number of flex credits that can be deposited into an account. Once the decision has been made, this allocation decision is irrevocable, unless employee’s family status has changed due to reasons such as a marriage or birth of a child.

About Employer Funding

Generally, employers choose a defined contribution approach to funding Health Care Spending Accounts, whereby a set amount or percentage of salary is deposited into the Health Care Spending Account.

Some alternatives for employer funding include the following:

• Increase the corporate budget to enhance Employee benefits;

• Reduce other elements of the group insurance plan, if applicable (e.g. co-insurance from 100% to 80%);

• Changes in cost sharing arrangements of existing employer sponsored group insurance plans so that employees pay the health care premium and the employer contributes an equal amount to a Health Care Spending Account;

• Option for an employee annual bonus;

• The employer in lieu of a raise provides funding for a Health Care Spending Account

It is not necessary for money to be deposited in a trust fund nor assets separated. The employer may create a book account for an employee’s Health Care Spending Account in which credits and debits can be tracked.

When are Flex Credits Allotted? It is at the discretion of the employer as to whether the entire allotment of credits will be deposited into the account at the beginning of the year, or over intervals (monthly or quarterly). There are advantages and disadvantages of each method. The most common method is the annual allotment of flex credits. In addition to easier administration of an annual allotment of flex credits, the entire amount is available at the beginning of the year for those employees who need it. If flex credits were deposited monthly or quarterly, the employee may be required to pay out of their pocket for expenses that exceed their account balance, consequently, if the entire amount is available, the employee may use all of


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his/her credits at the beginning of the year and have nothing left to draw on for the rest of the year.

In addition, if all of the credits are allocated to the account at the beginning of the year, the employer could be at financial risk of an employee exhausting all of his/her funds in the account and then terminating employment before the end of the year.

Conditions and Requirements for Health Care Spending Account Funds Funds allocated to a Health Care Spending Account must be used to reimburse expenses incurred during that year. There can be no “cash out” of the plan.

Unused flex credits can be dealt with in one of two ways: “Use it or lose it”

1. Any remaining amount in the account at the end of the plan year is forfeited and returned to the employer OR

2. Carry-Over or Rollover Feature

Unused flex credits will be rolled over for the following 12 months (without any tax consequences to the employee). Unused flex credits can be rolled over a maximum of one year. Flex credits rolled-over from the prior plan year are used up first before the flex credits deposited for the current plan year. This minimizes the chances of forfeiting the rolled-over flex credits at year-end.

The Health Care Spending Account must incorporate a “use-it-or-lose it” feature for unused flex credits for all terminations, retirements, deaths and leaves of absence that last longer than 30 days.

Claims Administration The Employer, a Third Party Administrator or the Insurer can handle the Claims Administration process. All claims must first be submitted through the Employee’s or Spouse’s Group Insurance plan and through the Coordination of Benefits process prior to being submitted to the Health Care Spending Account.

Regardless who incurred the expense, the employee must sign the claim form.

Claim form and proof of payment is submitted to the employer for reimbursement. (If claim has gone through group insurance, attach “Explanation of Benefits” from Insurer).


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Employer evaluates if the claim meets requirements (expense is eligible and if there are enough flex credits to cover and claim is either approved or rejected).

If it is approved, they send the cheque. It is rejected; they then send an explanation to employee.

Employers typically provide covered persons with a grace period of usually one to three months after the year-end to submit expenses for reimbursement. Once claims are no longer accepted, any unused balance in the account is either forfeited or rolled over the following year, depending on the design of the account.

Employees are given a certain length of time to submit all year-end claim expenses. The norm is 90 days.

Quarterly reports can be provided to an employer by the Third Party Administrator or Insurer, indicating claims paid out of the spending account, account balances, and any unused account dollars forfeited at year-end.

The Employer has the option to decide how reimbursements will be made from the Health Care Spending Account, the frequency and the minimum amount of expenses that should be submitted (i.e. $50.00 minimum).

What are the costs? The costs of the plan will include the cost of medical services and products plus premium tax and sales tax.

In addition, the following expenses are required if your plan has Third Party Administration:

• Claims administration – set by insurer/plan administrator

• General administration – set by insurer/plan administrator

• Claims and general administration costs would include:

• Ongoing administration by insurer/plan administrator;

• Standard reports;

• Ongoing inquiry/service through plan administrator;

• ASO (Administrative Services Only)/Cost Plus accounting and reconciliation (if administration is provided through insurance company);

• Monthly tape updates of credit/eligibility information from plan sponsor, as applicable;

• Production of employee cheques;

• Year-end listings (where applicable) of payments made to members from accounts covering taxable items.


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The Employer is usually responsible for paying the administration expenses; otherwise, they must be deducted from the employees’ spending account dollars, giving them less to spend.

Sample Tax Calculation for Health Care Spending Account Benefits Paid

Jane Doe submitted a claim for $300 under her Health Care Spending Account. The tax would be calculated as follows:

Premium Tax $300 X 2% = $6.00

Retail Sales Tax $300 X 13% = $39.00

Total Tax = $45.00

Jane Doe will be reimbursed $300 and the Health Care Spending Account will be debited $345.00

Covered and Ineligible Expenses Covered Expenses If a Health Care Spending Account is added to an employer's existing Group Insurance Plan, flex credits can be used to pay for co-insurance not paid by the employer benefit plan, deductibles, or amounts that exceed plan maximums. In addition, a Health Care Spending Account may cover expenses that are generally not covered under a conventional plan.

A HCSA can offer more flexibility than traditional plans as its scope of coverage is far broader than a typical benefit plan. In addition to expenses usually reimbursed, a HCSA can, for example, provide reimbursement for:

• Cosmetic surgery • Prescribed over-the-counter medications • Home renovations when medically required • Home care

A HCSA can be used to pay deductibles, coinsurance, amounts in excess of benefit maximums and to broaden the scope of coverage of an existing plan. For example, a HCSA could cover:

• Professional services (e.g. chiropractor, physiotherapy) above the annual maximum

• Medications not included in a plans drug formulary • Eye glasses and contact lenses if not covered by the existing plan or

amounts in excess of the maximum if covered


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• Dental services that may not be part of the existing dental plan (e.g. caps, crowns, bridges, orthodontics), Dental expenses above the plans annual maximum

A partial list includes:

• Insurance premiums paid by the employee or the individual’s spouse for private health and dental plans;

• Cosmetic medical and dental treatment;

• Over the counter drugs, provided they are prescribed by a physician;

• Drugs for conditions sometimes excluded under conventional plans such as erectile dysfunction, fertility, obesity and hair loss;

• Laser eye surgery;

• Professional services of a dietician, acupuncturist or Christian Science practitioner.

• Dental Care (preventative/restorative/orthodontic);

• Facilities and Services – alcohol/drug addiction, nursing home care, special school, institution for mental or physical handicap, licensed private hospital, semi-private or private charges in a hospital, care of a person who has been certified as mentally incompetent, care of a blind person, full-time attendants in a nursing home;

• Medical Equipment and Devices.

A complete list of eligible expenses is available through the Canada Revenue Agency (CRA).

Ineligible Expenses Ineligible expenses will include any medical expenses that are not considered to be deductible from income under the Income Tax Act, such as:

• Premiums paid to provincial medical or hospitalization plans;

• Medical costs for which the employee is reimbursed or is entitled to be reimbursed through other plans;

• Air Conditioners, humidifiers, dehumidifiers, heat pumps or heat or air exchangers;

• Non-prescription birth control devices and antiseptic diaper services.

Who can be covered as a dependent? According to CRA, a wide range of dependents is covered under Health Care Spending Accounts. A dependent can be another relative who resides in Canada at any time during the year, for whom the employee is claiming a tax credit that year. This individual must be the plan member’s parent, grandparent, grandchild, brother, sister, uncle, aunt, niece or nephew.


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Factors to consider before starting a Health Care Spending Account:

• Is a Health Care Spending Account the right fit for the organization?

• Will setting up a Health Care Spending Account align with corporate objectives?

• Will Health Care Spending Accounts meet the needs of your workforce? Do employees expect and want their plan sponsor to take care of all their healthcare needs, or are they looking for more flexibility and control?

• Is your objective benefit enhancement or cost control?

• Will the employees' perception of the value of the benefit be worth the amount of administrative effort a Health Care Spending Account will require?

• Where will the funds come from? (new employer money or flex credits freed up from benefit trade-offs, or both) How much is available? Are there any limits that should be set on accounts? How will you handle any forfeiture?

• What limits will you place on the flex credits that employees can deposit (only applicable if the Health Care Spending Account is part of a full flexible benefit plan). Limiting the number of flex credits an employee can contribute can limit the risk to the employee of individual forfeitures or rollovers of flex credits.

• How will you handle unused funds at year-end - use it or lose it...or a rollover?

• Method of reimbursement – employers should incorporate features that will facilitate administration. Generally, a limit on how often reimbursement may be received and a minimum total of expenses that should be submitted will ease the work of the plan administrator.

• How will you communicate the plan? Communication is essential to the success of any benefit plan.

Advantages of the HCSA Increased flexibility allows employees to have more control over their benefits, better meeting their needs and consequently increasing morale and job satisfaction.

• Employers can use Health Care Spending Accounts as an Attraction and Retention tool in today’s competitive marketplace.

• Employers can offer new types of health related benefits to employees without being locked into potentially expensive benefits.

• Employers can deliver benefits tax effectively.

• Employees can claim for expenses which otherwise may not have been covered.

• A wider range of dependents can be covered under the plan.


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• A Defined Contribution approach allows employers to have better control and predictability over their costs.

Unlike some conventional plans, Health Care Spending Accounts generally reimburse 100% of allowable expenses for a broad range of dependents with the only maximum being the flex credit limit of the Health Care Spending Account.

• If being used in conjunction to a conventional plan, the implementation of a Health Care Spending Account can soften the impact of employee cost sharing in the conventional plan.

• There are no renewals, reserves or inflation factors to contend with.

• Because dollars in a Health Care Spending Account are limited, employees are more accountable and are motivated to spend wisely.

Disadvantages of the HCSA Stand-alone Health Care Spending Account may not meet the requirements of an employee who has significantly high medical expenses.

• Administration time and costs could be high with implementation of a Health Care Spending Account.

PRIVATE HEALTH SERVICES PLANS (PHSP) FOR THE NEW MILLENNIUM Employee benefits are constantly changing as to what benefits to provide and how best to set them up for Employees.

Traditional health benefit plans could appear to be restrictive by their nature and tend to force employers into a pre-designed package that may or may not be right for each employee. Premiums are constantly rising; coverage is being restricted as well as tax consequences for group plans may not be available for the small business market.

A Private Health Services Plan (PHSP) is a simple plan with radical benefits for a small business.

In Canada, certain employment benefits are not taxable even though they may be deductible to the employer. There is now an incentive to employers to provide these benefits since after tax returns are greater than straight salary to the employee. Dental and health benefit plans provided by an employer to an employee are considered tax-free benefits.

Small companies can now offer health benefits tax-free to their employees, while deducting this cost as a business expense, without having a complex Employee Benefit package.


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Many companies now offer plans designed in accordance with Canada Revenue Agency (CRA) guidelines. A cost-plus health plan that allows pre-tax corporate dollars to pay for its employee’s health care costs.

This type of plan maximizes the opportunity to fully utilize virtually 100% of all health and dental services and, at the same time, merge with existing Canadian tax laws.

The term, private health services plan, ordinarily applies to some or all of the following:

• Extended medical insurance, such as prescription drugs and semi-private hospital rooms.

• Dental benefits,

• Vision or eye care benefits.

In order to be considered a benefit the plan must cover either medical or hospital expenses such as:

• Payments to a medical practitioner, nurse, dentist, public or private hospital for medical or dental services,

• Remuneration for attendant care or the cost of full-time care in a nursing home or other institution,

• Transportation of patients to or from hospitals, by ambulance,

• A patient, and if required an attendant, has to travel to obtain medical services not available locally;

• Fares paid for trips in excess of 40 kilometers,

• Reasonable costs where no such transport was available, for trips of 40 to 79 kilometers, or reasonable costs for trips of 80 kilometers or more,

• Medical aids such as artificial limbs or eyes, wheel chairs, crutches, braces, trusses, speaking or hearing aids, iron lungs or oxygen tents or artificial kidney machines,

• Products, such as diapers, required because of incontinence caused by illness or injury, Prescription eye glasses or contact lenses,

• Seeing eye dogs for blind, deaf or impaired persons, including maintenance and training,

• Reasonable expenses for bone marrow or organ transplants, including a person to accompany the patient and costs to arrange the transplant,

• Reasonable renovation costs related to access to or mobility within the home of a patient who lacks normal physical development or who has a severe or prolonged mobility impairment

• Reasonable expenses for the rehabilitation of a person suffering hearing or speech loss, including lip reading or sign language training,

• A wide variety of medicines, equipment, aids, devices prescribed by a medical practitioner and related to physical impairments, conditions or


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syndromes (see Federal Income Tax Regulation Section 5700 for a full list),

• Laboratory tests, radiography or other diagnostic procedures as prescribed by a medical practitioner, and

• Payments to a dental mechanic, or elective surgery.

To be a formal plan there must be an element of risk. Under federal jurisdiction employer contributions to private health care plans are not taxable. Neither is benefits received by the employee from the plan. In Quebec, the employer contribution to private health plans is taxable.

Traditional premium paying health and dental plans offer true insurance with various degrees of coverage, depending on the specific plan the client expects to use. The Insurance Company is most often inclined to insure the larger groups. As a result, the smaller companies have ineffective plans in place.

In some scenarios, Employee benefits may not even be made available to them, while the only alternative would be an Individual insurance plan to cover the expenses. This can result in a higher premium cost.

Comparison of a Traditional Employee Benefit Plan and a Private Health Services Plan

Traditional Plan Private Health Service Plan

High cost premiums No premiums – No monthly payments

Regardless of use, you pay premiums No medical bills – No cost to you

Enrollment requirements are set by insurer Employer sets requirements

Yearly and lifetime limits No limits

Reimbursement limits No deductible Clauses – you set limits

Numerous health costs not covered 100% coverage on all health service costs

Dental premiums are 70% of premiums Delete high cost dental premiums with pre-set limits.

Refusal of claims Easy claims process

Up to six weeks claim process Usually a quick turnaround

Premiums MAY be deductible All payments for medical services are 100% deductible.

These types of plans would interest the following groups of individuals:

• A one-person corporation or a processional corporation.

• Small business corporation (2-10 employees).

• Mid-size firms (10-30 employees).

• Large companies (30+ employees).

It would also be a benefit to consider the level of income. The higher the income, the greater the benefit to the Insured individual.


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What determines if a plan is a PHSP? According to the regulations as set out in the Income Tax Act of Canada, a Private Health Services Plan qualifies if it meets the following criteria:

• Under Section 6(1)(a)(I) of the Income Tax Act a plan qualifies if expenses that are allowed to be paid also qualify for a medical expense tax credit (IT-519R).

• Coverage for dependent as defined in the Tax Act (same sex spouses).

• Benefit elections must be made prospectively.

• If choices are made after the Plan Year starts, some amounts may be subject to tax.

• Benefit elections are irrevocable for the Plan Year – prospective changes are allowed for changes in family status.

Conditions that must be followed to be a PHSP In order to meet the definition of a PHSP as set out in the Act, several conditions must be met by the Plan:

1. The funds of the PHSP must not revert to the employer or be used for any purpose other than providing qualifying benefits to the employees.

2. Customs Revenue Agency (CRA) has indicated that the non-reversion and exclusive use requirements of a PHSP effectively require the relative trust document:

3. “Contains a clause that no property of the trust, whether such property is acquired from the capital or income of the trust, shall be invested in the shares, notes, bonds, debentures or similar indebtedness issued by:

The employer,

• A person who does not deal at arm’s length with the employer, or

• A person who is a member of a group of persons not dealing at arm’s length with the employer.

Nor shall any such property of the trust be invested in property which is or will be used directly or indirectly, solely or otherwise, by the employer or any person who does not deal at arm’s length with the employer or who is a member of a group of persons not dealing at arm’s length with the employer.”

The plan does not specifically address the reversion issue although that because the employer contributions do not exceed the amounts required to provide the benefits, there would normally be no excess funds that could revert to the employer.


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The trustee must act independently of the employer; that is, the employer must not have control over the trust. The employer’s contributions may not exceed the amount required to provide the benefits.

The payments by the employer cannot be gratuitous but must be legally enforceable by the trustees of the arrangement. Employees in the Plan have a legally enforceable claim against the employer by virtue of their contract of employment.

The Plan must have an element of insurance. CRA has accepted that a self-insured arrangement similar to the Plan may qualify as a PHSP.

CRA has indicated that where employees are reimbursed up to a certain dollar maximums each year and are permitted to carry forward excess claim or unused reimbursement room to subsequent years, such a plan may not qualify as a PHSP. However, where the Plan permits the carry forward of either the unused allocation or eligible medical expenses for a period of up to twelve months, the Plan will be considered to have the necessary element of insurance.

The Plan allows the carry forward of unused benefits for a maximum of one plan year. Therefore, this requirement is met.

CRA will recognize a PHSP that provides any or all of the coverages for expenses, which would normally qualify as medical expenses under the relevant provisions of the Act.

The amounts paid by the Plan must be paid for one or more of:

• The employee

• The employee’s spouse, and

• Any member of the employee’s household with whom the employee is connected by blood relationship, marriage or adoption.

In order to be deductible by the employer, the amount of coverage must be reasonable in the circumstances taking into consideration such factors as employment status and term of service of the employee.

If non-arm’s length employees are included in the plan, then coverage should be comparable to that which normally is offered to employees in an arm’s length situation.

If it is in fact necessary to be a shareholder in order for the corporation to pay for coverage under the plan and employees who are not shareholders are not provided with similar coverage.


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It will normally be reasonable to conclude that the employee-shareholder has obtained the benefit by reason of his or her shareholdings and not by reason of employment.

The normal exclusion for benefits under a PHSP would not apply and the individual would be considered to be in receipt of a taxable benefit.

“On the other hand, when equivalent coverage under a PHSP is extended to all employees, including the employees who are shareholders, the benefit provided to the employee-shareholder from such coverage is normally considered to be an employment benefit rather than a shareholder benefit.

Similarly, when all employees of a corporation are shareholders and it is reasonable to conclude, based on the particular facts of the situation that the RHSP has been provided as a part of a reasonable remuneration package the benefit from such coverage is also considered an employment benefit rather than a shareholder benefit.”

The result would be that the benefit is excluded from the income of the employee-shareholder.

PHSP’S are not for everybody, but they really do offer an alternative for anybody who is self-employed or who owns a business of any size.

The result is that these plans could be used either on their own, or in combination with existing Employee Benefit Plans to complement their coverage’s, and at the same time control premiums.

PHSP contribution for Corporations

• The Income Tax Act does not place a limit on the amount of deduction allowed for PHSP premiums.

• A PHSP can be set up for a corporation with only shareholders as employees

• Payments for medical expenses of shareholders will only qualify if the shareholder received the benefit in his/her capacity as an employee, not as a shareholder. In order for the benefits to qualify

• The shareholder must be actively engaged in the business activities of the corporation - see CRA Technical Interpretation 2003-0050541E5 (pdf)

• The benefits must be reasonable, and be consistent with what would be offered to an arm's length employee providing similar services


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PHSP contributions for Unincorporated businesses

An unincorporated business cannot simply make payments directly from employer to employee, as this will not qualify as a PHSP. It is necessary to have an insurance plan through a third party. Further, if there are no employees covered by the PHSP besides the sole proprietor, the CRA's view is that a cost plus plan will not constitute insurance, so will not qualify as a PHSP.

The allowable deduction for PHSP costs for an unincorporated business is limited by S. 20.01(2) of the Income Tax Act. Where the business provides coverage under the PHSP to full-time arm's-length employees, and 50% or more of the employees of the business are arm's-length employees, the maximum allowable deduction for the sole proprietor and dependents will be equal to the cost of equivalent coverage under the plan in respect of the arm's-length employees.

Where there are no other employees, or fewer than 50% of the employees are arm's-length employees, the maximum allowable deduction for the sole proprietor and dependents will be an annual amount equal to the total of $1,500 for each of the sole proprietor, spouse, and dependents age 18 or more, plus $750 for each dependent under 18. Thus, for a sole proprietor with a spouse and 2 children under 18, the annual allowable deduction would be a maximum of $4,500.

Tax consequences to Employer and Employee Employer Contributions made to the Plan by an employer using the accrual method of accounting will be deductible for tax purposes in the taxation year in which the legal obligation to make the contributions arose.

Employee The employee will not be considered to have received a taxable benefit from employment so that there will be not tax consequences as a result of being a member of the Plan.

TAXATION OF INDIVIDUAL HEALTH & DENTAL INSURANCE AT A GLANCE As of the February 1998 Federal Budget, individually owned personal health insurance may be tax deductible:

Self-employed and unincorporated

A. Your own personal health insurance may be deducted as a business expense reducing your taxable income.


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B. Any health and dental premiums paid on behalf of employees is tax deductible for employers and is not considered a taxable benefit for employees for federal tax purposes.

C. If your primary source of income is through self-employment or income from other sources does not exceed $10,000, you could realize an income tax saving of up to 54 percent on the Personal Health Insurance premiums you pay. Your savings will depend on the level of your income and the province in which you live.

D. If you have no permanent, full-time employees, there is an annual deduction limit of $1,500 for you, your spouse and each supported adult child and $750 for each other child.

E. If you have one or more permanent, full-time employees with at least 3 months of service, the amount deductible is limited only by the cost of equivalent coverage for those employees, provided that 50% or more of those employees receiving coverage are not related to the owner.

If less than 50% of those employees receiving coverage are arm’s length, the deduction is limited to the lesser of the cost of equivalent coverage for employees and the limits outlined above.

F. All deductions are further reduced where the cost is shared between the employee and employer. For example, if the deduction determined above was $1,700 and your company only covers 30% of your employees’ premium, your deduction would be limited to $510 or 30% of $1,700. If you qualify for the medical expenses tax credit, the remaining $1,190 may be claimed as a part of that credit.

Incorporated Businesses Any health and dental premiums paid on behalf of employees continues to be tax deductible for employers and is not considered a taxable benefit for employees for federal tax purposes.

Owner employees may be entitled to deduct their own premiums if the benefits are received by virtue of employment rather than ownership. For example, if the owner employee received more generous benefits than the other employees, these benefits could be considered to be received by virtue of ownership rather than employment.

Other Individuals


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Include health and dental coverage as part of other medical expenses when calculating tax credits.

On your tax return, include your personal health insurance premium for the year as a medical expense. Either spouse can claim the medical expense tax credit on their return based on medical expenses for any 12 month period ending in the taxation year.

HOW GROUP INSURANCE RENEWALS ARE CALCULATED: Two Major Considerations

• Pooled benefits based on demographic and market factors - Life, Accidental Death and Dismemberment, and Long Term Disability.

• Experience benefits based on the companies usage or claims rate - Short Term Disability, Health and Dental benefits.

A. POOLED BENEFITS The experience of the plan is an important factor in determining the renewal 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 an employer group is directly affected by the size of your company, the demographic make-up of your employees, and an aging population.

1. Company size Generally speaking, larger groups, as administrative costs are lower achieve greater economies of scale. This, in turn, lowers the cost of insurance and ultimately the premium that is paid.

2. Demographics The age and gender of a group also has a direct impact on the life insurance rates. As the group gets older, the likelihood of death among the employee’s 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 the group.

3. Aging population


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Besides the demographics of the 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 a group, the demographic make-up of the 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 & 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.


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B. EXPERIENCE RATED BENEFITS Healthcare, dental care; vision and short-term disability are known as 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 that the 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 medications as this represents 71.3% of all health claims (in real dollar terms) and 88.9% of all claims incidence incurred.

Your 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 the 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 the credibility. Smaller groups have a lower credibility factor since it is more difficult to predict claiming patterns from year to year.


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

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 that Insurance companies like to look at when renewal time comes are:

• Overall utilization

• Inflation

• Offloading from the government plans.

HOW IS DRUG INFLATION CALCULATED? NEW DRUGS are designed to counter new diseases, but also replace chronic use drugs. When dealing with drug plans only, utilization and aging demographics have an enormous impact on the costs. It must be noted, however, increasing drug therapy has a positive impact in overall health costs. It is estimated that for every $18 spent on drug therapies, $111 dollars is saved in other health services.

Some factors for developing new drug therapies include:

• Cost of developing a new drug therapy is approximately $250 million.

• Out of a 20-year patent cycle, average of 13 years to get a drug therapy approved. Therefore, only 35% of the life of a patent remains in order to recuperate investment and R & D costs.

More and more drugs are being replaced by new, more effective and more expensive drug therapies. As an example of this trend let us examine an arthritis sufferer as a case study. Celebrex (new drug therapy) cost $1.45 (2x / day) vs. Naproxen (old drug therapy) $0.32 (2x / day).

Offloading of government services by the public sector impacts negatively on drug costs. Shortened stays in hospital mean that individuals must buy drugs for themselves sooner after an illness. An estimated 30% of services have been offloaded by the government and have therefore increased costs directly and indirectly for drug plans.


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In Quebec, private insurers must include all medications on the RAMQ (Québec, the Régie de l'assurance maladie plays a key role in Québec's healthcare system) list, which continues to be modified.

Another example of the increased offloading, the RAMQ plans original premium was $175 in 1997, and now is $667 for 2017-2018. As well all the other elements of the plan, deductibles, co-insurance and out of pocket maximums, have been adjusted upward. Overall, the programs costs have risen by at least 18% per year.

Deterioration of plan cost controls occur due to the impact of inflation on your deductible, stop-losses, and co-insurance. As inflation increases, the purchasing power of your “fixed dollar” amount of deductibles or cost controls in your plan deteriorate, and have less of an overall impact on maintaining the cost sharing relationship with the insured.

Drug Utilization and Demographic Trends

Prescription drug expenditures represent a significant component of health care costs in Canada, with estimates of $27.7 billion spent in 2012. After several years of double-digit growth, the rates of change in these expenditures have gradually declined in recent years, forecasted at a 16-year low for 20121.

Changes in prescription drug expenditures are driven by many factors. For example, while the recent rate decline has mainly been driven by the launch of generic products and generic price reforms, expensive emerging therapies, as well as increases in the volume of drug use, are expected to continue to fuel the upward pressures on costs.

Given the complex forces at work, simple statistics on drug utilization and costs only provide a limited insight into the factors that drive growth. Identifying the major drivers and understanding the effect they have on prescription drug expenditures allows policy makers and researchers to anticipate future cost pressures and expenditure levels Even if 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 start rising steeply with age.

Legislative Changes

The last few years has seen provincial governments across Canada place strict limits on the pricing of generic drugs. Not only were these restrictions applied to public sector pricing, but they were also extended to the private sector. Presently, the cost of generic drugs has been limited to between 20% and 35% of the brand name price, depending of the jurisdiction. In addition, the cost of the fourteen

http://www.pmprb-cepmb.gc.ca/view.asp?ccid=887#fn0


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most common generic molecules was limited to 18% of the brand price in most Canadian jurisdictions.

The fourteen (14) molecules, along with the brand name and the most common condition treated are:

1. Atorvastatin (Lipitor – cholesterol) 2. Ramipril (Altace – blood pressure) 3. Venlafaxine (Effexor – depression) 4. Amlodipine (Norvasc – blood pressure) 5. Omeprazole (Losec – ulcers, reflux) 6. Rabeprazole (Acifix – ulcers, reflux) 7. Citalopram (Cipralex – depression) 8. Pantoprazole (Protonix– ulcers, reflux) 9. Rosuvastatin (Crestor – cholesterol) 10. Simvastatin (Zocor – cholesterol) 11. Clopidogrel (Plavix – heart disease, stroke) 12. Gabapentin (Neurontin – seizures, neuropathic pain) 13. Metformin (Glucophage – type 2 diabetes0 14. Olanzapine (Zyprexa – schizophrenia, bipolar disease)

DENTAL CARE TRENDS

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 age 35. The inclusion of dependents also increases the utilization of dental services per employee.

During the child-rearing years (between 25 and 45), the average covered amount rapidly increases. As plan member’s age, they also tend to require major dental services more often for themselves.

Trend is comprised of a number of components which blend together to influence the cost of providing coverage over time. The most common factors are:

Utilization Patterns This refers to the change in demand for a product or service over time. Influences over utilization include things like the age of the employee population, demands for new technology and social acceptance of products/services.

Inflation Characterized as increases in the cost of providing identical products and


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services over time. This is what most people think about when referencing the idea of “trend”.

Technological advances This represents changes in cost that result from the emergence of new medical procedures, equipment and medications that replace existing technology. Although technology will typically result in an immediate increase in Health and Dental costs, it is possible to have advances that will reduce costs in the long term.

Deductible leveraging This refers to the reduced effectiveness of a fixed deductible over time. Unless deductibles are increased to keep some type of pace with inflation, they are less and less effective at placing a drag on claims as they represent a declining percentage of the claims value. Most plans have not increased deductibles since they first implemented them, in some cases going back as far as the 1970’s. Plan design elements such as coinsurance, generic substitution on drugs, managed formularies and strict adjudication requirements are far more effective at reducing costs and modifying claiming patterns.

Legislative Changes These can have both an inflationary and deflationary impact on private health plans. Reductions in coverage in the public medicare system typically result in higher claims for private plans, which are often required to fill in the gaps that are formed. Deflation is less common, but the generic drug price controls implemented over the last few years are examples of a legislative change that has had a positive impact on drug claims.

Provincial Fee Guides

Dental plans are 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.

A Fee Guide is a list of suggested fees for dental services published by the various provincial dental associations across Canada. The notable exception is Alberta, where a fee guide has not been published since 1997. There is usually a Fee Guide for General Practitioners, as well as separate Fee Guides for Specialists who charge more for their specialization and expertise.


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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 on average 2 - 2.5% from year to year.

Approximately 10% of procedures are not subject to fee guide maximums. As well more and more dentists are charging up to the maximum allowed by the fee guide.

Insurance companies and third-party administrators use the Fee Guides as a “reasonable and customary” guideline for the purpose of calculating eligible reimbursement amounts under a plan. While most plans pay according to the “Current General Practitioner Fee Guide in the Province of Residence”, some plans will also pay for Specialists Fee Guides and others may pay according to a historical Fee Guide (e.g., Current minus two years or fixed 2013).

Each year a new list of suggested (typically higher) fees is published. One key thing to remember is that the published list is a Fee Guide, not a Fee Schedule. Dentists are allowed to charge whatever they wish for the provision of their services. The insurers will reimburse according to the Fee Guide specified under a plan and any excess amount is the responsibility of the patient.

The following increases were noted for 2015, 2016 and 2017

Province 2015 2016 2017

NL 1.8% 1.5% 3.0%

PEI 2.3% 2.5% 1.5%%

NS 2.2% 3.5% 1.8%

NB 2.0% 2.0% 2.0%

QC 2.1% 2.6% 2.5%

ON 1.5% 2.0% 1.7%

MB 2.9% 2.4% 2.9%

SK 2.0% 1.9% 2.2%

AB 3.2% 2.9% 1.8%

BC 2.0% 3.2% 4.5%

Some of the insurers do not all use the same adjustment for dental Fee Guides. Some will use the average announced by the provincial association while others will calculate a factor (typically higher) that is specific to their book of business. Our Rate Model calculations use the average increase announced by the provincial dental association(s).

HEALTH AND DENTAL FRAUD AND ABUSE

Fraud and abuse can be significant contributors to a benefit plan’s claim experience and, thus, to renewal costs. Fraud and abuse siphon dollars away


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from the payment of legitimate claims and result in a drain on valuable and finite benefit dollars.

“Abuse” is a situation where a service or supply is provided to a covered person even though it was not “medically necessary.”

Abuse is a “Wellness Clinic” that refers a patient from a chiropractor to a massage therapist for treatment simply because the patient has exhausted their annual chiropractor maximum.

Abuse is an individual who views their benefit plan maximums as an entitlement and obtains massage therapy simply because they saw a sign encouraging patients to use up their massage benefits before the end of the year, rather than because it was warranted.

“Fraud” can come in many forms, but usually involves a claim being submitted for a service that wasn’t actually preformed; a supply that wasn’t actually provided; or a charge that was inflated above what was actually paid by the patient.

Fraud can be as simple as an employee or a provider submitting a claim for acupuncture when massage therapy was performed, a clinic submitting a claim to an insurer for orthotics that were not requested by or supplied to the patient, or a dentist billing for dental procedures not actually performed or indicating a higher number of time units than was performed.

Health fraud in Canada is a serious problem, estimated to have a multi-billion dollar price tag. Fraud against employee benefit plans can be perpetrated by claimants or service providers independently, or the two can work together for mutual gain

The problem with insurance fraud is that it is difficult to detect, and even harder to prove. It is seldom reported, either because employees don’t pay sufficient attention to receipts or, in some cases, the employee is an active participant.

PROVISIONS OF AN EMPLOYEE BENEFIT PLAN MASTER CONTRACT Resident

This is a person who is legally entitled to be or to remain in Canada and who makes his home, and is ordinarily present, in a province or territory of Canada and who satisfies the requirements for a Government Health Insurance Plan.

Employee An employee is a Resident who is directly and permanently employed on a full time basis by the Policyowner at the policyowners place of business in Canada,


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or at such other place or places in Canada as such person may be required to be to carry on the policyowners business and:

• Is regularly scheduled to work a minimum of 30 hours per week for at least 8 weeks in each calendar year quarter, and

• Is employed on the Effective Date of the Policy, or commences Employment after the Effective Date and has completed the eligibility period, and who is also in a Class shown in the Schedule of Benefits.

Employment Refers to employment as an Employee of the Policyowner.

Actively at Work This term usually means, any day an Employee is actively at work performing all the usual and customary duties of his / her job with the Policyowner for the scheduled number of hours for that day.

Person Insured This is the Insured Employee and an Insured Dependent.

Child Is a Resident who is a natural child, stepchild, or legally adopted child or ward of the Employee or of the Spouse, and who normally resides with the Employee or with the Spouse in a regular parent-child relationship and who is being claimed as a dependent of the Insured Employee or of the Spouse for Income Tax purposes.

Spouse A spouse is defined as your legal or common-law (opposite or same sex) spouse, subject to the conditions listed below:

• A spouse can be married to the Insured Employee, or

• A common-law spouse must have been living with you for at least 1 year on a continuous basis, must not be related to you by blood, and must be recognized as your spouse in the community in which you live. (completion of a common-law declaration is required.)

• A spouse from whom you are legally separated is not eligible for coverage;


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Usually upon written request by the Insured Employee, the insurance under the Policy will be extended immediately for the named person upon the birth of a child that comes from this union.

Dependent An unmarried Child, who is dependent on the Employee or on the Spouse for support, provided that the Child is over the age of 24 hours and:

• Is under the age of 22 years or

• Is under the age of 26 years and is a full-time student at an accredited educational institute, and

For the purpose of Extended Health Benefits coverage, if provided in the Policy, Child who is alive at birth and is under the age of 24 hours will be insured.

The Dependent Life, Extended Health Benefits and/or the Dental Benefit, if provided under the Policy, will continue beyond the limiting age of 22, for an unmarried Child if:

• The Child became handicapped prior to reaching the limiting age; and

• The Child is incapable of self-sustaining Employment by reason of mental or physical handicap and is wholly dependent on the Insured Employee or on the Spouse for support and maintenance; and

• If the Child became mentally or physically handicapped after age 18, application for coverage and proof of disability is submitted to the Company within 31 days of reaching the limiting age as previously outlined.

Eligibility Period This period is outlined on the Schedule of Benefits.

Eligibility Date This will be the later of the Effective Date of the Benefit and the date that the Employee completes the Eligibility Period for the Benefit.

Physician A physician or surgeon or a specialist medical doctor duly qualified and legally licensed by the jurisdiction in which they operate. One who prescribes and administers medical treatment and drugs professionally or performs any surgery within the scope of their license.


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One who specializes in a particular branch of medicine and who is neither insured for benefits under the Master Policy, nor related by blood or marriage to the Person Insured.

Government Health Insurance Plan The provincial or federal legislation and the regulations, which provide government, sponsored hospital, drug, and dental or other medical care benefits for Residents of Canada. In Ontario, OHIP would be the governing legislation that affects people in Ontario.

Institution Refers to a hospital, convalescent hospital, a rest home, a nursing home, a home for the aged, or any other place that would provide similar care.

Reasonable and Customary This term refers to the charges for medical or dental services, supplies or treatments incurred by the Insured individual. These charges cannot be in excess of the general level of charges made by other providers of similar services in the locality or geographical area where the charge is incurred.

Plan Refers to the Policy and any other policy, contract or arrangement other than the Master Policy, which will provide benefits or services for medical or dental care or treatment. This will include Employee benefits in addition to any other employer, union, trustee, employee benefit association or professional association.

Evidence of Insurability The written health information that is provided to determine whether a person satisfies the Company’s medical underwriting requirements.

No Evidence Limit The amount of insurance an eligible Employee and an eligible Dependent may obtain without providing Evidence of Insurability. At each rate, re-calculation the Company may establish a new No Evidence Limit.

Pregnancy / Parental Leave of Absence Any formal pregnancy or parental leave taken pursuant to Provincial or Federal Law or pursuant to mutual agreement between the Insured Employee and the Policyowner.


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Incontestability Clause Any Policy as it relates to the Policyowner and the Person Insured is always voidable by the Company for fraud. In the absence of fraud, if the Policyowner fails to disclose or misrepresents a fact in any statements made in application for the Policy, the Policy may be voidable by the Company, except if the Policy has been in existence for a continuous period of two years.

Disability Insurance is always voidable by the Company for failure to disclose or misrepresentation in all provinces except Quebec. In Quebec, if disability insurance has been in effect for a period of two years or more, the insurance cannot be voidable by the Company for not disclosing or misrepresentation.

Suicide Most contracts do not contain a suicide two-year exclusion clause and suicide is not considered Accidental death.

Currency and Place of Payment Every amount payable to or by the Company under a Master Policy will be in lawful money of Canada and will be payable at its Head Office. However, payments complying with any other arrangement agreed to in writing in advance by the Company may be made elsewhere.

Evidence of Age The Insurance Company always reserves the right to request proof of the age of any Person Insured.

WHAT CAN COMPANIES DO TO CONTROL THE COST OF EMPLOYEE BENEFITS? Take a look into the future to see what the trends of Employee benefits will look like. For starters, employers should get a better handle on how their own costs are expected to change in the next few years. This is not as difficult as it sounds since rising costs depend largely on demographic changes, which can be predicted with a high degree of confidence. By reviewing data on new hires and turnover, an actuary can project the future demographics of an organization’s workforce and use it to estimate future costs. This knowledge can help prepare employers for what to expect and to plan accordingly.

Change the cost-sharing equation - No one likes to pay more, but surveys show that employees are fairly open to increasing their share of benefits costs if this is


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what it takes to maintain health coverage. Before making any changes, an employer will probably want to benchmark current practices against their peer group.

Better governance - More diligent oversight of the benefits program is likely to reap some savings. A good place to start is with a claims audit. Some findings from past audits have uncovered unauthorized expenditures such as:

• Co-ordination with Medicare being ignored for retirees, hence the employer plan paying for benefits that should have been covered by government.

• Paramedical limitations not coded into the system.

• Out-of-pocket maximums being ignored resulting in the employer’s plan paying more than promised.

• Reimbursement for drugs not eligible for coverage under the plan.

• Reimbursement of eye glasses that were not an eligible expense.

• Review rationale for providing post-retirement life, health and dental coverage - Many organizations committed to providing post-retirement benefits when they thought the cost was minimal. As the cost has become better understood, post-retirement benefits coverage has been declining.

A recent Trends and Projections survey showed that the number of companies providing post-retirement health coverage is declining. The one hurdle preventing an even more rapid decline is that the courts consider post-retirement benefits to be vested at the point of retirement. Hence, they cannot be easily taken away from retirees.

Post-retirement benefits are similar to defined benefit pension plans in that both take many years to phase out and few organizations are launching new plans.

Focus on wellness - The traditional emphasis of the medical system and by extension of employer sponsored benefits programs has been on diagnosing and treating illness, not on prevention. This is changing. A growing number of employers have implemented wellness programs. Approximately a third of companies have an employee wellness program.

Most practitioners are convinced that wellness programs can improve the health of the workforce and hence improve productivity. The challenge is to quantify it. Doing so is critical since this is one of the few benefits areas where intervention might significantly reduce claims without cutting back on benefits or increasing costs. This area is sure to evolve rapidly in the next few years.

Partner with employees - Consider having employee representatives on an advisory committee to deal with benefits issues. This may be the best way to get employees to buy in to remedies that may involve cut-backs in coverage or increasing cost-sharing on the employees’ part.


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IT’S AN ONGOING EVOLUTION Pension plans seem to go through a major overhaul every five to ten years because of external events such as provincial pension reform in the late 1980s and tax reform in the early 1990s. In the case of benefits programs, changes tend to be less dramatic but occur more frequently, so change is almost certain to be a constant.

Here are some reasons why organizations will constantly need to review their benefits programs:

Government downloading of costs - As governments pass along the responsibility for certain benefits, employers need to be diligent in managing the impact on their own plans. The default can be an automatic increase in employer costs that could have been avoided. The most recent Ontario budget, for instance, introduced individual healthcare “premiums”. In some cases, employers may be required to bear the cost because of inadvertent wording in their collective bargaining agreements dating back to the 1980s, when Ontario last had OHIP premiums.

Changing demographics - The effect of demographic change on benefits programs is profound, but is masked by the fact it seems to occur at a glacial pace. Employers need to review their coverage in light of their changing demographics every five years or so.

New health problems - Although they are not new problems, factors such as obesity, Type 2 diabetes, and stress-related health issues are becoming increasingly prominent. The prevalence of these conditions will trigger changes in coverage.

New treatments - The emergence of employee health risk assessments and various wellness programs can assist employees in improving their own health outcomes. To be successful, employers need to be clear on their objectives when they introduce new programs.

New technology - Access to the Internet (and employer Intranets) is now commonplace.

Perhaps the biggest impact of technology in terms of benefits program design is that it facilitates flexible benefits programs and healthcare spending accounts. Online enrolment, for example, has proven to be much more effective than paper-based enrolment. Technology can also be effective in improving the communication of plan changes and wellness programs.

ADDITIONAL GOVERNMENT BENEFITS FOR THE EMPLOYEE


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Employment Insurance (EI) Benefits – Formerly UIC The Employment Insurance Act is a total restructuring of the old Unemployment Insurance program and was implemented in January 1997. The Act was designed to help today's labour force, providing assistance where it is most needed and offering incentives for claimants to return to work.

Employment Insurance (EI) provides temporary financial assistance for unemployed Canadians while they look for work or upgrade their skills. Canadians who are sick, pregnant or caring for a newborn or adopted child, as well as those who must care for a family member who is seriously ill with a significant risk of death, may also be assisted by Employment Insurance.

The Employment Insurance system is based on hours of paid work and adheres to fluctuations in work situations such as part-time, extended hours and compressed weeks.

The principle of the hour’s system is simple, regardless of whether you work full-time, part-time, as a seasonal worker or on and off throughout the year, the hours that you work and for which you are paid are accumulated toward eligibility for EI benefits. Using hours instead of weeks to calculate eligibility ensures that you are credited for all your paid work time. This approach applies to overtime, which is calculated hour for hour no matter what the rate of pay.

As well, paid leave of any type is insured for the number of hours that normally would be worked in that period, regardless of rate of pay.

Federal Budget Employment Insurance Changes effective January 1, 2017

The last federal budget in March 2016 announced changes to Employment Insurance rules including a reduction in the waiting period for benefits from two weeks to one-week effective January 1, 2017. At the same date, the premiums will be reduced.

The decrease in the waiting period will also apply to special EI benefits which include: maternity, parental, compassionate care, parents of critically ill children and sickness benefits. The government has clarified that the total number of weeks of EI benefit entitlement, related to regular or special benefits, will not change.

The Budget Implementation Act has been passed and proposed regulations were released by the federal government this fall.

Key implications for plan sponsors:


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• Short term disability (STD) plans – Sponsors of STD plans with two week waiting periods for benefits may wish to reduce the waiting period to one week in light of the change to the EI program. Most plan sponsors with STD waiting periods of one week or less do not need to make any changes.

• Supplementary unemployment benefit (SUB) plans – Sponsors of SUB type plans (including EI carve-out, maternity leave, leave for care of a child, and compassionate care leave) may see a reduction in plan costs as employees will be able to access EI benefits earlier in their leave period. SUB plan designs may need to be modified to wrap around the reduced waiting period. There is a transitional provision (in place until January 3, 2021) included in the proposed regulations that allows combined EI and employer wage replacement benefits to exceed the typical 95% limit during the second week of a disability.

• EI premium reduction program (PRP) – The proposed regulations include a transitional provision to provide existing plans participating in the PRP with a four year period to update their plans while continuing to qualify for participation in the PRP. This transitional provision will apply to plans that are in place before the reduction of the waiting period, and expires on January 3, 2021.

• Long term disability (LTD) plans – Plan sponsors may consider adjusting their LTD elimination period to coordinate with changes to other programs.

• Salary continuance or other wage replacement arrangements – Plan sponsors with other arrangements should consider the impact of any potential changes on expected costs, disability management best practices, and other factors.

The considerations required in light of the changes to the EI program will vary for each plan sponsor.

EI premium rate change

The Canada Employment Insurance Commission has recently confirmed the 2018 EI premium rates. The employee premium rate will be $1.66 per $100 of insurance earnings. The maximum employee contribution will be $858.22. The employer premium rate will be $1201.51 for 2018 which is 1.4X the employee rate.

The 2017 rate change was the first under a new rate setting mechanism that will set the EI premium rate annually at a seven-year break-even level, as forecasted


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by the EI Chief Actuary. Annual rate adjustments after 2017 will be subject to a limit of 5 cents.

Maximum insurable earnings (MIE) for 2018 will increase to $51,700 from $51,300 in 2017.

Number of hours of insurable employment required to qualify for EI For those who lose a job through no fault of their own, are able to work and are available for work. You must have worked a certain number of insurable hours, normally from 420 to 700, over a qualifying period, usually the previous 52 weeks. The number of insurable hours required depends on where you live in Canada and the unemployment rate for that region.

Who is eligible?

The following information is a guideline. We encourage you to apply for benefits so our processing agents can determine if you are eligible.

You may be entitled to Employment Insurance (EI) regular benefits if you:

• were employed in insurable employment; • lost your job through no fault of your own; • have been without work and without pay for at least seven consecutive days

in the last 52 weeks; • have worked for the required number of insurable employment hours in the

last 52 weeks or since the start of your last EI claim, whichever is shorter; • are ready, willing and capable of working each day; • are actively looking for work (you must keep a written record of employers

you contact, including when you contacted them).

You may still qualify for benefits, even if you work for an employer who is related to you.

Qualifying period The qualifying period is the shorter of:

• The 52-week period immediately before the start date of a claim, or

• The period since the start of a previous EI claim if that claim had started during the 52 week-period.

Only the insurable hours that fall within the qualifying period are used to start a benefit period. However, the qualifying period may be extended up to 104 weeks under certain conditions.

How long you could receive EI regular benefits


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You can receive EI from 14 weeks up to a maximum of 45 weeks, depending on the unemployment rate in your region at the time of filing your claim and the amount of insurable hours you have accumulated in the last 52 weeks or since your last claim, whichever is shorter.

How much does the individual receive?

For most people, the basic rate for calculating EI benefits is 55% of your average insurable weekly earnings, up to a maximum amount. As of January 1, 2018, the maximum yearly insurable earnings amount is $51,700. This means that you can receive a maximum amount of $547 per week.

Your EI payment is a taxable income, meaning federal and provincial or territorial - if it applies - taxes will be deducted.

EI MATERNITY, PARENTAL AND SICKNESS BENEFITS

EI maternity benefits are offered to biological mothers, including surrogate mothers, who cannot work because they are pregnant or have recently given birth. A maximum of 15 weeks of EI maternity benefits is available.

Benefits can be paid as early as 12 weeks before the expected date of birth, and can end as late as 17 weeks after the actual date of birth. The weekly benefit rate is 55% of the claimant’s average weekly insurable earnings up to a maximum amount.

EI parental benefits are offered to parents who are caring for a newborn or newly adopted child or children.

There are two options available for receiving parental benefits: standard or extended.

1. Standard parental benefits can be paid for a maximum of 35 weeks and must be claimed within a 52-week period (12 months) after the week the child was born or placed for the purpose of adoption. The weekly benefit rate is 55% of the claimant’s average weekly insurable earnings up to a maximum amount. The two parents can share these 35 weeks of standard parental benefits.

2. Extended parental benefits can be paid for a maximum of 61 weeks and must be claimed within a 78-week period (18 months) after the week the child was born or placed for the purpose of adoption. The benefit rate is 33% of the claimant’s average weekly insurable earnings up to a maximum amount. The two parents can share these 61 weeks of extended parental benefits. You can choose to claim extended parental


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benefits only if your child was born or placed with you for adoption on or after December 3, 2017.

The following information is a guideline. You may be eligible to receive Employment Insurance (EI) maternity or parental benefits if:

• you are employed in insurable employment; • you meet the specific criteria for receiving EI maternity or parental

benefits; • your normal weekly earnings are reduced by more than 40%; and • you have accumulated at least 600 hours of insurable employment during

the qualifying period or, if you are a self-employed fisher, you have earned enough money during the qualifying period.

If you are employed in insurable employment…

If you are employed in insurable employment, your employer will deduct the applicable EI premiums from your wages or salary.

You need to pay EI premiums on all your earnings up to a maximum amount. In 2018, for every $100 you earn, your employer will deduct $1.66, until your annual earnings reach the maximum yearly insurable amount of $51,700. The maximum amount of premiums to be paid in 2018 is therefore $858.22.

Since Quebec has its own program that offers maternity, paternity, and parental benefits, the Government of Canada has adjusted the premiums accordingly for that province. In 2018, the premium rate for workers in Quebec is set at $1.30 for every $100 of earnings, up to a maximum amount of $672.10 for the year.

EI maternity or parental benefits

EI maternity benefits are payable only to the biological mother who is unable to work because she is pregnant or has recently given birth. To receive maternity benefits, you need to prove your pregnancy by signing a statement declaring the expected due date or the actual date of birth.

EI parental benefits are payable only to the biological, adoptive, or legally recognized parents while they are caring for their newborn or newly adopted child or children. To receive parental benefits, you must sign a statement declaring the newborn’s date of birth or, when there is an adoption, the child’s date of placement for the purposes of the adoption and the name and address of the adoption authority. In cases where the child is not legally adoptable, parental benefits could be payable from the date you attest that you consider the placement a permanent one. In these circumstances, the Commission may, at


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any time, request proof certifying that the child for whom you are claiming parental benefits has been placed with you by a recognized authority and that the placement was not merely a temporary one.

For biological or legally recognized parents, EI parental benefits can be paid starting from the child's date of birth. For adoptive parents, parental benefits can be paid starting from the date the child is placed with them for the purpose of adoption. In cases where the child is not legally adoptable, parental benefits could be payable from the date you attest that you consider the placement a permanent one.

You are eligible to collect EI if:

1. Normal weekly earnings are reduced by more than 40% you may be eligible to collect - When your normal weekly earnings are reduced by more than 40% because of pregnancy or your need to care for newborn or newly adopted children, you may be eligible for EI maternity or parental benefits.

2. You have accumulated at least 600 hours of insurable employment during the qualifying period - Hours of insurable employment are the hours you work, for either one or more employers under written or verbal contracts of service, for which you receive wages.

The qualifying period is the shorter of:

• the 52-week period immediately before the start date of your EI period; or • the period since the start of a previous EI benefit period, if that benefit period

started during the last 52 weeks.

To be eligible for EI maternity benefits, you must have accumulated at least 600 hours of insurable employment in your qualifying period.

If you are a self-employed fisher, you must have earned $3,760 from fishing during the 31-week qualifying period immediately before the start of your benefit period.

To be eligible for EI parental benefits, each parent who applies for benefits must have accumulated at least 600 hours of insurable employment in his or her qualifying period. If you are a self-employed fisher, you must have earned $3,760 from fishing during the 31-week qualifying period immediately before the start of your benefit period.

Both parents can apply for EI parental benefits


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Both parents can apply for EI parental benefits but they have to share the benefits. Furthermore, both parents are required to choose the same parental benefit option, either standard or extended. The option chosen by the first claimant who completes the EI application will be considered as the option chosen by the second claimant. The choice is final once parental benefits have been paid on a claim. This means that you cannot change between standard and extended once parental benefits have been paid.

Standard parental benefits

In total, there are 35 weeks of standard parental benefits available to eligible parents of a newborn or newly adopted child.

There are many ways you can decide to use your standard parental benefits. For instance, one of the parents can take the entire 35 weeks of standard parental benefits, or both parents can share them.

Examples

• If the biological mother wants to return to work after her maternity leave, the other parent can then take the 35 weeks of standard parental benefits.

• If one parent decides to take only 10 weeks of standard parental benefits before returning to work, the other parent can use the remaining 25 weeks of standard parental benefits.

• If one parent decides to return to work after taking a few weeks of standard parental benefits, but then realizes a few weeks later that he or she would prefer to stay home with the child, he or she is still entitled to the unused weeks of standard parental benefits, as long as the 52-week period after the birth or adoption placement has not expired.

Extended parental benefits

In total, there are 61 weeks of extended parental benefits available to eligible parents of a newborn or newly adopted child.

There are many ways you can decide to use your extended parental benefits. For instance, one of the parents can take the entire 61 weeks of extended parental benefits, or both parents can share them.

Examples

• If the biological mother wants to return to work after her maternity leave, the other parent can then take the 61 weeks of extended parental benefits.


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• If one parent decides to take only 20 weeks of extended parental benefits before returning to work, the other parent can use the remaining 41 weeks of extended parental benefits.

• If one parent decides to return to work after taking a few weeks of extended parental benefits, but then realizes a few weeks later that he or she would prefer to stay home with the child, he or she is still entitled to the unused weeks of extended parental benefits, as long as the 78-week period after the birth or adoption placement has not expired.

How much could you receive?

The basic rate for calculating EI maternity benefits is 55% of your average weekly insurable earnings, up to a maximum amount. As of January 1, 2018, the maximum yearly insurable earnings amount is $51,700. This means that you can receive a maximum amount of $547 per week.

The basic rate for calculating EI parental benefits depends on the option you choose:

Standard parental benefits are paid at a weekly benefit rate of 55% of your average weekly insurable earnings, up to a maximum amount. For 2018, this means that you can receive a maximum amount of $547 per week for up to 35 weeks.

Extended parental benefits are paid at a weekly benefit rate of 33% of your average weekly insurable earnings, up to a maximum amount. For 2018, this means that you can receive a maximum amount of $328 per week for up to 61 weeks. (The amount of $328 can be increased if you are eligible to receive the Family Supplement).

Calculation of benefits

The amount of weekly benefits is calculated as follows:

• Service Canada will calculate your total insurable earnings for the required number of best weeks (the weeks that you earned the most money, including insurable tips and commissions) based on the information you provide and/or your Record(s) of Employment

• Service Canada will determine the divisor (required number of best weeks) that corresponds to your regional rate of unemployment

• Service Canada will divide your total insurable earnings for your best weeks by your required number of best weeks


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• Service Canada will then multiply the result by 55% for maternity benefits and for standard parental benefits or by 33% for extended parental benefits to obtain the amount of your weekly benefits.

In regions of Canada with the highest rates of unemployment, we will calculate using the best 14 weeks; in regions of Canada with the lowest rates of unemployment, we will use the best 22 weeks. In other regions, the number of weeks used to calculate benefits will be somewhere between 14 and 22, depending on the unemployment rate in those regions.

You may be eligible for a EI Family Supplement benefit

If we determine that your net family income is $25,921 or less per year, that you have children, and that you or your spouse receives the Canada Child Benefit, you are considered a member of a low-income family. You may therefore be eligible to receive the EI Family Supplement. It would be applied automatically by Service Canada. No action is required from you.

The amount of EI Family Supplement you receive depends on:

• your net family income (up to the $25,921 yearly maximum); and • the number of children in your family, and their ages.

The Family Supplement may increase your benefit rate to as high as 80% of your average insurable earnings. If you and your spouse claim EI benefits at the same time, only one of you can receive the Family Supplement. It is usually better for the spouse with the lower benefit rate to receive the Family Supplement.

If your income level rises, the Family Supplement gradually decreases. You are no longer eligible to receive the Family Supplement when your net family income is greater than $25,921.

What happens when you receive other money during the waiting period?

Any amounts you receive that are allocated to the one week waiting period, including vacation pay or severance pay, will be deducted dollar for dollar from the first three weeks of benefits that you are entitled to receive.

How long you could receive maternity or parental benefits?

A maximum of 15 weeks of EI maternity benefits is available. Benefits can be paid as early as 12 weeks before the expected date of birth and can end as late as 17 weeks after the actual date of birth.


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EI standard parental benefits can be paid for a maximum of 35 weeks and must be claimed within a 52-week period (12 months) after the week the child was born or placed for the purpose of adoption.

EI extended parental benefits can be paid for a maximum of 61 weeks and must be claimed within a 78-week period (18 months) after the week the child was born or placed for the purpose of adoption

What happens if you work while on EI?

Should you work while receiving EI maternity benefits, Service Canada will deduct the entire amount you earn dollar for dollar from your benefits.

If you work while receiving EI parental benefits, you can earn up to $50 per week or 25% of your weekly benefit, whichever is higher. We will deduct any money earned above that amount dollar for dollar from your benefits.

However, until August 11, 2018, a Working While on Claim pilot project is in place which changes the way your weekly EI parental benefits are treated should you work.

Under this pilot project, once you have served the waiting period, you will be able to keep 50 cents of your EI benefits for every dollar you earn, up to 90% of the weekly insurable earnings that we used to calculate your EI benefit amount. This 90% amount is called the earnings threshold. If you earn any money above this threshold, we will deduct it dollar for dollar from your benefits.

The following types of income will be deducted from your EI maternity and parental benefits:

• other income from employment (including self-employment), such as commissions;

• payments received as compensation for a work accident or an occupational illness, such as compensation for lost wages;

• payments received under a group health insurance plan or a group wage loss replacement plan;

• certain payments received under an accident insurance plan to replace lost wages;

• retirement income from a retirement plan, a military or police pension, the Canada Pension Plan, the Quebec Pension Plan, or provincial employment-based plans; and

• allowances, amounts, or other benefits paid under provincial legislation, such as benefits under the Quebec Parental Insurance Program.

Other types of income have no impact on your EI maternity and parental benefits, including:


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• disability benefits; • survivor or dependent benefits; • workers' compensation benefits paid under specific regulations; • additional insurance benefits paid under a private plan approved by

Service Canada (for example, payments for pain and suffering or medical expenses that you receive from an insurance company after you have been injured in a car accident);

• additional maternity or parental benefits paid by your employer from a supplemental unemployment benefit plan (as long as the income, benefits, and additional amounts combined do not exceed 100% of your weekly earnings);

• sickness or disability payments received under a private wage loss replacement plan; and

• retroactive salary increases.

COMPASSIONATE CARE BENEFITS

One of the most difficult times for anyone is when a loved one is dying or at risk of death. The demands of caring for a gravely ill family member can jeopardize both your job and the financial security of your family. The Government of Canada believes that, during such times, you should not have to choose between keeping your job and caring for your family.

Compassionate care benefits are Employment Insurance (EI) benefits paid to people who have to be away from work temporarily to provide care or support to a family member who is gravely ill and who has a significant risk of death within 26 weeks (six months). A maximum of 26 weeks of compassionate care benefits may be paid to eligible people.

What is "care or support"?

Care or support of a family member means:

• providing psychological or emotional support; or • arranging for care by a third party; or • directly providing or participating in the care.

Am I eligible?

You can receive compassionate care benefits for up to a maximum of 26 weeks if you have to be absent from work to provide care or support to a gravely ill family member at risk of dying within 26 weeks. If you are unemployed and already receiving EI benefits, you can also apply for compassionate care benefits.

To be eligible for compassionate care benefits, you must be able to show that:


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• your regular weekly earnings from work have decreased by more than 40 percent; and

• you have accumulated 600 insured hours of work in the last 52 weeks, or since the start of your last claim (this period is called the qualifying period).

Could I be eligible to receive compassionate care benefits to care for someone else?

Yes. You can also receive compassionate care benefits to care for a gravely ill person who considers you a family member, such as a close friend or neighbour. A signed Form INS5223, Compassionate Care Benefits Attestation, is required from the gravely ill person or their legal representative.

Is my job protected if I take compassionate care leave?

Most provincial and territorial labour codes provide job protection for workers in this type of family situation. However, the definition of "family member" varies. It is important that you confirm with your employer and the provincial/territorial government that you have job protection for compassionate care leave before you apply.

Can I share compassionate care benefits?

Yes. You can share the 26 weeks of compassionate care benefits with other members of your family. Each family member must apply for and be eligible for these benefits.

If you plan to share compassionate care benefits, you and your family members should agree on the number of weeks that each of you will take before you apply for benefits. Each family member can claim the benefits at any time during the 52-week period, either at the same time or at different times.

What information and documents do I need?

To apply online for compassionate care benefits, you will need the following information:

• your Social Insurance Number; • your mother's maiden name; • your mailing and residential addresses, including the postal codes; • your complete banking information, including the financial institution name,

the branch number, and your account number, if you want to sign up for direct deposit;

https://catalogue.servicecanada.gc.ca/content/EForms/en/Detail.html?Form=INS5223


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• employer names, addresses, dates of employment, and reasons for separation for all your employers for the last 52 weeks;

• your detailed version of the facts, if you quit or have been dismissed from any job in the last 52 weeks; and

• information about the gravely ill family member, such as first and last name, date of birth, and home address (if some of this information is not available when you apply, you can provide it to us later).

After you apply online, you will need to provide us with the following documents before we can finalize your claim:

• if your SIN begins with a "9," proof of your immigration status and work permit;

• the two required forms that prove the ill family member needs your care or support (see the box called "Medical proof" below for details); and

• any required information about the ill family member that was not available when you applied online.

Medical proof

When requesting compassionate care benefits, as soon as possible after you apply, you must provide medical proof showing that the ill family member needs care or support and is at risk of dying within 26 weeks.

As proof, you must submit the following two forms:

• Form INS5216A, Authorization to Release a Medical Certificate, which must be completed and signed by the gravely ill person or their legal representative; and

• Form INS5216B, Medical Certificate for Employment Insurance Compassionate Care Benefits, which must be completed and signed by the medical doctor of the gravely ill person to confirm their significant risk of death within 26 weeks.

You must submit these two forms at the same time. Please note that you are responsible for any fees the doctor requests for completing the medical certificate form. Another medical practitioner, such as a nurse practitioner, can sign the medical certificate when:

• the gravely ill family member is in a geographic location where access to a medical doctor is limited or not possible; and

• a medical doctor has authorized the other medical practitioner to treat the ill family member.

Only one medical certificate is required per gravely ill family member within the 52-week period, regardless of whether only one person is claiming the 26 weeks


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of benefits, or whether these benefits are being shared. If more than one medical certificate is submitted, it is the first certificate that determines the start and end dates of the 52-week period.

When will you receive your first payment?

If Service Canada has all the required information and if you qualify for benefits, you will usually receive your first payment within 28 days of the date we received your claim. If you do not qualify, we will notify you of the decision we made about your claim.

For how long can you receive compassionate care benefits?

You can receive compassionate care benefits for a maximum of 26 weeks within the 52-week period that starts during one of the following weeks, whichever is earlier:

• the week the doctor signs the medical certificate; or • the week the doctor examines the gravely ill family member; or • the week the family member became gravely ill, if the doctor can

determine that date (for example, the date of the test results).

The benefits end when:

• 26 weeks of compassionate care benefits have been paid; or • the gravely ill family member dies or no longer requires care or support

(benefits are paid to the end of the week); or • the 52-week period has expired; or • you have exhausted the maximum benefits payable on a claim that

combines compassionate care benefits with other types of EI benefits.

If you submit more than one medical certificate, it is the first certificate that determines the start and end dates of the 52-week period.

Can you work while receiving compassionate care benefits?

You cannot work full time and receive compassionate care benefits at the same time. However, you are entitled to work part time and keep a portion of your benefits.

Normally, if you work and receive compassionate care benefits at the same time, you are entitled to earn a certain amount without having your benefits reduced.


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You can usually earn up to $50 per week or 25 percent of your weekly benefit, whichever is higher. Any money earned above that amount will be deducted dollar for dollar from your benefit.

However, until August 11, 2018 a Working While on Claim (WWC) pilot project is in place which changes the way earnings are deducted.

Under this pilot project, once you have served the waiting period, if your earnings are equal to or less than 90% of your weekly earnings that were used to calculate your benefit rate, your benefits will be reduced at a rate of 50% of your earnings each week. Any earnings that exceed this 90% threshold, will be deducted dollar for dollar from your benefits.

You must report all gross earnings—before taxes and deductions—during the week you earn them, as well as any other money you may receive while collecting compassionate care benefits.

How much will you receive?

The basic benefit rate is 55 percent of your average insurable earnings, up to a yearly maximum insurable amount ($51,700 in 2018). This means that, in 2018, you can receive a maximum payment of $547 per week. Your EI payment is taxable income, meaning federal and provincial or territorial taxes, if they apply, will be deducted.

You could have a higher benefit rate if your family includes children, and if you earn a low family income—less than $25,921 per year. If you or your spouse receives the Canada Child Tax Benefit, you may then be entitled to the Family Supplement, which means a higher benefit rate. However, the benefit payments will never be more than $547 per week.

Can you combine compassionate care benefits with other types of benefits?

Yes. You can combine compassionate care benefits with other type of benefits. However, the type of other benefit may make a difference to the length of your claim, as described below.

Compassionate care benefits combined with regular benefits

You can receive up to 50 weeks of benefits when compassionate care benefits are combined with EI regular benefits. For more information, visit the Service Canada website.

http://www.servicecanada.gc.ca/eng/home.shtml

http://www.servicecanada.gc.ca/eng/home.shtml


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Compassionate care benefits combined with sickness, maternity, parental, or family caregiver benefits

You may receive up to 102 weeks of benefits when compassionate care benefits are combined with sickness, maternity, parental and/or family caregiver) benefits.

Will you have to repay benefits at income tax time?

When you file your income tax return, you will not be required to repay any of the compassionate care benefits you received. However, if you received compassionate care and regular EI benefits within the same taxation year, you may be required to repay some or all of the regular EI benefits.

Can you quit my job for compassionate care reasons?

The compassionate care benefits program is designed to help you provide care or support to a gravely ill family member at risk of dying without having to quit your job. If you do quit, however, you can still receive compassionate care benefits, but it is possible that you may not be paid EI regular benefits, should you later request them.

Once you are no longer in receipt of compassionate care benefits, you may be able to receive EI regular benefits if quitting your employment was the only reasonable alternative in your case, considering all the circumstances. In other words, you took all the necessary steps to avoid quitting your job.

What happens to your claim if there is a labour dispute?

If your absence from work to claim compassionate care benefits was already approved by your employer before a work stoppage occurred due to a strike, lockout, or other form of labour dispute, you may still be eligible for compassionate care benefits.

Can you receive compassionate care benefits outside Canada?

Yes. You may receive compassionate care benefits to care for or support a family member, regardless of where that family member lives. You are required to apply for benefits and submit the same information and documents as you would to take care of a gravely ill family member residing in Canada.

If you go outside Canada, you must advise Service Canada by calling the EI Telephone Information Service line.

What benefits are available from Canada's public pensions for individuals who are gravely ill?


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A gravely ill individual may be eligible for EI sickness benefits, and may also be eligible for disability benefits from the Canada Pension Plan (CPP). The individual can apply for both of these benefits at the same time.

If the gravely ill person worked in Quebec, he or she contributed to the Quebec Pension Plan (QPP), which offers benefits similar to those of the CPP.

What benefits are available to family members of a gravely ill person?

The CPP and QPP also pay disability, survivor, and children's benefits to those who qualify.

Surviving spouses or common-law partners and dependent children may be eligible for a CPP or QPP death benefit, survivor's pension, or children's benefit.

EI DISABILITY BENEFIT

The Employment Insurance (EI) program offers temporary financial assistance to unemployed workers. This assistance includes providing a short-term sickness benefit to people unable to work because of sickness, injury, or quarantine.

If you cannot work because of sickness, injury or quarantine, but you would otherwise be available to work, you could be eligible to receive up to a maximum of 15 weeks of EI sickness benefits.

Eligibility

The following information is a guideline. We encourage you to apply for benefits so our processing agents can determine if you are eligible. You may be entitled to receive EI sickness benefits if:

• you are employed in insurable employment; • you meet the specific criteria for receiving EI sickness benefits; • your normal weekly earnings have been reduced by more than 40%; and • you have accumulated at least 600 hours of insurable employment during

the qualifying period.

EI sickness benefits are payable only to those people who are unable to work because of sickness, injury or quarantine but who would otherwise be available for work if not for their incapacity due to medical reasons. To receive sickness benefits, you need to obtain a medical certificate signed by your doctor or approved medical practitioner.

Note: You are responsible for any fees your doctor or approved medical practitioner charges you for completing the medical certificate.


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How much could you receive?

We cannot tell you exactly how much you will receive before we process your application. For most people, the basic rate for calculating EI benefits is 55% of your average insurable weekly earnings, up to a maximum amount. As of January 1, 2018, the maximum yearly insurable earnings amount is $51,700. This means that you can receive a maximum amount of $547 per week. EI sickness benefits can be paid for a maximum period of 15 weeks, depending on how long you are unable to work.

You may be eligible for the Family Supplement

Your benefit rate may be higher if it is determined that your net family income is $25,921 or less per year, that you have children, and that you or your spouse receives the Canada Child Tax Benefit. If this is the case, you are considered a member of a low-income family. You may therefore be eligible to receive the EI Family Supplement. The amount of EI Family Supplement you receive depends on:

• your net family income (up to the $25,921 yearly maximum); and • the number of children in your family, and their ages.

The Family Supplement may increase your benefit rate to as high as 80% of your average insurable earnings. If you and your spouse claim EI benefits at the same time, only one of you can receive the Family Supplement. It is usually better for the spouse with the lower benefit rate to receive the Family Supplement.

If your income level rises, the Family Supplement gradually decreases. You are no longer eligible to receive the Family Supplement when your net family income is greater than $25,921.

EMPLOYMENT INSURANCE (EI) FISHING BENEFITS

Employment Insurance (EI) provides fishing benefits to qualifying, self-employed fishers who are actively seeking work. Unlike regular EI benefits, eligibility for EI fishing benefits is based on earnings, not insurable hours of employment.

Fishers may be eligible to receive regular fishing benefits as well as sickness, maternity, parental, compassionate care and/or family caregiver benefits.

Eligibility

Your eligibility depends on how much you earned from self-employment in fishing during your qualifying period.


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The qualifying period for summer fishing benefits cannot start earlier than the week of March 1. For winter fishing benefits, it cannot start earlier than September 1. The qualifying period also cannot start more than 31 weeks immediately before the start of a benefit period.

If you applied for benefits earlier and your application was approved in the last 31 weeks, the qualifying period is from the start of the previous benefit period to the start of your new benefit period.

The amount you need to earn during your qualifying period varies depending on the unemployment rate in the region where you live. As Table 1 shows, you need to earn a minimum of between $2,500 and $4,200 during your qualifying period to qualify for fishing benefits.

Calculation of benefits

To calculate your weekly EI fishing benefit, we consider your total earnings during your qualifying period. The earliest start date of the qualifying period is the week of March 1 for summer fishing or September 1 for winter fishing. This is how we calculate your weekly benefit:

1. We calculate your total self-employment earnings from fishing during your qualifying period—the last 31 weeks or from the start date of your last claim for EI benefits (we use the total earnings from the shorter period).

2. We determine the unemployment rate in your region and select the divisor that applies at that unemployment rate (see Table 1).

3. We divide your total self-employment earnings from fishing during your qualifying period by the applicable divisor. This gives us your weekly insurable earnings from self-employment in fishing.

4. If you have earnings from employment other than as a self-employed fisher, we calculate your total earnings from the last 26 weeks of that other employment, using only the weeks contained in the fishing qualifying period. We divide this amount by the applicable divisor or by the number of weeks worked, whichever is greater. This gives us your weekly insurable earnings from regular employment.

5. We add the results from Steps 3 and 4 together to find your total weekly insurable earnings.

6. We compare your total weekly insurable earnings with the allowed maximum weekly amount, and we select the lower figure. The maximum weekly amount can vary from year to year and is based on the maximum insurable earnings for the calendar year. To find out more about the maximum weekly amount or the maximum insurable earnings for this year, visit our Web site at www.canada.ca or call our EI Telephone Information Service at 1-800-206-7218 (TTY: 1-800-529-3742).

7. We multiply that lower figure by 55% to obtain the amount of your weekly benefit.


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You may be eligible for the Family Supplement

If your net family income does not exceed $25,921 per year, you have children and you or your spouse receives the Canada Child Tax Benefit, you are considered a member of a low-income family. Therefore, you may be eligible to receive the EI family supplement.

Benefit Duration

If you qualify for fishing benefits, you may receive up to 26 weeks of benefits within a period of 37 or 38 weeks, depending on the day of the week on which April 1 or October 1 falls. This period is called the benefit period.

Benefit Period

The benefit period for a winter claim can start as early as the week of April 1 and must end no later than the week of December 15.

The benefit period for a summer claim can start as early as the week of October 1 and must end no later than the week of June 15.

The benefit period can be extended to a maximum of 52 weeks if you are claiming EI special benefits such as sickness benefits. The benefit period is extended by one week for each week of special benefits claimed. ALL EI BENEFITS ARE TAXABLE

EI benefits are taxable, no matter what type of benefits you receive. Federal and provincial or territorial taxes, where applicable, will therefore be deducted from your payment.

CANADA PENSION PLAN DISABILITY BENEFITS

The Canada Pension Plan (CPP) disability benefit is available to people who have made enough contributions to the CPP, and whose disability prevents them from working at any job on a regular basis. The disability must be long lasting or likely to result in death. People who qualify for disability benefits from other programs may not qualify for the CPP disability benefit.

You must apply for a disability benefit in writing. There are also benefits available to the children of a person who receives a CPP disability benefit.

The CPP disability benefit is administered by Social Development Canada (SDC), a federal government department.


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It may take as long as three months for you to find out if your application for a disability benefit has been accepted. This time frame is much shorter for terminally ill applicants.

If an application for a CPP disability benefit is not granted, there are three opportunities to have the application reviewed or reconsidered.

Once a person qualifies for and begin receiving a CPP disability benefit, they must contact SDC to keep them informed of certain specific events in your life. Some examples include: if the person changes their name or their address, or if they earn over a certain amount each year.

SDC will occasionally review the health and work status of people receiving a CPP disability benefit, to ensure that they continue to be eligible.

Definition of CPP / QPP Disability The disability pension is payable to a contributor who satisfies the definition of “disabled.” Generally, it means physical or mental impairment that is both severe and prolonged. Under the QPP, the definition is modified in the case of a contributor age 60 or older. He or she will be deemed to be disabled if unable to pursue, on a permanent basis, his or her current occupation.

Definition of 'Severe and Prolonged' “Severe" means that you have a mental or physical disability that regularly stops you from doing any type of substantially gainful work. Within this definition, the words mean: Incapable - Not able or fit to pursue any substantially gainful occupation as a result of the disability.

Regularly - The capacity to work is sustainable.

Pursuing - To actually engage in an occupation, and does not mean being able to look for work.

Work that a person might reasonably be expected to do regardless of whether it is his/her previous job by virtue of:

• Having the necessary skills, education or training;

• Having the capacity to acquire those necessary skills, education or training in the short term; and,

• Having reasonable access to suitable employment, given the individual's limitations but does not mean a job has to be available.


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• Substantially gainful occupation: Work that is productive and profitable. This is measured in part by a dollar amount that is set annually and against which a person's earnings are compared. However, earnings alone do not determine whether the regular capacity to pursue work exists. CPP also assesses elements of functional capacity, productivity and performance.

"Prolonged" means that the disability will prevent the individual from going back to work in the next 12 months, or is likely to result in death.

To qualify, the applicant must meet both the "severe" and "prolonged" criteria. HRDC medical adjudicators assess the severity of the disability first. If the applicant does not meet the "severe" criteria, HRDC does not consider the question of whether the disability is prolonged.

Many people mistakenly believe that CPP eligibility decisions are granted on the basis of a specific disease or condition alone. This is not the case. Rather, the decision is based on the limitations that a disease or condition imposes on a person's ability to work and earn an income on a regular basis.

Remarriage does not revoke a surviving spouse’s pension. If the second spouse dies, the calculation of the pension may be based on the higher of the pensions that would have been payable to the now-deceased contributors.

This definition is so restrictive, that usually CPP / QPP benefits will not be taken into account in planning for an unforeseen disability. If you do however, are qualified to receive CPP /QPP disability benefits, the chances are that you won’t be receiving them for long… they will eventually become survivor’s benefits.

Who is eligible to receive CPP/QPP Disability? To qualify for a Canada Pension Plan (CPP) disability benefit, an individual must

• have a severe and prolonged disability; • be under the age of 65; and • meet the CPP contribution requirements.

How are CPP disability benefits are calculated? Benefits are based on earnings and contributions credited to an applicant's CPP or QPP account and on how long he or she contributed (this is known as the contributory period). A portion of the monthly disability benefit is based on a flat rate.

Contributions on pensionable earnings


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Contributions to CPP are made on annual earnings above a minimum amount called the "yearly basic exemption" (YBE). Since 1998, this amount has been frozen at $3,500. No contributions are made on earnings above a limit called the "year's maximum pensionable earnings". This amount is linked with the average Canadian wage. It changes each year.

CPP contributions are made on earnings between the basic exemption and the maximum pensionable earnings for the year.

They are based on:

• Employment earnings from salary or wages; and

• Self-employment earnings.

The employer matches each employee's contribution. Those who are self-employed pay both shares. Earnings and contributions can also be gained or reduced by splitting CPP credits between two people who separate or divorce (see Splitting CPP Credits). A person cannot make voluntary contributions to the CPP.

The Canada Revenue Agency is responsible for collecting and recording contributions.

Anyone can ask for a record of the earnings recorded in his or her account. This is called a Statement of Contributions and can be requested once a year. It includes estimates of disability, retirement, death and survivor benefits.

When a benefit becomes payable, earnings in a contributory period are adjusted to reflect current dollar values. All CPP benefits are based on the earnings, contributions and number of years in a person's contributory period.

Contributory period formulae Each person has his or her own contributory period, which is based on the span of time it is hypothetically possible for a person to contribute to the CPP. To determine a person's lifetime average pensionable earnings, his or her earnings are divided by the months in his or her contributory period.

The contributory period is calculated from January 1, 1966, or the month following the applicant's 18th birthday, whichever is later, and ends the earliest of the following:

• The month in which the contributor is deemed to have a disability;

• The month before the retirement pension starts;

• The month of the contributor's 70th birthday; or

• The month the contributor dies.


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• Months when a person received a disability benefit from the CPP or QPP are not included in the contributory period.

What happens if there are years of zero or low income? Most people do not work from the age of 18 to retirement without some interruption in their employment history. For example, they can be:

• Unemployed.

• In school or university.

• Receiving disability benefits; or

• Raising children.

Although CPP calculations include both how much and how long a person has contributed, some periods of low income can be dropped out of the calculation. Dropping out periods of low income can increase the amount of a person's benefit.

Here are some ways the calculation can be adjusted Child rearing drop-out provision means months of little or no earnings because of caring for children less than seven years of age who were born after December 31, 1958, can be excluded from the contributory period when benefits are calculated. Unlike the other three drop-out periods listed below, this benefit must be applied for by the client.

Other considerations in calculating benefits Other circumstances must be considered in the calculation of a person's contributions to the CPP.

Quebec Pension Plan credits:

If a person has contributed to the QPP and the CPP, his or her contributions to both plans will be combined. Both plans will be used to determine whether the person meets the contributory requirements and to calculate the benefit he or she will receive.

If the person contributed only to the QPP, or contributed to both plans but resided in Quebec at the time he or she applied for the disability benefit, the QPP would pay the disability benefit.

Social security agreements with other countries Anyone who has contributed to a social security program in a country with which


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Canada has a social security agreement may use those credits to help meet the contributory requirements of the CPP.

Once eligibility is established, however, the amount payable is based only on actual contributions to the CPP and/or QPP.

CPP credits might also help an individual qualify for a foreign pension. This is done by adding periods of contributions to the CPP and/or QPP to periods of coverage under the social security program(s) of the other country. A person must meet that country's contributory requirements to be entitled to a benefit from that country.

Splitting CPP credits In a legal marriage or a common-law relationship (whether opposite-sex or same sex), both spouses share in the building of their assets and entitlements, including CPP credits. When a relationship ends, the CPP credits built up by the couple during the time they lived together can be divided equally between them. This is called "credit splitting". Splitting CPP credits protects the spouse who was the lower wage earner or had no wages during a couple's years together by increasing his or her CPP credits. This means that he or she would be eligible for a larger benefit once the application is approved.

In the case of a legal divorce or annulment that took place on or after January 1, 1987, no application is needed. Simply notify the government that the divorce occurred and they will ask for certain information. In all other cases (e.g., legal or common-law separation), an application requesting credit splitting is required.

There is a time limit for applying if a person is in one of the following two situations:

A legally separated person whose spouse has died must apply within three years of the spouse's date of death.

A person separated from a common-law union (which has lasted one or more years) must apply for credit splitting within four years of the separation.

STEPS IN THE CALCULATION OF A CPP/QPP DISABILITY BENEFIT To determine the amount of a CPP disability benefit, the basic retirement amount must first be calculated. The disability benefit is equal to 75 % of a person's calculated retirement pension, plus the flat rate.

1. Pensionable earnings for every year of a person's contributory period are adjusted to their current value.


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2. All drop-outs are applied to the record of earnings. However, no drop-outs can be applied if the number of months remaining in the contributory period is less than 48.

3. After all the earnings have been adjusted to reflect their current value, and the periods of little or no earnings have been removed, the earnings for the remaining months are added together and divided by the number of months remaining in the contributory period. This provides the contributor's average monthly pensionable earnings.

4. The retirement pension is calculated at 25 % of the average monthly pensionable earnings.

5. The disability pension is calculated at 75 % of the retirement pension, plus a flat rate. The flat rate used in the formula is the flat rate for the year in which the benefit is effective.

Combined benefits People who are receiving a survivor's pension may also have contributed to the CPP on the basis of their own earnings and may also be entitled to a disability benefit. A CPP recipient can get both a survivor and a disability benefit at the same time. CPP combines the two benefits into one monthly payment. There are, however, limits to what a person can receive, which will not equal the total of both benefits.

In such cases, the survivor receives a combined pension which is calculated as follows:

• If the survivor also receives a disability benefit, the larger of the two flat-rate amounts is paid.

• Any earnings-related benefits or benefit components may be added together, but their total may not exceed 75 percent of the maximum retirement pension payable for the year in which the contributor becomes eligible for the second benefit.

The individuals benefit The monthly disability pension is a flat-rate component (subject to review) plus an earnings-related component equal to 75% of the calculated retirement pension. It will be payable to age 65 (unless the disability pensioner dies or recovers) when it will be replaced by the retirement pension.

A spouse already disabled at the contributor’s death is entitled to the full survivor’s pension at any age under age 65. If the disabled spouse recovers before attaining age 45, the pension will be reduced by 1/120th for each month he or she is under age 45.


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How much will you get:

There are 2 parts to the CPP disability benefit:

• a basic amount • an extra amount that depends on your CPP pension contributions

In 2018, the most someone can get is approximately $1,336 per month.

2018 CPP/QPP Disability and Survivor amounts

Flat amount

Earnings-related portion

Total

CPP disability benefit $485.20 $850.63 $1,335.83

CPP survivor benefit – younger than 65

$189.31 $425.31 $614.62

QPP disability benefit $485.17 $850.63 $1,335.80

Children of disabled contributor

$244.64

When will you receive your payment?

If the Canada Pension Plan (CPP) approves your application for disability benefits, you can start getting payments as early as 4 months after your disability started.

If the CPP does not approve your application, you can appeal.

Getting your payments

If you have had your disability for more than 4 months when the CPP approves your application, you may get “retroactive payments”.

This means that the CPP pays you money that you were eligible for before they approved your application. CPP can find you to be disabled up to 15 months before the date of your application.

Retroactive payments are calculated to start 4 months after the date CPP determines you became eligible for benefits because of your disability. This means the most you can get are 11 months of retroactive payments.


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CPP disability payments can go directly into your bank account. You must have an account that’s in your name. Or, if you have a joint account, you must be one of the account owners.

TAXATION OF CPP / QPP BENEFITS Contributions are tax deductible and benefits taxable when received.

Individuals who receive income from more than one source may find that they have taxes to pay when they file their income tax return. This can happen if they receive income that has no tax withheld or not enough tax withheld at source.

This is often the case for individuals who receive Canada Pension Plan (CPP), Quebec Pension Plan (QPP), or Old Age Security (OAS) benefits in addition to other pension, interest, employment, or self-employment income.

For anyone applying for CPP, QPP or OAS benefits, it is important to understand that the addition of this income could mean they will owe taxes when they file their next income tax return. To determine this, they should calculate what their tax liability will be for the year.

If they expect to have to pay tax, they may find it convenient to arrange to have tax withheld from their CPP benefits, or they can increase the amount that is already withheld on another source of income.

Clients who need help calculating their tax liability should contact their tax services office. For identification purposes, they may be asked to provide their social insurance number, date of birth, and the total income amount they reported on line 150 of their last tax return. This information is also necessary if the enquiries agent needs to access their personal tax information.

2018 COMPLETE CPP/QPP BENEFITS OVERVIEW


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Canada Pension Plan rates are adjusted every January if there are increases in the cost of living as measured by the Consumer Price Index. The table below lists the maximum and average monthly rates for CPP/QPP benefits for 2018

Canada Pension Plan (CPP) and Quebec Pension Plan (QPP) - Type of benefit

New benefits maximum amount 2018

Number of benefits October 2017

Amounts paid October 2017

CPP QPP CPP QPP CPP (in millions)

QPP (in millions)

Retirement (at age 65) $1,134.17 $1,134.17 5,059,136 1,837,630 $2,868.4 $927.0

Post–Retirement Benefit (CPP) (at age 65)1

$28.35 not applicable

2,646,174 not applicable


Retirement Pension Supplement (QPP)1

not applicable


585,756 not applicable

$15.0

Disability $1,335.83 $1,335.80 337,324 62,719 $304.1 $63.0

Survivor – younger than 65

$614.62 (see Note 1) 220,041 64,827 $87.5 $44.8

Survivor – 65 and older $680.50 $680.50 893,890 305,340 $280.0 $96.8

Total - Survivor benefits2 not applicable

not applicable

1,113,931 370,167 $367.5 $141.6

Children of disabled contributor

$244.64 $77.67 74,374 6,763 $17.9 $0.7

Children of deceased contributor

$244.64 $244.64 53,736 12,558 $13.0 $3.1

Death (maximum one-time payment)

$2,500.00 $2,500.00 12,562 3,885 $28.7 $9.6

Total - CPP/QPP benefits2

not applicable

not applicable

6,651,063 2,293,722 $3,633.8 $1,160.0

Combined benefits

Survivor/retirement (retirement at 65)

$1,134.17 $1,134.17 840,174 270,079 $683.0 $197.2

Survivor/disability $1,335.83 not applicable

14,160 2,043 $14.6 $2.4

Total - Combined benefits not applicable

not applicable

854,334 272,122 $697.6 $199.6

Note 1 for above table - Each year a valid contribution is made to the CPP while a retirement pension is being received, the person becomes eligible for a post-retirement benefit (PRB) in January of the following year and thus can receive more than one PRB. Since the PRB is a supplementary benefit which enhances the retirement benefit, the number of PRBs is not included in the total CPP benefits. This exclusion applies to the Retirement Pension Supplement for the total QPP benefits.

Note 2 for above table - Total may not add up due to rounding.


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WORKER’S COMPENSATION BOARD (WCB) We all are aware that the Government provides for on the job coverage for any accident, injury or work related sickness.

The Principle of Workers' Compensation

The Workers' Compensation Act is based on the Meredith Principle, outlined by then Chief Justice of Ontario, Sir William Meredith, in his report on workers' compensation more than 80 years ago.

The four parts of the principle are that employers bear the direct cost of compensation, receiving protection from lawsuits arising from injuries; workers give up the right to sue their employers and receive compensation benefits at no cost for work-related injuries; negligence and fault for the cause of injury are not considerations; and a system administered by a neutral agency would have exclusive jurisdiction over all matters arising out of the enabling legislation.

This neutral agency became the Workers' Compensation Board (WCB).

Your Responsibilities as an Employer

As an employer, your responsibilities, (besides registering with the appropriate WCB and paying premiums), are to work with employees to prevent illness and injury, and to report injuries and help injured employees return to work.

As you've already guessed, Workers' Compensation is administered provincially rather than federally, which means that exactly which businesses must carry Workers' Compensation insurance and which businesses may choose to carry Workers' Compensation insurance varies from province to territory.

Who Has to Register?

Generally, if your business is incorporated, or if you have any employees, you must register with your provincial Workers' Compensation Board or WCB (and pay Workers' Compensation insurance premiums). Sole proprietors or independent operators running unincorporated businesses with no employees don't have to register for Workers' Compensation insurance, although they may choose to carry optional coverage.

This isn't always the case, however; in the Northwest Territories, all businesses need to register with the WCB within 10 days of commencing operation, even if the business has no workers, as you can't get a business license without a certificate of compliance from the WCB.


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In B.C., virtually every employer has to register with WorkSafe Online, including people who are building their own homes, and people who hire casual domestic help on a regular basis, such as gardeners, cleaners, or nannies.

If you're a really small business, the number of employees you have may determine if you have to register for Workers' Compensation insurance. In New Brunswick, for instance, you must register for coverage if you employ three or more workers; in Nova Scotia, you must register if you have two or more workers. In other provinces, such as Alberta, where you must register with the WCB within 15 days of hiring your first full- or part-time worker, or Ontario, where you must register within 10 days of hiring your first full- or part-time worker, it makes no difference.

Corporate Regulations Vary Province to Province

In Alberta, directors (registered officers) of corporations are not automatically covered, although they may apply for optional personal coverage.

However, if your company is incorporated in B.C., all shareholders or officers who are actively engaged in the company business are regarded as employees of the company.

In New Brunswick, employers who operate a limited company must include in their annual reported payroll all individuals receiving salary from the company, regardless of age, including the owners, executive officers, directors and managers, which means you will have to include your children in your report if you're paying them to work for your corporation. Other provinces have age restrictions.

It doesn't matter if the employees are full-time, part-time, or casual, or if they're contract workers or subcontractors. In many provinces, such as Alberta, if you hire a proprietor (an individual who operates a company but doesn't have any employees) to do work for you, the proprietor is considered to be one of your workers, unless he maintains his own WCB account.

Even if he does, you're still not off the hook. In Alberta, If you hire contractors or subcontractors with their own WCB accounts, you have a responsibility to ensure that these accounts are in good standing, which you can do by obtaining a clearance from the WCB. This protects you from becoming liable for payment of your contractor's or subcontractor's premiums.

You May Want Workers' Compensation Insurance Even if You Are Exempt

Some industries are exempt from mandatory Workers' Compensation insurance. In Ontario, computer programmers, private health care practices such as those of


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doctors and chiropractors, private day cares, travel agencies, photographers, and taxidermy are among the exempt industries.

Industries that are exempt in one province may not be in another, so you'll need to check with your provincial WCB to be sure.

Even if Workers' Compensation insurance isn't mandatory for your business, you may still want to purchase it voluntarily. If you're a contractor, for example, you may find that principals prefer to deal with contractors who have their own Workers' Compensation insurance, and some companies will insist on proof that you have your own coverage.

When you purchase optional personal Workers' Compensation insurance coverage, be sure to base the amount you buy on your insurable earnings, as this is the amount that will be used to determine compensation if you do suffer a work-related injury. If you purchase only the bare minimum, you won't receive enough benefits to replace your lost income.

The Cost of Workers' Compensation Insurance

The cost of Workers' Compensation insurance depends upon what industry category your business is in. All the WCBs classify businesses according to the industry in which they operate, because it's assumed that businesses with similar operations share similar risks.

When you first register with the WCB, you have to supply a complete description of your business operations to determine your industry category. The rates for Workers' Compensation insurance are calculated per $100 of insurable earnings. The Association of Workers' Compensation Boards of Canada has various statistics on provincial assessment rates and rates by industry classification.

There's quite a difference in the average premium rates between provinces. In 2018, for instance, Manitoba had the lowest premium rate at $.95 per $100 of payroll. The second lowest average assessment rate for 2018 was Alberta, at $1.44.

Meanwhile, at the other end of the scale, Nova Scotia’s 2018 average assessment rate was $2.65, followed by Ontario with an average assessment rate of $2.35.

All WCBs use a performance-based pricing system, which will also affect the cost of your premiums for better or worse. On the positive side, employers who reduce the number of accidents and injuries in their operations pay less. The downside is that employers with poor accident and injury track records pay higher premiums.


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This experience plan means that you can earn discounts on your Workers' Compensation insurance premiums over time. Some provinces, such as Alberta, provide even more incentive; you can earn an additional discount of up to 20% by participating in the Partners in Injury Reduction program.

The Advantage of Being Covered

Registering with the WCB and paying Workers' Compensation insurance premiums are definitely not among most business people's favorite activities, but they are necessary. Think of what could happen to your business because of even a single judgment for a work-related injury. The WCB insurance programs provide employers with protection, allowing them to pool the risk and share the cost.

What do the different Provinces call Workmen’s Compensation?

Alberta Workers' Compensation Board

British Columbia Workers' Compensation Board

Manitoba Workers' Compensation Board

New Brunswick Workplace Health, Safety, and Compensation Commission (WHSCC)

Newfoundland Workers' Compensation Commission of Newfoundland and Labrador

Northwest Territories and Nunavut Workers' Compensation Board of the Northwest Territories and Nunavut

Nova Scotia Workers' Compensation Board

Ontario Workplace Safety and Insurance Board

Prince Edward Island Workers' Compensation Board

Quebec Commission de la santé et de la sécurité du travail (CSST)

Saskatchewan Workers' Compensation Board

Yukon Workers' Compensation, Health and Safety Board

Association of Workers' Compensation Boards of Canada Even though each Province has its own form of Workmen’s Compensation, they are all members of this Association.

The Association of Workers’ Compensation Boards of Canada (AWCBC) was founded in 1919 as a non-profit organization. It was established to facilitate the exchange of information between Workers’ Compensation Boards and Commissions at a time when workers’ compensation law, policy and administration were in their infancy.


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There were six founding members: Ontario, Nova Scotia, British Columbia, Manitoba, Alberta, and New Brunswick. Saskatchewan joined in 1929, Quebec 1931, Prince Edward Island 1949, and Newfoundland 1950.

Lastly, the Northwest Territories and Nunavut and Yukon Territory joined in 1974. Membership has expanded to include two honorary members, and a number of associate members who are interested and focus on activities consistent with the AWCBC's vision which supports the common goal of safe workplaces and healthy workers.

GENERAL WORKMEN’S COMPENSATION GUIDELINES AND RULES

Employees hired abroad

Employees engaged locally in another country are divided into two groups for workers' compensation purposes:

1. Employees and their dependents, in a country that has a workers' compensation law, who are entitled to benefits because the employing department contributes to the country's compensation fund;

2. Employees and their dependents who are not entitled to workers' compensation under any local (national) law. To report accidents in the second group, refer to "Persons locally engaged outside Canada" under "Responsibilities of the employer".

Employees on travel status As a general rule, employees are covered by the Act whenever they are traveling on duty, in Canada or abroad, as long as they are engaged in work for their department or agency at the time of injury.

However, coverage is not provided during any departure from the itinerary that is for personal reasons. A compensation claim is handled by the province in which the worker is usually employed.

Death occurring away from home When an employee dies as the result of an occupational injury or disease while serving at a location other than his or her usual place of employment, and the resultant charges exceed the amount of compensation payable, a supplementary payment may be made with the approval of Treasury Board.


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The additional expenses are usually for the preparation and transportation of the body. Particulars of any such claims should be sent by the employer to the appropriate Regional Injury Compensation Unit of Human Resources and Skills Development Canada, as soon as possible after the accident.

Flying accidents compensation regulations When injured or killed while travelling on a non-scheduled flight (a flight in an aircraft that is not a private one and that is not operated on a scheduled flight), an employee or his or her dependent’s may make a claim either under the Government Employees' Compensation Act or under the provisions of the Flying Accidents Compensation Regulations.

Any claims made under the regulations should be forwarded to the nearest office of the Canadian Pension Commission. The appropriate Regional Injury Compensation Unit of Human Resources and Skills Development Canada should also be notified of the accident.

Right to choose your own doctor An injured person has the right to choose a doctor for the required treatment, but once the choice is made it must be adhered to. Permission to change doctors must be obtained in writing from the provincial workers' compensation authority except in Quebec where there is no such restriction.

Benefits provided The nature and extent of medical treatment, the type of hospital accommodation, the scale of compensation for loss of earnings in cases of disability, and the rates of benefits for the dependents of deceased employees are the same as those provided in the Provincial Workers' Compensation Acts.

For example, a federal worker employed in Ontario and injured while at work qualifies for benefits available in that province.

Occupational diseases In each province, occupational diseases are recognized for workers' compensation purposes. In addition, regulations authorized by Section 8 of the Act provide a broader coverage in some instances for public service employees. Under these regulations, any disease, other than the occupational ones cited in provincial acts, that is due to the nature of the employment and peculiar to or characteristic of a particular process, trade or occupation in which the person was employed at the time the disease was contracted, may be compensated.


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In addition, the regulations provide for coverage of employees working abroad (other than locally-engaged employees) for diseases that result from the environmental conditions of the place outside Canada to which the employee was assigned.

Disallowance of claims The most common reasons for disallowing a claim are the following:

• It is not shown clearly that the disability is the result of an accident, or occupational disease.

• The injury or occupational disease reported did not arise out of and in the course of employment.

• A description of an accident is given, but the disability is not the result of it.

• The injury reported is not substantiated by medical evidence.

• The employer will be informed by Human Resources and Skills Development Canada or a provincial workers' compensation board of the decision. The question of eligibility for compensation can be determined only by the workers' compensation authorities. Departmental officials do not have any adjudication authority but must report all work place injuries and occupational diseases, other than first-aid only incidents, to the appropriate Regional Injury Compensation Unit of Human Resources and Skills Development Canada.

Rehabilitation services Federal government employees are eligible for rehabilitation services provided under the Provincial Acts. These include physical medical treatment and, in some provinces, vocational rehabilitation, with retraining for other work, in cases where the injury leaves the employee with a permanent disability that makes it impossible for him or her to resume his or her former occupation. Where desirable and feasible, there is specialized training in academic and commercial fields.

Occasionally an injured employee is physically incapable of resuming usual duties because of injuries resulting from the accident. If the disability is temporary, every effort should be made, as soon as he or she is well enough, to assign the employee to work that is within his or her capabilities until such time as he or she is able to resume pre-accident duties. If the employee is permanently incapacitated to an extent that will not permit resumption of former duties, he or she should be assisted in every way to obtain work appropriate to his or her remaining capabilities.

Review and appeals All jurisdictions allow an opportunity for reconsideration of unfavourable


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decisions. An employee, the employer or their representatives may ask for a review of a decision by directing such a request to the appropriate provincial authority. This request should contain sufficient new or additional evidence, usually medical, to warrant a review of the claim.

Immediate attention is required when injured Employees who are injured should be given immediate attention. In order to minimize the severity of the injury the first priority is first aid and/or medical care. Should the employee need to be transported to a medical facility, transportation will be provided by the employer.

Reporting injuries Each employer is responsible for establishing and disseminating appropriate departmental directives and instructions concerning the procedures for notification of occupational injuries or diseases. It is the responsibility of the injured employee to notify his or her immediate supervisor of the injury as soon as possible.

In cases where, as a result of a work injury, an employee has had to obtain medical treatment outside of working hours, he or she should personally notify the employer immediately upon return to work, or by some other appropriate means if he or she is unable to return to work.

Every employer is required to establish procedures and monitoring systems to ensure that all employee occupational injuries or illnesses that require professional medical care (beyond first aid) are reported to the appropriate Regional Injury Compensation Unit of Human Resources and Skills Development Canada within three days of their occurrence. Such injuries must be reported on the compensation form prescribed by the workers' compensation board of the province where the injured employee is usually employed.

Compensation forms must not be sent directly to a provincial workers' compensation authority.

The employer is required to maintain an accurate record of the date, type of injury, etc., for all minor injuries that involve first aid only, that is, those which do not require the services of a medical doctor. These records are to be retained in the work place for two years. Employers are reminded that in the case of first aid, injuries should not be reported to Human Resources and Skills Development Canada.

If the employer does not agree with the details of the accident as stated by the employee, the employee's version must appear in the compensation form, but should be accompanied by appropriate comments regarding the employer's view


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of the circumstances. In addition, the employer may request an impartial investigation by the provincial compensation board.

All compensation forms must be signed by the foreperson, supervisor, or other responsible person in charge who has first-hand knowledge of the occurrence.

The original signed compensation form and subsequent employer's reports are to be submitted by the employer in duplicate to the appropriate Regional Injury Compensation Unit of Human Resources and Skills Development Canada.

Recurrent disability An employee may be absent because of the recurrence of a disability sometime after the return to work. Subsequent absences should be reported to the appropriate Regional Injury Compensation Unit of Human Resources and Skills Development Canada by means of an explanatory letter or an amended compensation form. The original claim and/or file number should be quoted if available.

The claim is then referred to the appropriate provincial authority. When the employee again returns to work, an Employer's Subsequent Statement must be submitted.

If the employee’s income continues When completing a compensation form involving time off from work, particular attention should be given to the item regarding amounts that have been paid or will be paid to the injured employee for the period of disability. If the employing department or agency intends to grant salary in the form of injury-on-duty leave, this should be indicated by stating either "Will be paid salary for period of disability" or "Will be paid salary if claim accepted by the compensation board".

The Employer’s Subsequent Statement completed when the employee returns to work, and should also state the amount paid and the period for which the employee was paid salary.

Injury-on-duty leave Public service employees are generally entitled to this type of leave through the employment regulations or through their collective agreement provided the claim is approved by the appropriate workers' compensation authority. Human Resources and Skills Development Canada is prepared to inform the employer of the workers' compensation authority's decision on each claim when the provincial authority does not do so directly. This service can only be provided satisfactorily when accidents are reported promptly. Failure to do so will in many cases cause a disruption in the injured employee's pay.


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When it is decided to stop granting injury-on-duty leave with pay to an employee who is still disabled, the employer should notify the appropriate Regional Injury Compensation Unit of Human Resources and Skills Development Canada at once. The office will promptly arrange for the employee to receive the applicable workers' compensation benefits until the claim is settled.

Accident investigation report At least two distinct and separate procedures and reports are required where there is an accidental injury in the work place. Some confusion exists because of the overlap of these two reports.

One is generated for compensation purposes and is injury oriented and it is the one referred to as the compensation form.

The other report details the accident causes and recommends corrective action to make the work place safer. This second report is an "accident investigation report". Because of the differing purposes of these reports the employer is cautioned that a totally different approach must be used in completing the accident investigation report.

Place of usual employment A claim for compensation is adjudicated by the province in which the employee is usually employed. For the purposes of the Act, this would be the province in which the employee has been appointed or engaged to work. For instance, an employee who is hired in Ottawa to work in Alberta would be considered to be usually employed in Alberta, whereas a person who usually works in Ottawa but who is sent to Alberta on a temporary assignment would still be considered to be usually employed in the province of Ontario.

Also, the place of usual employment is not always the place of residence: for example, for an employee who resides in Gatineau, Quebec, but who is employed in Ottawa, Ontario, the province of usual employment is Ontario.

Employee has a choice of action A workers' compensation law principle recognized in the Act is that workers' compensation is a substitute for common law action taken by an injured worker against his or her employer.

However, when an employee's injury is caused by a third party, that is, a person who is not the employer or employer's servant or agent acting in the course of employment, the employee or his or her dependents have the right to elect (a) to claim compensation under the Act, or (b) to bring an action against the third party.


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Employee takes action Under the Act, an employee is protected up to the full amount of compensation to which he or she is entitled whether he or she elects to claim compensation or to bring an action against the third party.

If an employee, as a result of an action, recovers less than the amount to which he or she was entitled under the Act, he or she may be paid the difference between what was actually obtained through the action and the amount of compensation for which he or she was eligible.

If the case is to be settled out of court, then the employee must, before making a final settlement with the third party, submit the proposed settlement to Human Resources and Skills Development Canada for approval by the Minister of Labour to be eligible for this difference. However, if the settlement is by a court judgment, then no prior approval by the Minister is required.

Employee claims compensation In most cases, the injured employee chooses to claim compensation under the Act and thereby subrogates Her Majesty to the rights under it. Where the circumstances appear favourable, Human Resources and Skills Development Canada endeavours by various means to obtain a settlement directly with the third party. In the more serious and complicated cases, action for recovery may be taken in the courts by the Department of Justice. Should the amount recovered and collected from the third party exceed the amount of compensation to which the employee or his/her dependents are entitled under the Act, Human Resources and Skills Development Canada may pay to the employee or dependent’s a portion of the excess.

However, this payment may be deducted from any subsequent benefits to which the employee or dependents might become entitled under the Act for the same accident.

Full information is required To institute a court action or to make a demand for payment from a third party; a complete description of the incident must be supplied promptly to Human Resources and Skills Development Canada.

It is essential to a proper evaluation of the case that these details include the following:

• A written statement from the claimant which includes the time, date, place and full description of the accident.

• Statements from witnesses (photographs taken at the scene if possible).


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• A police report where applicable, which is treated as confidential.

• A coroner's report, if the accident was fatal and an inquest was held.

Except in provinces with no-fault legislation, if an automobile accident is involved, the name and address of the owner of the car and of the driver if it was operated by someone other than the owner, the registration number, the province and year of issue, and a statement about the insurance carried on the vehicle involved.

If injuries are caused by an accident on private property and the injured person is lawfully on the property at the time, give the particulars of the hazard or defect causing the slip, fall or other condition, or the event leading to the injuries. State if there had been a previous complaint to the owner or occupant of the premises about the hazard or defect. Describe the weather conditions if they were a factor. If, as in the case of a letter carrier, there was an attack by a dog, state whether the dog is considered vicious and had been known to attack another person. State if liability insurance is carried on the property.

CANADA SPENT MORE THAN $6,600 PER PERSON ON HEALTH CARE IN 2017

Canada is spent approximately $242 billion on health care in 2017, with spending growing by almost four per cent over 2016.

That $242 billion works out to about $6,604 per Canadian -- $185 more per person than last year, reports the Canadian Institute for Health Information (CIHI), a not-for-profit organization that analyzes health care information in Canada.

Health costs represented approximately 11.5 per cent of Canada’s gross domestic product (GDP) in 2017 -- similar to last year, the organization predicts.

For years, public health observers have worried the amount of money spent on health care has not kept pace with inflation and population growth. CIHI says since 2010, the average annual increase on health care has been only 3.2 per cent. But that appears to be shifting, says Michael Hunt, the director of health spending and strategic initiatives at CIHI.

“Canada’s economy is improving and, as we have seen in the past, when there is more economic growth, more money is spent on health care,” he said in a statement.

Hospitals will continue to use the largest share of health care dollars in 2017, as they have for 20 years, accounting for 28.3 per cent of total spending.

Medications will use up another 16.4 per cent, while physician services are close behind at 15.4 per cent of costs.


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Over the last couple of years, the pace of growth on drug spending has increased; this year, spending on medication is forecast to grow by 5.2 per cent.

Medications used to treat rheumatoid arthritis and Crohn’s disease, called anti-TNF drugs (tumor necrosis factor alpha inhibitors), account for the highest proportion of public drug spending, even though they are used by a small percentage of the population.

Newer medications used to treat hepatitis C also contributed to the growth in medication spending in 2016.

The aging population in Canada also plays a role in the increased costs of healthcare in the country. the aging population is adding about one per cent per year to total expenditures. As the population begins to age into those more elderly years, they will certainly contribute more in terms of what’s required to meet the health care needs of an aging population.

When broken down provincially, the more sparsely populated areas--such as the territories-- bring added expenses to the overall costs.

Provinces along the East Coast generally have older populations and as a result, have an increased demand for healthcare.

In 2017, $39.8 billion was expected to be spent on medications in Canada. Of that, $14.5 billion, or 42.7 per cent , will be financed by the public sector.

Those costs will be covered by provincial/territorial programs ($12.4 billion); federal direct drug subsidy programs ($760 million); and social security funds ($1.3 billion).

The rest will be paid for privately, either through private health insurance, or out-of-pocket. In fact, out-of-pocket drug costs are expected to add up to $13.3 billion, or $362 per person, this year.

Canada spent $1,012 per person on medications in 2015. That’s much less than the United States, which spent $1,457 per person, but more than every other country in the OECD (Organization for Economic Co-operation and Development) except Switzerland. Canada also spent significantly more than the OECD average of $709 per person.

AND WHAT ABOUT THE IMPACT OF MEDICAL MARIJUANA? A SMOKING HOT TOPIC FOR HEALTH AND BENEFIT PLANS

Bill C-45 (Cannabis Act) created quite a stir in April 2017 when it was introduced to the House of Commons. The bill’s intention is to create a framework to control the production, distribution, sale and possession of cannabis in Canada. It should


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be noted that the Cannabis Act focuses on recreational marijuana and is not expected to change the way individuals access cannabis for medical purposes. Even though Bill C-45 is still under review, it could become effective by July 1, 2018 should it be approved.

Canadian legislation surrounding medical marijuana has changed dramatically over the years. Access to cannabis for medical purposes was first permitted in Canada in 1999 under Section 56 of the Controlled Drugs and Substances Act. The Minister of Health had the authority to grant special exemptions to individuals who were suffering and dying from debilitating illnesses. However, it was still generally considered a crime to possess cannabis in Canada at this time.

Since then, several important court cases—along with changes in societal opinion—have contributed to changes in Canadian legislation. Today, medical marijuana can be obtained through a health practitioner’s prescription and bought from a licensed producer. However, this begs the question: can employees claim medical cannabis under their group health and benefit plan?

Medical marijuana and benefit plans

In most cases, for a drug to be reimbursed as an eligible expense under a group benefit plan in Canada, a Drug Identification Number (DIN) is required. In order for a drug to be sold and receive a DIN,

Health Canada must review and approve its safety, efficacy and quality against the standards of the Food and Drug Act and its regulations. To date, cannabis is not an approved therapeutic drug in Canada and does not have a DIN. While carriers may reject claims under this basis for fully insured plans, some self-funded administrative services only (ASO) plans may have more flexibility in choosing what is to be covered under their plans. Since the employer is the one paying the claims and the carrier is only administering the plan, ASO plans may have more flexibility to tailor their decisions.

While medical marijuana is generally not eligible under a group extended healthcare benefit, it can be acceptable as a healthcare spending account (HSA) expense. Since the regulations for HSA expenses rely on the guidelines of the Canada Revenue Agency—and specifically expenses that are eligible under the Medical Expense Tax Credit—medical marijuana is generally an eligible expense through a HSA.

Special cases in Canada

Recently, there have been some plans that have covered medical marijuana for a variety of reasons. Notable employer decisions and exceptions include the following:


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• A student at the University of Waterloo was successful in having the health insurance provider cover his medical marijuana in 2014. This was approved based on the student’s medical evidence, the financial impact on the plan and how the coverage affects the student’s personal and academic well-being.

• In 2017, the Nova Scotia Human Rights Commission determined that prescribed medical marijuana for a Nova Scotia man must be covered by the Canadian Elevator Industry Welfare Trust Plan (a multi-employer plan).

• Loblaws and Shoppers Drug Mart recently announced the addition of medical marijuana to their benefit plan with a $1,500 annual maximum. Claims will only be considered for prescriptions to treat symptoms of multiple sclerosis and side effects of chemotherapy.

• Ontario Public Service Employees Union (OPSEU) announced the addition of medical marijuana to their benefits plan on June 15, 2017, with a $3,000 annual maximum. There are no medical condition limitations.

• In an effort to reduce opioid use and addiction, an Ontario construction union, LiUNA! Local 625, extended coverage for medical cannabis to its retired, disabled workers and dependents.

Conclusion

With the likely legalization of recreational marijuana looming, an increasing number of individuals view medical cannabis as an acceptable form of treatment, which can drive a benefit plan’s usage up.

Undoubtedly, the pressure is likely to increase on plan sponsors to provide coverage and the potential cost impact for marijuana could be significant. Insurance companies are still hesitant to provide specifics on the projected cost impact, citing a lack of credible data.

Nonetheless, the estimated cost of a regular marijuana user is projected to be around $10,000 per year. Beyond group benefits, medical marijuana in the workplace raises a number of concerns for employers and relevant policies should be proactively reviewed or created.

EXPERTS PREDICT THAT EMPLOYER HEALTHCARE COSTS WILL CLIMB 130% BY 2025

Employers and plan sponsors must embrace technology and flexibility to meet challenges posed by higher costs, shifting demographics and a more mobile workforce.


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In a report published in May 2017, Mercer, a global consulting leader in advancing health, wealth and careers, today predicted that health benefits costs to employers would climb by 130% by 2025.

Announced at Mercer’s inaugural Future of Healthcare: Evolution to Revolution event series, the higher costs are expected to be driven by specialty drugs, higher rates of chronic and mental illness, increased benefits fraud and increased health pooling costs.

Along with an increasingly diverse and mobile workforce, this highlights the challenges employers will face as they compete for talent in a challenging healthcare world.

But these challenges are matched with opportunity: employers that understand the issues will be able to plan for, and succeed in, the long term.

“As costs rise, employers need to step up to remain competitive,” says Brian Lindenberg, Partner and leader of Mercer Canada’s Health Practice. “This means embracing the personalization of benefits enabled by technology, leveraging innovative funding models, and offering more flexible plans in keeping with the needs of a more diverse and ever-changing workforce.”

EMPLOYERS MUST PERSONALIZE THEIR “BENEFITS PROMISE”

The modern workforce, with up to 5 generations in the workplace, is more diverse in its wants and needs than ever. By 2025 this trend will be even more pronounced.

This means that employers must:

1. Develop relationships with specialty vendors: With the availability of specialty drugs to treat specific diseases driving higher costs, Mercer stresses that employers must develop relationships with a broader range of vendors, in order to provide targeted services and communications, better access to healthcare practitioners, and better manage costs.

2. Begin to shift from the traditional group benefits model: The traditional model is not responsive to consumer demand. Younger and more tech-savvy workers want customizable plans that match their unique healthcare needs. Voluntary benefits, including a defined contribution model and taxable and non-taxable healthcare spending accounts, are a promising method of cost control. The existing voluntary benefits market in Canada is relatively small, less than $20 million in annual premiums compared to approximately $5 billion in the United States. The success of this model in the United States shows promise in Canada for benefit plan sponsors, allowing more choice, lower costs and portability, and


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employers looking to adapt to a changing workforce should strongly consider implementing them.

3. Leverage data to truly personalize benefits: Wearable technology, genetic testing, claims and demographic data all contribute to our understanding of an individual’s likely health needs and advancements in data science will allow benefits to be truly personalized. As this area of healthcare science develops, employers must be prepared to present employees with an optimal benefits plan, based on data, to improve employee engagement with benefits, improve retention, and bolster their position with respect to their competitors.

The healthcare space in Canada is undergoing unprecedented technological and demographic transformation and these same forces also promise to transform the workplace. “The status-quo solutions offered by the market today will not meet the needs of tomorrow’s workforce,” concludes Lindenberg. “That’s why we’re working to help employers get ready for the change.”

Are Employers ready to rethink their group benefits plans?

Ultimately, the future is theirs. What they do with it will define your success in the coming years. Will they stand still as others take advantages of the opportunities these changes present? Or will they get on board with new innovations to offer real value to their employees, while also reducing costs?

THESE ARE SOME EMPLOYEE PERKS AND BENEFITS THAT RESEARCH SAYS WE ALL WOULD LOVE TO HAVE

In 2017, The Harvard Business Review conducted its own study to find out which types of benefits are most valued by employees and job seekers.

From their findings, they concluded that the top benefits and perks employees look for are better health, dental and vision insurance (88 per cent), and more flexible hours (88 per cent). This is followed by more vacation time (80 per cent), work-from-home options (80 per cent) and unlimited vacation (68 per cent).

The least desirable five perks were found to be free coffee (30 per cent), company-wide retreats (26 per cent), weekly free employee outings (24 per cent), on-site gyms (22 per cent) and team bonding events (20 per cent).

Companies that go above and beyond


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While some of us may just be happy with a free gym membership or free snacks every so often, some companies really take the perks and benefits things to a whole new level.

In 2015, bulk grocery delivery company, Boxed, in the United States surprised employees by announcing it would be paying for employees’ weddings and their kids’ college tuition.

Since 2008, Goldman Sachs has offered a unique benefit as well: the company will pay for gender reassignment surgery should an employee want it.

Other companies to offer some wicked perks and benefits include:

• Google: Free gourmet meals, in-house massages, dry cleaning on campus, haircuts and salons on-site and nap pods. Surviving spouses or partners of deceased employees also receive 50 per cent of their salary for 10 years.

• Twitter: Three catered meals a day, on-site acupuncture, improv classes, in-office yoga and Pilates classes, laundry and dry cleaning services.

• Airbnb: Employees receive a $2,000 stipend to travel and stay in an Airbnb listing anywhere in the world.

• Facebook: Parents of newborns get $4,000 in “Baby Cash,” as well as four months maternity and paternity leave. Employees also get internal professional development classes and free meals.

• Apple: Discounts on Apple products and stocks, commuting reimbursement, tuition assistance and donation matching. The company sometimes hosts concerts and “beer bashes,” and has a wellness centre with dietitians, chiropractors and other medical professionals on site. Women can also receive fertility aid and have the opportunity to freeze their eggs.

• Ask: The website company offers an open vacation policy. This means employees are able to take as much time off as they wish..

• Dreamworks Animation: Employees are treated to regular movie screenings and short movie festivals to reduce stress and inspire creativity.

• CIBC: Offers alternative work arrangements to promote a work-life balance among employees. Employees are able to design their own work schedules so that it suits their needs.

• Canadian National Railway Company/CN: Long-term career development with “generous” tuition subsidies for courses related to an employees’ current position (up to $4,000).

• Ford Motor Company of Canada, Limited: Tuition subsidies of up to $6,400, in-house apprenticeships and skilled trades programs, as well as an on-site fitness facility.

CONCLUSIONS


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It is easy to see the gloom in the current situation. We have identified the rather daunting challenges employers face in delivering an effective benefits program to their employees at a manageable cost to the business, but there will continue to be challenges.

When it comes to our Federal healthcare situation, the majority of Canadians believe we have an effective healthcare system.

But the reality is that if changes are not made to our public healthcare system, it will fail us in the long run. The failure of our system to adapt to Canadians’ changing needs will leave us with a very expensive health-care system that delivers mediocre results.

Canadians should have a health-care system that is truly worthy of their confidence and trust.

There are four clear steps that could be taken to help achieve long term healthcare success:

1. Integration and innovation

Health-care stakeholders in Canada still function in silos. Hospitals, primary care, social care, home care and long-term care all function as entities unto themselves. There is poor information sharing and a general failure to serve common patients in a coordinated way. Ensuring that the patient is at the centre — regardless of where or by whom they are being served — will lead to better, safer, more effective and less expensive care. Investments in information systems will be key to the success of these efforts.

2. Enhanced accountability

Those who serve Canadians for their health-care needs need to transition to accountability models focused on outcomes rather than outputs. Quality and effectiveness should be rewarded rather than the amount of service provided. Alignment of professional, patient and system goals ensures that everyone is pulling their oars in the same direction.

3. Broaden the definition of comprehensiveness We know many factors influence the health of Canadians in addition to doctors’ care and hospitals. So why does our “universal” health-care system limit its coverage to doctors’ and hospital services? A plan that


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seeks health equity would distribute its public investment across a broader range of services. A push for universal pharmacare, for example, is currently under way in Canada. Better integration of health and social services would also serve to address more effectively the social determinants of health.

4. Bold leadership Bold leadership from both government and the health sector is essential to bridge the gaps and break down the barriers that have entrenched the status quo. Canadians need to accept that seeking improvements and change does not mean sacrificing the noble ideals on which our system was founded. On the contrary, we must change to honour and maintain those ideals. Our leaders should not be afraid to set aspirational goals.

Redefining meaningful Employee benefits in tandem with Government Benefits starts with an open mind!

the financial advisor guide to employee benefits self

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