Every once in a while, we need to ask ourselves, “What could possibly go wrong?”
By: Bill Zolis
What is it that keeps benefits plan administrators up at night? Details. Or, more to the point, the seemingly small details that can fall through the cracks and suddenly turn into big problems when a claim is submitted and runs into complications.
Every conversation with a new hire should include a fairly in-depth conversation about benefits. Many of the things that fall through the cracks reveal a lack of two-way communication. Explain everything. Walk the employee through the application process. Explain any alternatives and choices that need to be made. Impress upon them the need to communicate any changes in status.
So what could possibly go wrong? Let’s start by looking at the some of the details that just seem to have a way of falling through the cracks from time to time.
Coverage for spouses. Your plan has comprehensive coverage for spouses of plan members. Your plan member flies to the Caribbean for a destination wedding and doesn’t inform the plan administrator. They think their spouse is automatically covered – until a claim for spousal benefits is submitted and the coverage provider sends you a memo asking, “Who’s this person?”
Coverage for spouses, part II: Your plan, of course, covers common-law spouses. Your plan member lists a common-law spouse for coverage. All good. Except that a plan member’s partner does not legally become a “spouse” until they have been living together continuously for one year.
Coverage for spouses, part III: It cuts both ways. When a marriage ends in divorce or the death of a spouse, so does the spousal coverage. It’s a little trickier when common-law marriages end. According to the Government of Canada, a common law marriage “is severed or ends upon the death of one partner or when at least one partner does not intend to continue the conjugal relationship.”
Beneficiaries: Your plan members lists one or more beneficiaries for life coverage. They may assume that reporting a change in marital status also automatically changes their beneficiary. Of course, it doesn’t. In other words, the former spouse may still be the beneficiary, and the new spouse may not.
Beneficiaries, part II: When a plan member designates a minor person – under age 18 – as beneficiary, he or she should also designate a trustee. Otherwise, any benefits may be held in trust until the beneficiary reaches the age of majority.
Spousal coverage waiver: When new employees provide their information for enrolment in the benefits plan, they are usually asked if they have current coverage from a spousal plan. If they do, coverage for extended health care – basically drugs, vision and dental – may be waived. The spouse’s plan most likely also covers dependent children, so their coverage is also waived. However, the employee should still provide full details about all dependents – including the spouse – so that they can be added to the plan in case the spouse’s coverage ends for any reason.
Out of country: Make sure staff know that they should contact the insurer immediately if they have an out-of-province or out-of-country emergency. Some group insurers have clauses regarding health stability, pre-existing medical conditions and travel restrictions. Changes in prescriptions, new medical tests that can affect their health status, or travel to areas with government travel advisories could all affect coverage.
Max Life and Long-term Disability: Confirm that employees receive the maximum Life and LTD amounts that they are eligible for using the definition of earnings shown in your policy. Get a signed waiver from the employee if they choose not to apply for additional Life or LTD benefits (above the Non-Evidence Maximum).
Eligibility date: A new employee joining the benefits plan has a Hire Date and an Eligibility Date. You have 31 days from the Eligibility Date to enrol the employee in the plan, or face the possibility that he or she will be considered a “late applicant” and have to submit medical information. The Eligibility Date is sometimes incorrectly listed as the Hire Date – meaning that coverage does not kick in until the waiting period – often 90 days – is over.
Terminating coverage: When a plan member’s employment ends, for whatever reason, their benefits also end. This may be at the end of a notice period (often the same as the “statutory notice” following a termination). However, it’s important to remove them from the plan, or claims may continue to be submitted.
Converting coverage: Plan members who leave their employment may be able to convert some of their coverage by taking over payment of the premiums. However, they have just a 30-day window in which to do so, or they will have to start from scratch with the insurance provider – and submit medical information that will include pre-existing conditions.
Student coverage: When dependent children reach the age of 21, their coverage usually ends – unless they are enrolled in post-secondary education. The plan member needs to submit a valid Student Confirmation Form, or claims may be denied.
Changes in salary or wages: Some benefits, such as Life and LTD, are based on the plan member’s earnings. If this changes, it needs to be recorded and reported immediately, or a plan member’s benefits could end up being paid out based on the previous, lower figure.
Up to date information: Make sure benefit booklets and on-line information regarding benefits are up to date and accurate. Make sure any changes to the plan are communicated to employees right away.
Liability: Make sure you have Plan Benefits Administrator liability coverage. This is available as a rider to your general business liability policy from your property and casualty/general /business Insurance broker.
What strikes me about the things that fall through the cracks and create headaches for plan sponsors, administrators and members is that they are so often related to missed communications. We turn to the plan member and say, “Why didn’t you inform us?” And the plan member responds, “Why didn’t you ask me?”
At least the solution is fairly self-evident. As benefits administrators, we need to keep the two-way communication going. We need to ask.
The above information is for general reference only. It is not intended as legal or tax advice. You may or may not be affected by any or all of these issues. Changes to interpretations, conventions, legislation or individual company policies may affect these guidelines. Please check with your insurance provider, lawyer, accounting or human resources professional for further information.
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I’ve been asked to speak at an Employee Compensation Seminar in Ajax on March 21. Learn how to recruit and retain talent by taking a look at employee compensation. Our three panelists will cover the topics of compensation packages, different forms of compensation, how they should be laid our in an agreement or policy, and company perk suggestions. Breakfast is included.
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I really appreciate comments, ideas, suggestions or just observations about the blog or any other topics in benefits management. I always look forward to hearing from readers. If there’s anything you want to share, please email me at bill@penmorebenefits.com.
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