Benefits administrators are always caught in the middle when claims are rejected
As a benefits administrator, you probably have a filing cabinet with hard copies of all the documents relating to every aspect of your employees’ benefits. Take a careful look at that cabinet. There may be a nasty surprise inside, just waiting to jump out and bite you.
The first you hear of any problem may be when an important looking piece of snail mail from your insurance provider lands on your desk: an employee’s benefits claim is being questioned or even outright rejected. Or worse – the employee is standing in front of your desk holding a rejected claim, and not very happy about it.
What went wrong?
Of course, the employer pays premiums to the insurance carrier based on the information they have on file about plan members. If the employer is not paying premiums in line with the benefits that the employees expect – because of inaccurate information on file – there are going to be complications, possible conflicts and often significant expenses once a claim is filed.
A lot of people, especially the younger ones, pay very little attention to the ifs, ands or buts of their coverage – until they have a claim. Then they discover that what they assumed, or what they thought was covered, or what they heard in the lunchroom, is not really accurate.
One of the things that many employers do is to send annual, individual memos, spelling out each employee’s plan details in plain language. This has several clear benefits: it informs employees of exactly where they stand, it gives them a chance to update or correct the record, and it creates a paper trail of your due diligence.
Employees generally have 31 days to update their information – marriage, divorce, birth of a child – in order for the plan to provide the coverage the employee should be entitled to.
There are any number of details that need to be accurately listed, but here are some of the tricky ones that come up all the time.
- Marital status: It’s the employee’s responsibility to advise you of changes in marital status. This obviously includes marriage and divorce, but what about legal separation? This may or may not affect the status of the spouse listed in the employee’s information. And then there is the question of eligibility of what we used to call “common law” spouses – at precisely what point in time does this person become eligible for spousal benefits?
- Changes in beneficiary: An employee may list a spouse or a relative or even a friend as the beneficiary of his or her death benefit under your benefits plan. If that beneficiary dies, who is eligible for the payment in the event of the employee’s death? This needs to be clearly spelled out – it does not automatically go to any heir or next of kin.
- Status of dependents: Dependent children may be eligible for things like dental coverage up to a certain age, and beyond that age if they are attending full-time school. Some other dependent relatives may be eligible if they are living with the employee at home and are classed as “dependent,” regardless of age, due to disability. Again, all the details, including documentary evidence of their status, needs to be on file – and shared with the insurance provider.
- Number of dependent children: When an employee has a happy addition to the family – by birth or adoption – this fact needs to be noted in the employee’s benefits profile.
- Blended families: This can get complicated. If Employee A lists his or her domestic partner as a dependent, is that person automatically covered? It probably depends on how long they have been continuously together. Under Ontario law, they are considered “spouses” after three years, or after one year if they have a child.
- Salary: Benefits such as life insurance and disability benefits are usually dependent on the employee’s salary, or average earnings, at the time a claim is made. It’s important that salary information on employees be kept up to date – and that the employer is paying premiums based on that salary.
- Designated beneficiary: Employees, especially the younger ones, will often designate a parent or sibling as their beneficiary when they are first hired. Often, they assume that this will automatically switch to their spouse if they get married, but it isn’t so. Employees need be informed and reminded via the annual benefits status memo that it’s up to them to provide information on their current status and preferences.
- Benefits window for departing employees: Under most plans, an employee has a month after leaving the job to convert his or her group life coverage to an individual plan. There may be many reasons for doing so, but the key consideration is the opportunity to extend the coverage without presenting medical information. This can be huge for the employee if there is now a “pre-existing” medical condition that would affect life insurance premiums or even make that person essentially ineligible for coverage. A review of this and other benefits information should be a part of every exit interview.
Accurate information, regularly reviewed and updated, as well as a well-documented paper trail of information provided to plan members, can prevent most of the common problems. But never say never… things can still fall through the cracks, and there are always going to be gray areas. That’s why it’s always a good idea to have comprehensive “benefits administrator liability insurance coverage” to protect you against the unexpected situation that lands on your desk one day out of the blue.