The Financial Advisor Guide to Employee Benefits
Self-Study Course # 3
EMPLOYEE BENEFIT PLANS
AN OVERVIEW OF HOW EMPLOYEE BENEFITS ARE CHANGING
In 2011, more than $200 billion was spent for health care in Canada with
approximately 70 per cent of the costs paid for by the federal and provincial
governments’ publicly funded system. Canadian employers pay for most of the
remaining 30 per cent of non-essential medical and dental expenses, according to
the Canadian Institute for Health Information and Statistics Canada.
While employer medical and dental plans were originally designed to be
supplementary to the publicly funded government plan, as a result of the federal
and provincial cut backs in healthcare services employers and private insurers
across this country 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.
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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 in an effort to make the Canadian players more globally competitive.
This new, 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 by approximately 15% for health and
7% for dental. 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.
Throughout this course, we will take a 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.
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On the Government side of benefits, we will look at the various programs that are
available.
AN INTRODUCTION TO EMPLOYEE BENEFITS
Canadians and Health Insurance
The vast majority of Canadians and their dependents are protected by one or more
of the health and life insurance industry’s products and services. In 2010, 23.1
million Canadians had extended health care coverage, 12.9 million had dental
coverage, and 10.5 were covered by disability insurance.
In 2010 Canadians paid 28.5 billion in premiums on new and existing health
insurance policies and received 22.4 billion in payments from health benefit
programs.
Insured health benefit plans played an essential role in providing protection against
financial loss for millions of Canadians
The Aging and Health Insurance
The senior population (adults 65 and up) is the fastest growing population group in
Canada. In 2011, 4,981.200 Canadians were 65 years old or older. This is more
than double the Canadian senior population in 1981 (2,361,000).

The senior population in Canada is expected to reach 5.9 million in 2016, 6.7
million in 2021 and 9.2 million in 2041.

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
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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. In this day and age
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. 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.
Corporate and Government Benefits can cover the following areas:

Health Benefits

Disability Benefits

Retirement Benefits
For the purpose of this course, we will only deal with the first two.
Description of Employee Benefit Plans
Employee Benefits are plans whereby the employees of a firm may be insured as a
group under one contract, with the insurance being payable for the benefit of
persons other than the employer.
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By issuing insurance in this way, it is possible to insure employees at a low net cost
and also extend the benefit of insurance to many employees who, because of age,
physical condition, occupation or cost, would not be able to secure individual
policies. Approximately 50% of all Canadian workers are covered by Employee
Benefit programs.
THE TRADITIONAL SOURCES OF BENEFIT GROUPS 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.
Professional Associations
Groups of Professionals like Doctors, Dentists, Lawyers etc. who are often too
small to purchase Employee Benefits individually by office, but when banded
together with other professional offices constitute a very large group.
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.
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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.
WHAT ARE THE ADVANTAGES OF EMPLOYEE BENEFIT PLANS?
Employer

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.
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.
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.
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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 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.
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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 DEPENDANTS CAN
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.
The three main factors that affect the amount of insurance are:

Earnings Level

Position, or

Flat Amount
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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 predetermined 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.
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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 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.
GROUP INSURANCE PRODUCTS
Creditor Group
Many feel that, even at a low price, loan repayment insurance is an unnecessary
addition to their monthly loan payment. 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.
Some Interesting Creditor Insurance Statistics:

Over 6,000,000 Canadians a year will suffer an accidental injury

Accidents are the leading cause of death for Canadians 45 years of age and
under
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
One in four Canadians between 25 and 45 years will be disabled for at least
90 days

Canadian insurers pay disability benefits under loan insurance plans in excess
of $230 million per year
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.
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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.
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.
Savings Group Insurance
Insurance is provided for depositors and/or investors, as a plan becomes selfcompleting if they die. It generally would cover the contractual payment period
only, but not equal to the total goal to be saved.
Association Group Insurance
Very simply, Association Group Insurance means, a group formed from members
of a trade or a professional association for group insurance under one master
health insurance contract.
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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. Associations
are groups of individuals or companies with similar occupations. Lawyers, Doctors
and some hardware chains all belong to Associations.
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 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.

Restrictive clauses, lower maximums and can contain a two-year suicide
clause.
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
The Association holds the Master policy. There is lack of control by the
member, subject to adverse experience due to other association members.
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)
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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.
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.
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.
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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.
GROUP DISABILITY PLANS
Disability is insured against, with two compatible benefits, either of which can
stand-alone. There are of course the Canada Pension Plan and Employment
Insurance (formerly Unemployment Insurance Commission Sick Benefit) that will
help cover the uninsured individual 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.
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
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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 Agent / Broker to know how the government Employment
Insurance (EI) Benefit works in co-ordination with Employee Benefit Plans.
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.
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.
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Injury
Accidental bodily injury sustained by the Insured Employee.
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.
HEALTH CARE (EXTENDED HEALTH CARE)
Extended Health Care Benefit is a benefit that picks up where Provincial Hospital
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.
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Health Care (EHC) provides a host of benefits that supplement the Government
Benefits (they cannot replace them) until the Government maximum have been
reached.
The Health Care Benefits usually provide for:

Semi-private or private room accommodation in a hospital

Prescription drugs

Private duty nursing

Ambulance services and Appliance and prosthesis

Paramedical services

Eye and hearing care
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
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.
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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.
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.
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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.
What are the insured components of the Health Care Benefits?
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 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 injectibles including serums, vaccines and injectibles vitamins, and

Extemporaneous Compounds prepared by a pharmacist.
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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 injectibles).

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.
MAJOR MEDICAL COMPONENT
Usually there is a stipulation stating that any of the following will be covered in the
Insured’s province of residence.
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.
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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 coverage’s 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.
Ambulance Services
This is standard coverage with all carriers. 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.
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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. Usually a
maximum amount is eligible to be paid out.
The person providing the services must be one of the following:

Registered Graduate Nurse (R.N.)

Registered Nursing Assistant (RNA)

Certified Nursing Assistant (C.N.A.)

Licensed Practical Nurse (L.P.N.)
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.
Paramedical Services
This section of an Employee Benefit Plan covers the following professionals when
they provide service while not confined to a Hospital. Usually there are maximums,
while any payment will not begin until any Government Health Insurance Plan has
paid their portion.
The following are standard professionals covered under most plans:

Speech Therapist

Clinical Psychologist

Masseur

Chiropractor

Osteopath

Podiatrist / Chiropodist / Naturopath

Physiotherapist
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Other benefits covered under this section of the contract:

Dental benefits for accidents.

Hearing Aids

Eye Exams

Medic Alert

Convalescent Hospital

Out of Province of Residence coverage

Accidental Dental coverage
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.
Terms to remember:

Dentist or Oral Surgeon

Dental Assistant

Fee Guide

Periodontal Services

Endodontist Services

Orthodontic Services
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Both Health and Dental care may have a deductible such as $25/$50 and/or a CoInsurance 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.
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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).
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.
Effective with the February 24, 1998 Federal Budget, Health and Dental premiums
became deductible for the self-employed.
GROUP CRITICAL ILLNESS INSURANCE
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.
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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:

1 in 4 Canadians will contract some form of heart disease.

75,000 Canadians suffer heart attacks each year.

However, there has been a 50% decrease in the heart and stroke rate since
1950.
Life threatening cancer:

1 in 3 Canadians will develop a life threatening cancer.

125,000 new cancer cases are diagnosed each year.
Stroke:

50,000 Canadians suffer a stroke each year.

75% survive the initial event.
Multiple Sclerosis:

More than 50,000 Canadians have Multiple Sclerosis

MS is the most common neurological disease among young Canadians.
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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
TRANSPORTATION
EXPENSES
HOME
CONVERSION
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
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
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
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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.
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.
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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

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
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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.
GROUP LONG-TERM CARE PLANS (Becoming more prevalent)
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.
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.
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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.
EMPLOYEE ASSISTANCE PLANS
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.
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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.
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.
GOVERNMENT BENEFITS
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.
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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 fulltime, 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.
Employment Insurance Premiums
As of January 1, 2012, the employee rate per $100 of insurable earnings is $1.83.
The corresponding employer rate is $2.56 per $100. Maximum insurable earnings
for 2012 are $45,900. The new legislative authority requires the EI Commission to
set the rate by November 14th every year so that employers can plan for the
following year.
The 2012 maximum employee contribution amount will be $839.97.
The 2012 EI premium rate for Quebec will be $1.47 per $100 for employees and
$2.06 for employers. Quebec offers its own parental benefits, resulting in a saving
for EI and explaining the difference with the rate for the rest of Canada. The
maximum annual EI employee premium in Quebec is $674.73 for 2012.
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What is covered?
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?
To be eligible for regular benefits you must show that:

you have been without work and without pay for at least 7 consecutive days;
and

In the last 52 weeks or since your last claim, this period is called the qualifying
period, you have worked for the required number of insurable hours. The hours
are based on where you live and the unemployment rate in your economic
region at the time of filing your claim for benefits.
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 much does the individual receive?
The basic benefit rate is 55% of your average insured earnings up to a maximum
amount of $485 per week in 2012. Your EI payment is a taxable income, meaning
federal and provincial or territorial - if it applies - taxes will be deducted.
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You could receive a higher benefit rate if you are in a low-income family — net
income up to a maximum of $25,921 per year (2011) — with children and you or
your spouse receive the Canada Child Tax Benefit (CCTB). You are then entitled
to the Family Supplement.
EI MATERNITY, PARENTAL AND SICKNESS BENEFITS
This government is available for those who are pregnant, caring for a newborn or
adopted child or sick.
Who is eligible?
To be entitled to maternity, parental or sickness benefits you must show that:

Your regular weekly earnings have been decreased by more than 40%; and

You have accumulated 600 insured hours in the last 52 weeks or since your last
claim. This period is called the qualifying period.
If you have been paid EI benefits in the past and you received a written notice, for
example, a warning letter or a penalty letter, for making a false statement, the
required number of hours worked to claim maternity, parental and sickness benefits
will be higher.
Working while on maternity, parental and sickness benefits
If you work while on maternity or sickness benefits, your earnings will be deducted
dollar for dollar from your benefits.
On the other hand, if you work while on parental benefits you can earn $50 per
week or 25% of your weekly benefits, whichever is higher. Any monies earned
above that amount will be deducted dollar for dollar from your benefits.
You must, of course, report any earnings you make while collecting maternity,
sickness or parental benefits.
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Various types of earnings
Earnings paid or payable by your employer at the end of your employment or while
you are receiving benefits, generally affect payment of your benefits.
Maternity benefits
Maternity benefits are payable to the birth mother or surrogate mother for a
maximum of 15 weeks. To receive maternity benefits you are required to have
worked for 600 hours in the last 52 weeks or since your last claim. You need to
prove your pregnancy by signing a statement declaring the expected due or actual
date of birth.
The mother can start collecting maternity benefits either up to 8 weeks before she
is expected to give birth or at the week she gives birth. Maternity benefits can be
collected within 17 weeks of the actual or expected week of birth, whichever is
later. Please note that the date you file your claim is very important in order for you
to receive the maximum maternity benefits you are entitled to.
If the actual date of birth is different from the expected date of birth, it is very
important that you provide this date as soon as possible after the birth of your child.
If your baby is hospitalized, then the 17 week limit can be extended for every week
your child is in the hospital up to 52 weeks — following the week of the child's birth.
You will still receive benefits for a maximum of 15 weeks, but payments can be
delayed until your child comes home.
The weekly EI payment and the number of weeks to be paid remain the same even
if you give birth to more than one child at the same time. At the same time you
present a claim for maternity benefits, yourself or/and partner can ask for parental
benefits.
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Termination of a pregnancy
When a pregnancy terminates within the first 19 weeks of pregnancy, it is
considered an illness under EI. If that is the case, sickness benefits may be paid as
long as the qualifying conditions for sickness benefits are met.
On the other hand, if the pregnancy terminates in the 20th week or later, the claim
for benefits can be considered for maternity benefits if the qualifying conditions for
maternity benefits are met.
The eligibility period for EI parental benefits can be extended for members of
military families
Note: The Government of Canada introduced a new measure in July 2010 to
extend the eligibility period for EI parental benefits, up to a maximum of 104 weeks.
This extension is available to Canadian Forces members who are prevented from
collecting all their parental benefits during the regular 52-week eligibility period
because their parental leave has been deferred or interrupted by an imperative
military requirement. The regular eligibility period starts during the week of birth for
a newborn or the week a child is placed with you for adoption and continues for the
following 52 weeks.
Parental benefits
Parental benefits are payable either to the biological or adoptive parents while they
are caring for a new-born or an adopted child, up to a maximum of 35 weeks. To
receive parental benefits you are required to have worked for 600 hours in the last
52 weeks or since your last claim. 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 purpose of the adoption, and the name and address of the adoption
authority.
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Parental benefits can be claimed by one parent or shared between the two
partners but will not exceed a combined maximum of 35 weeks.
Claimants making application for parental benefits must provide the name and
Social Insurance Number (SIN) of the other parent for cross-reference purposes.
Parental benefits for biological parents and their partners are payable from the
child's birth date and for adoptive parents and their partners from the date the child
is placed with you. Parental benefits are only available within the 52 weeks
following the child's birth, or for adoptive parents, within the 52 weeks from the date
the child is placed with you, unless your child is hospitalized.
The weekly EI payment and the number of weeks to be paid remain the same even
if you give birth to more than one child or if you adopt at the same time.
Compassionate Care Benefits
Employment Insurance Covers Care of Dying Relatives
Since January 4, 2004, eligible Canadian workers who take time off work to care
for a gravely ill family member can receive up to six weeks of employment
insurance benefits over a period of six months. Their jobs will also be protected.
Before the introduction of the compassionate care benefits, Canadians who took
time off to help a dying relative usually had to depend on their employer's goodwill
to be allowed unpaid leave and may have had to put their jobs at risk.
To qualify for the compassionate care employment insurance benefits, an applicant
must have worked 600 hours in the previous 52 weeks, and also must show that
regular weekly earnings have decreased by 40 percent. A medical certificate must
be provided to show that the family member has a high risk of death within 26
weeks.
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Compassionate care includes providing emotional support, arranging for third-party
support or directly providing the care. The benefits apply to care for a gravely ill
child, spouse or common-law partner, and parent, and include spouses and
common-law partners of parents.
The compassionate care benefits can be shared between eligible family members
and the dying family member can be in another country.
The federal government estimates that about 270,000 Canadians will be eligible for
the compassionate care benefits every year.
Quitting your job for compassionate care reasons
It is hoped that compassionate care benefits will 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, you may still be paid compassionate care benefits, but there is a possibility
that you will not be paid regular benefits.
You may be able to receive regular benefits if voluntarily leaving 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 employment.
Labour disputes
If your absence from work to claim compassionate care benefits was already
approved by your employer before the work stoppage for strike, lockout or other
form of labour dispute, you may be eligible for EI benefits.
Compassionate care benefits outside Canada
Compassionate care benefits to care for or support a family member who is gravely
ill and at risk of dying can be paid regardless of where that family member —
patient — lives. You have to apply for benefits and submit the same
information/documents as required for a person taking care of a gravely ill family
member residing in Canada.
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If you go outside Canada, you must advise Human Resources and Skills
Development Canada.
Employment Insurance (EI) Fishing benefits
A fisher is a self-employed person engaged in fishing. The following outlines how
the fishing benefits may apply to you. If you are not self-employed in fishing, but
you still work in the fishing industry for someone else, regular benefits, maternity,
parental and sickness or compassionate care benefits may be the solution.
To qualify for fishing benefits, fishers need sufficient earnings from selfemployment in fishing in a maximum 31 week period before their claim starts —this
period is called the qualifying period.
You will need to earn at least between $2,500 and $4,200 to qualify for fishing
benefits. This amount varies based on the unemployment rate in your region.
If you have been paid EI benefits in the past and you received a written notice, for
example, a warning letter or a penalty letter, for making a false statement, the
amount of fishing earnings required to claim fishing benefits will be higher.
If during the 52-week period that precedes the beginning of the qualifying period,
you have $3,000 or more of fishing earnings or 490 hours or more of:

Self-employment in fishing,

Fishing benefits,

Training relating to fishing which has been authorized by an Human Resources
and Skills Development Canada (HRSDC) officer,

Workers compensation,

Employment measures related to fishing or

A combination of the above,
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However, if you have just started working as a self-employed fisher, or have
returned to fishing after an absence of a year or more preceding your qualifying
period, you may need to earn a minimum of $5,500 of fishing earnings to qualify.
Also, if you have received one week or more of maternity or parental benefits in the
208 weeks preceding the 52-week period prior the qualifying period you will need
to earn between $2,500 and $4,200 to qualify for benefits.
Qualifying period
The qualifying period during which earnings may be accumulated will vary
according to the fishing seasons. It can start:

during the week of March 1st or

during the week of September 1st
The maximum length of the qualifying period is 31 weeks counting back from the
week prior to the beginning of your claim.
It is important to realize that the EI Commission is considered “second payer” in
many instances. This means that the benefits could be cut back or eliminated
unless or until the other benefits run out.
EI benefits are paid secondary to and reduced or eliminated by:

Any income including wages or commissions from employment.

Any payments in compensation for an accident or work-related illness, such as
workers' compensation for lost wages.

Income from Employee Benefits for sickness or loss of income.

Some accident compensation for loss of wages.

Retirement income from an employment pension, military or police pension,
Canada or Quebec Pension Plan or provincial plan based on employment.
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Money received from the following sources, will not affect EI benefits:

Disability pensions.

Workers' compensation payments from a permanent settlement.

Supplemental insurance benefits under a private plan approved by Human
Resources Development Canada for sickness benefits.

Supplemental payments to maternity or parental benefits provided by
employers (as long as the combined income of the benefit and supplement do
not exceed 100% of your normal weekly salary.

Your private sickness or disability wage-loss insurance.

Retroactive rises in your wages or salary.
Because EI is considered the second payor in the above situations, many
employers have opted out of the EI Sickness Benefit program by providing their
employees with plans, which are at least equal to or better than the EI
Commission.
For employers who exercise this option, the Employment Insurance Act allows for a
premium reduction to employers who have an employee income protection plan
meeting certain standards. These types of plans must be in the form of a formal
commitment from the employer.
The formal commitment could be:

A union or association agreement.

An industry-wide welfare trusts contract or a private carrier’s insurance policy

An employee’s handbook or a personnel policy bulletin.

A board of director’s minute stating employees’ entitlement to disability income
benefits.

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Any commitment in writing by the employer to the employees.
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The employer must reapply each year for the premium reduction by certifying that
the plan continues to meet all the above criteria.
As a rule of thumb, the premium reduction to the employer is approximately $75.00
- $100.00 per year per employee. This may not seem like much, but consider the
company with many employees. This would translate into large savings, and at the
same time provide a superior plan.
EI DISABILITY BENEFIT
Provide a limited short-term benefit that is provided to all insured workers.

Waiting Period: 14 days

Benefit: 60% for low-income workers

55% for high-income workers, based on insurable earnings.

Benefit Period: 15 weeks
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.
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.
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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. Severe means the inability to pursue any substantially gainful
employment, while prolonged means that the disability is likely to be of indefinite
duration or is likely to result in death.
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 a person is incapable of regularly pursuing any substantially
gainful occupation.
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.
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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.

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.
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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?
For the payment of a disability pension to a survivor or for payment of benefits for a
child of a disabled pensioner, a contributor must have contributed for:

2 out of the last 3 years of the contributory period or

5 out of the last 10 years of the contributory period

Have not received a CPP / QPP retirement pension benefit for longer than 12
months

For those individuals who have contributed 10 years or more and are under Age
65 they must not have received the retirement benefit of longer than 12 months.
A disabled survivor who is eligible for both a survivor’s pension and a disability
pension can receive an amount equal to the maximum retirement pension plus the
higher of the two flat-rate components of the survivor’s and disability pensions.
The disability for a child of a contributor who becomes disabled will be the same as
or orphans, but the qualifying period is the same as for the disability pension itself
and the benefit commences with the disability pension and ceases with the
disability pension or when a child is no longer a dependent.
Orphan’s benefits are payable to the surviving spouse or guardian if the orphan is
under age 18 and are payable directly to the orphan from age 18.
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In cases where both parents are contributors and they die or become disabled, a
dependent child can receive two benefits.
How 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:
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 selfemployed 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.
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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:
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.

Months when a person received a disability benefit from the CPP or QPP are
not included in the contributory period.
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.
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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.
The+ 65 drop-out
If a contributor works between the ages of 65 and 70, higher earnings from those
years can be used to replace months of little or no earnings earlier in the
contributory period.
The 15 percent drop-out
The 15 percent drop-out applies to everyone who has contributed to the CPP for at
least 10 years. After the number of months in a person's contributory period is
determined, the 15 percent of that period when his or her earnings were lowest are
dropped out of the benefit calculation. The benefit amount he or she receives is
calculated on the earnings and contributions recorded in the remaining 85 percent
of the contributory period.
The Disability drop-out
The months in which a person receives CPP disability benefits are excluded from
his or her contributory period when benefits are calculated.
Other considerations in calculating benefits
Other circumstances must be considered in the calculation of a person's
contributions to the CPP.
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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
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.
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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 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 percent 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.
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 percent of the average monthly
pensionable earnings.
5. The disability pension is calculated at 75 percent 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.
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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.
Benefits
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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For contributor:
Waiting period: 3 months
Amount: Flat rate (indexed) plus 75% of what remaining benefit would have been
at age 65 (in 2012, $445.50 plus 75% of age 65 retirement benefit)
For qualifying child:
Amount: Flat rate (indexed) - 224.62 in 2012
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.
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SELECTED MONTHLY MAXIMUM SURVIVOR and DISABILITY BENEFITS
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 Canada Pension Plan benefits in
2011/2012.
Canada Pension Plan Payment Rates
Type of benefit
Average monthly
benefit
(October 2011)
Maximum
monthly
benefit
(2012)
Disability benefit
$820.96
$1185.50
$512.64
$986.67
$383.56
$543.82
$301.15
$592.00
Children of disabled
contributors benefit
$218.50
$224.62
Children of deceased
contributors benefit
$218.50
$224.62
$701.46
$986.67
$949.22
$1185.50
$2,276.62
$2,500.00
Retirement pension
(at age 65)
Survivors benefit
(under age 65)
Survivors benefit
(age 65 and over)
Combined survivors &
retirement benefit
(pension at age 65)
Combined survivors &
disability benefit
Death benefit
(max lump sum)
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How Does Long Term Disability compare to the Canada Pension Plan
The Canada Pension Plan disability benefit commenced May 1970. It is paid only
in the event of a severe and prolonged disability of a taxpayer. The CPP disability
benefit is a primary payer and since the LTD integration clause may limit the total
benefit that can be received, the CPP and LTD benefits may be either “offset or
stacked”.
Offsetting the CPP Benefit will reduce the LTD premium, while stacking will not
affect the rates.
The CPP Benefit can be offset totally or just the contributors portion. Primary offset
will result in some premium relief. LTD and CPP Benefits may be the deciding
factor of whether a family survives economically or not. Certainly anything less is
sure economic disaster.
In 2012 close to 400,000 Canadians will receive either CPP or QPP disability
benefits. More than $300 million in benefits will be paid.
WHAT ABOUT THE CANADA PENSION PLAN (CPP) RESERVE FUND?
The reserve fund stood at $152.3 billion at September 30, 2011 – down slightly
from June 2011, but up almost 10% compared to one year earlier. Between 2005
and 2010 CPP assets grew at an annual rate of 3.8% - substantially better than the
performance of most other country’s pension programs.
The fund now has about 55 % invested in stocks, 30% in bonds, 4% in cash and
money market securities, 5% in real estate and 4% in private equity.
WORKMENS COMPENSATION BOARD (WCB)
We all are aware that the Government provides for on the job coverage for any
accident, injury or work related sickness.
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History of the WCB
Workers' compensation (or employees' compensation as it is called in the federal
public service), was one of the first additional employment benefits established for
federal public employees. This was in 1918, the same year that the charter for civil
service employment, the Civil Service Act, was passed. This major advance was
designed; it was said at the time, to place government employees on the same
footing as employees in private industry.
The original arrangement, whereby provincial workers' compensation boards look
after the treatment of injured employees and adjudicate and pay compensation
claims on behalf of the Government of Canada, continues to this day. The
provinces are reimbursed for these and other services by Human Resources and
Skills Development Canada.
Human Resources and Skills Development Canada receives and processes claims
from employees of federal departments and agencies. Claims are forwarded to the
appropriate provincial authority, and Human Resources and Skills Development
Canada is concerned with the provision of workers' compensation benefits for each
claimant until a case has been settled. A file is maintained on each claim and other
records are kept for accounting and statistical purposes. A general advisory service
is provided to employees and their unions, as well as to employers, on the
interpretation and application of the legislation.
Since each claim for workers' compensation is highly personal, it should be dealt
with promptly and with every consideration for the person involved. Each claim also
being unique must be handled with attention to detail and be as accurate as
possible. This can only be achieved if accident reports and other forms or material
are carefully completed and submitted promptly.
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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.
ONTARIO
For illustration purposes, we will highlight Ontario’s WSIB
Over the past few years, there have been significant changes at the old Workers
Compensation Board. They have a new name WSIB with a new focus on:

Worker and employer self-reliance.

Adjustments to the workplace accident plan.

A goal to have a fully funded system by 2014.
Under the Workplace Health and Safety Insurance Board, there will be a greater
emphasis on accident-employer involvement in rehabilitation and return to work
planning. They would like to have more worker co-operation in return to work
planning, where the employee takes an active part in the process.
There are new monetary changes to the benefits received. The compensation
level will reduce to 85% of pre-injury average net earnings. There will also be an
inflation-indexing factor: 1%, to a maximum of 4%. There will however be full
indexing for 100% disabled workers and survivors.
An important benefit change undertaken is to eliminate chronic occupational stress.
There are new guidelines for chronic pain healing time as well as Benefit payment
time.
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2012 Premium Rates
The 2012 average premium rate for Schedule 1 employers is $2.40 for every $100
of insurable earnings, an increase from $2.35 in 2011.
This increase does not mean rates will increase for all employers. Premium rates
for individual rate groups have been recalculated based primarily on injury
frequency and claims costs for individual rate groups.
Annual Maximum Earnings Ceiling
The annual maximum earnings ceiling for 2012 is $81,700. Earnings over the
annual maximum are not insured.
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.
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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.
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.
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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.
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.
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
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 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.
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Responsibilities of the employer
Workers' compensation for occupational injuries and diseases is an employee's
right, not a privilege, and it is the responsibility of the employer and Human
Resources and Skills Development Canada to see that this right is protected.
To enable Human Resources and Skills Development Canada to do its job
effectively, the employer must report within three days all injuries involving medical
attention or lost time.
HRSDC determines whether the employer is covered under the Government
Employees' Compensation Act and obtains required information on employee
status. Claims are checked immediately for accuracy and completeness,
countersigned, and then forwarded to the appropriate provincial workers'
compensation authority. The compensation authority decides whether the
disablement is the result of an occupational injury or disease, and determines the
benefits to be provided.
Immediate attention
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.
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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 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.
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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.
Statistical information
Records of accidents are essential to successful occupational safety programs just
as records of production costs, sales, profits and losses are essential to the
successful operation of business. To improve occupational health and safety, it is
necessary to have accurate records of the incidence of work injuries and illnesses.
This in turn allows occupational groups, departments or agencies to identify those
problem areas that require immediate attention. Therefore, the compensation form
should be filled out as completely and accurately as possible.
Details such as an employee's age, the date current employment started, and the
employee's wage or salary level (in cases where the injured person is or will be
disabled beyond the day of the injury) should also be entered on the accident
report.
Employers are required to ensure that all compensation forms furnish complete
and related details of the accident and the nature of the injury. For example, it is
not sufficient to indicate in a general way that an employee injured him or herself or
suffered pain. It should be stated whether the injury was a contusion, bruise,
laceration, strain, etc. The specific part of the body which was injured and the
cause of the injury should also be identified.
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.
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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.
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.
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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.
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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.
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.
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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).

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.
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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 worldclass specialists and personal care management, Best Doctors® can help people
make informed decisions about your healthcare when it matters most.
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.
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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 redefine the
original diagnosis and to recommend treatment protocols, as well as access to the
most qualified specialists and facilities worldwide.
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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, integrity and independence.
So What Does the Best Doctors® services 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.
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 (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
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.
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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.
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Conclusion
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.
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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% administration fee
and any applicable taxes.
HEALTH CARE SPENDING ACCOUNTS (HSCA’s)
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 predefined 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
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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 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 E.I. or C.P.P. 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.
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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.
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.
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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. coinsurance 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 his/her credits at the
beginning of the year and have nothing left to draw on for the rest of the year.
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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.
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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).
Employer evaluates if the claim meets requirements (expense is eligible and if
there is 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).
Costs
The costs of the plan will include the cost of medical services and products plus
premium tax and sales tax.
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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.
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
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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 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).
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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;

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.
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?
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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.

A Defined Contribution approach allows employers to have better control and
predictability over their costs.
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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 MILLENIUM
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.
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.
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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.
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,
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
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 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.
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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).
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It would also be a benefit to consider the level of income. The higher the income,
the greater the benefit to the Insured individual.
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.
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.
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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. 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.
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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 selfinsured 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.
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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.
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 employeeshareholder.
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.
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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.
Future Health Care Costs Still Worry Many Canadian Employers
A survey by Morneau Sobeco shows that rising health care costs is a prime
concern for 58 percent of Canadian employers. Rising health care costs are
prompting 18 percent to review cost sharing, and 27 percent plan to review
disability benefits.
Some employers are now offering their employees more money to purchase Health
and Dental Insurance on their own.
INDIVIDUAL HEALTH & DENTAL INSURANCE 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 healthcare packages to cover the needs of individuals and their families.
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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. 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.
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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 are able to 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.
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.
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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.
INDIVIDUAL HEALTH & DENTAL COVERAGES
It doesn’t matter if you choose Blue Cross, Manulife, Green Shield or one of the
many Managing General Agents who market Individual Insurance coverage’s as
the core products are going to be the same. Of course as mentioned earlier,
premiums and coverage’s will vary from supplier to supplier.
Extended Health Benefits
Extended Health Benefits include coverage in Canada for: accidental dental;
ambulance and ambulance attendants; diabetic supplies and equipment; hearing
aids; medical supplies and equipment; orthopedic shoes; ostomy supplies; other
practitioners such as physiotherapists, psychologists, chiropractors and speech
therapists; oxygen and oxygen equipment; private-duty nursing; prosthetic
appliances and speech aids.
Hospital Benefits
Some plans will pay the eligible expenses for a semi-private room, in excess of the
amount paid by provincial health care plans for Blue Cross cardholders.
Traditional Dental Benefits
Traditional Dental Benefits include annual recall exams; cement restorations;
crowns and fixed bridges; dentures; extraction of teeth and other surgical services;
fillings; fluoride treatments; scaling and polishing; major repairs and restorations;
root canal therapy and X-rays.
Traditional Drug Benefits
Eligible expenses include medically-necessary drugs prescribed by a recognized
health care professional licensed to prescribe.
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Traditional Vision Care Benefits
Traditional Vision Care Benefits include the following as eligible expenses when
prescribed or performed by a licensed optometrist, ophthalmologist or optician: eye
examinations; lenses; frames; contact lenses; and visual training/remedial eye
exercises.
With some of the carriers, you can add:
1. Travel Insurance
2. Visitors to Canada Insurance
Some of the Medical Assistance Services Available:
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.
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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.
TAXATION OF INDIVIDUAL HEALTH & DENTAL INSURANCE
As of the February 1998 Federal Budget, your 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.
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.
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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 (not included in the above categories)
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 ARE GROUP INSURNACE RENEWALS CALCULATED?
Two Major Considerations

Pooled benefits based on demographic and market factors - Life, Accidental
Death and Dismemberment, and Long Term Disability.
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
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
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.
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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.
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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.
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.
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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.
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.
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HOW DO THEY CALCULATE DRUG INFLATION
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. 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 $563. 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.
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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.
UTILIZATION AND DEMOGRAPHIC TRENDS
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. Furthermore, usage
per individual has increased. In 1998 adherents to the RAMQ between the ages of
18 - 65, made an average of 12.5 drug prescriptions per year. In 2003, they made
17.1, a 36.8% increase. In those same periods, adherents age 65 and over,
claimed an average of 39 times a year in 1998’ compared with 62.5 in 2003’, a
60% increase.
DENTAL CARE TRENDS
Utilization
Like healthcare, an aging workforce and the overall impact of aging on claims
affect dental care utilization. The average cost per dental service and the average
number of dental services covered both tends to be higher for those over 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.
Fee Guides and Inflation
Your dental plan is designed to reimburse dental procedures based on provincial
dental fee guides, prepared by provincial dental associations. While a dentist can
charge more, most insurers reimburse procedures based on the provincial fee
guide.
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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.
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, 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.
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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
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 commonlaw declaration is required.)

A spouse from whom you are legally separated is not eligible for coverage;
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
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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.
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.
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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.
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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.
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.
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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
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, postretirement benefits coverage has been declining.
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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.
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.
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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 to
employees.
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AND NOW, FOR SOME THE GOOD NEWS!
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. There is, however, some good news.
The vast majority of Canadians believe we have an effective healthcare system.
According to a healthcare survey, 86% of Canadians would rate the quality of
services in our healthcare system as good to excellent. This is a higher percentage
than we have seen in years. In the same survey, 94% of plan members say their
employer benefits program meets their needs either “somewhat well” or
“extremely/very well”. Canadians are living longer than ever. There are fewer
illnesses that cannot be treated effectively. And for some illnesses, new treatment
(e.g. via drugs) is less invasive and more effective than it once was (e.g. surgery).
A Final Note
The information compiled in this course is for information and educational purposes
only. You are advised when dealing with your prospects and clients, that you
recommend they seek the advice of their Accountants and Lawyers.
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