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© Copyright 2002
Rogers Media. The following article first appeared in the February 2002 edition
of BENEFITS CANADA magazine.
Benefits Trends
Insure or bust
Alberta wants plan sponsors to insure all health
benefits. This burden could see employers exit the benefits business.
By Kathryn Dorrell
 Imagine finding out that your organization has to
insure its health benefits with a third party or face a $200,000 fine. For most
employers this is unthinkable. That's because health benefits, ranging from drug
coverage and dental plans to accidental death and dismemberment, are largely run
on an administrative services only (ASO) or self-insured basis.
In what is turning into a benefits manager's
worst nightmare, Alberta says all employers providing health benefits to
employees in that province must independently insure them or face hefty fines.
The only exception is for benefits offered by an employer/ employee association.
Apparently, Alberta says health benefits have had to be
insured for years. Although it was never aware the vast majority of plans were
not operating this way. Nor did it bother to enforce the law in the past. No
wonder the benefits industry is taken aback.
The fiasco--which may have far-reaching
implications--came to light after Alberta revised its Insurance Act late last
year, requiring all long-term disability plans to be insured in excess of two
years. When employers sat down to review the legislation with regulators they
got an unpleasant surprise in the form of a whole new interpretation of an old
Act.
"They informed us all employer health benefits must be
insured. We never thought the Act applied to ASO and self-insured plans, which
we do not consider to be 'insurance' under the Act," says Elaine Noel-Bentley,
senior director, total compensation with Petro-Canada in Calgary. Insurance
companies were not even interpreting the legislation the way Alberta wants it
enforced, says Michael Wolpert, a lawyer and consultant with Towers Perrin in
Calgary.
Alberta's attempt to protect employees and ensure they
have benefits well into the future is noble. But employers across Canada with
plan members in that province are now in a tight spot.
Insuring health benefits will be expensive if not
impossible. Wolpert says providers can simply refuse to insure organizations
over the long term, notably those with a lot of disabled workers. That leaves
employers with the impractical option of setting up an employee/employer
association.
The other course of action is to cancel benefits. After
all, they are not legislated. "The cost implications are worrisome," says
Noel-Bentley. "If the problem can't be resolved, why not just give cash and get
out of the benefits business entirely?" Hopefully regulators are thinking long
and hard about that question.
The Alberta government is working with the benefits
community to find a solution. The Minister of Finance has put a hold on fines
for now and has spoken with plan sponsors, consultants and insurers. The
government was also drafting a discussion paper at press time (available at
www.finance.gov.ab.ca). "We hope they will contemplate change," says
Noel-Bentley.
Still, a positive outcome is not assured. This means the
future of benefits is uncertain for Alberta workers--and possibly for employees
in other regions where regulators decide to suddenly enforce a literal
interpretation of an old Act.
Only employees in Ontario and Quebec are assured of not
suffering this fate. In these provinces sales taxes are applied to self-insured
benefits plans, which means regulators won't insist health benefits are
'insurance' that has to be backed by a third party.
Hopefully, regulators in other parts of Canada will have
more sense than those in Alberta, where the government has earned a reputation
for taking a controversial approach to health issues. Alberta has slashed more
healthcare services than any other province in Canada, putting more pressure on
private plans. It is incredible that this same government is insisting employers
must support their health benefits promises with insurance.
If regulators are not careful they could find their
attempts to protect employees backfire. Workers could lose their drug, dental
and other health benefits altogether. BC
Kathryn Dorrell is
managing editor with Benefits Canada.
kdorrell@rmpublishing.com.
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