An Ontario group benefits advisor is calling on Canadian insurers to change a long-term disability practice that adversely affects employees at small companies.
Dave Patriarche, president of Mainstay Insurance Brokerage Inc. and founder of the Canadian Group Insurance Brokers, is asking Canada’s major insurers to make a small administrative change that would ensure employees at the same company don’t have differing levels of LTD coverage depending on when they were hired.
“It [would be] good for everybody. There are no losers on this one,” he says. “The employee is getting better coverage, the employer has an employee that has a better benefit [and] the insurance company . . . takes on a little bit of risk but they get more premium.”
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When an employee goes on LTD leave, they receive a percentage of their income during their time away from work. However, employees at small companies — with fewer than 100 staff — receive a different type of coverage, called the non-evidence maximum. In these cases, when an employee goes on leave, they receive a monthly amount based on their income up to a limit without being required to provide proof of their health. And if their salary entitles them to a higher monthly LTD payment, they’d need to apply to the insurance company, to be either approved or denied.
As small companies hire more employees and grow in size, they become eligible for increases to their NEMs. Any employees hired after the NEM increase start at the higher value, but employees who’ve been at the company longer are often stuck at the lower original NEM value.
“What you have is this inequity,” says Patriarche. “As a company grows, there are people who are left at different benefit levels just because of the date that they were hired. And that’s a problem.”
In particular, this is problematic where employees went on leave at the lower NEM value and were denied more coverage by their insurer, he says. “So what we started doing years ago was we’d say, ‘We want [the employee at a lower level] to be moved up. . . . We know she was declined, we know she’s in poor health, we know she’s high risk, but we want her moved up so she’s the same as everybody else.'”
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In his role as an advisor, Patriarche has encouraged insurers, on a case-by-case basis, to move existing employees up to the new NEM level when their employer qualifies for it. He says he’s previously received pushback, particularly around existing employees who’ve been denied further coverage, as they were considered too high risk.
In early February, he began contacting Canadian insurers and third-party administrators — including the Co-operators Group Ltd., iA Financial Group, Medavie Blue Cross, Pacific Blue Cross and RBC Insurance — to determine their policies and encourage them to make changes. He’s charting the results on the CGIB’s website.
In 2013, the Great West Life Assurance Co. (now the Canada Life Financial Corp.) was the first insurer to make the change. It sent out a letter to group benefits advisors noting “any current employee who has previously applied for and been declined excess coverage at previous NEM levels can now be improved to the new NEM levels.”
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Most recently, on Feb. 4, Sun Life announced changes to its policy in an email to its small plan sponsor clients. “If the client chooses the NEM increase, it will apply to all members in the same class,” noted the email. “This increase will also apply to members previously declined for coverage above the NEM. This means that all covered members will benefit from the new NEM.”
In an email to Benefits Canada, Sun Life spokesperson Carson MacIsaac said the decision was made “proactively to support the evolving needs of our clients.”
According to the CGIB website, Desjardins Insurance, Fenchurch General Insurance Co. and Manulife Financial Corp. are among the insurers that already move all members of the class up to the new NEM.
Patriarche is also calling on the Canadian Life and Health Association to take a position on the issue. In an emailed statement, Sarah Hobbs, the CLHIA’s director of policy, said the association currently doesn’t have one.
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“It is very much a matter to be negotiated between the group employer and their insurer,” she wrote. “By way of explanation, the [NEM] set by insurers is based on a number of factors and is not solely based on the size of the group insured individuals. The decision to increase the NEM and apply it to those individuals who were previously declined will depend on the insurers’ risk profile, as well as the insurers’ negotiations with the group employer.”