© Copyright 2006 Rogers Publishing Ltd. The following article first appeared in the January 2006 edition of BENEFITS CANADA magazine.
Benefits Trends: The ability to change
Can’t remember what you pay out in extended healthcare and dental benefits upon disability? Find out. Because changing that policy is an option.
By Anna Sharratt

EMPLOYERS ARE A CONFUSED BUNCH WHEN IT COMES TO providing extended healthcare coverage(EHC) and dental benefits for disabled employees. This was the subject of a recent phone call from a concerned third party administrator in Markham, Ont.

“It comes up in every conversation with every client I speak with,” says Cheryl Jones, regional business development director for Johnston Group. “It’s the extended healthcare and dental costs and the assumption on the employee’s part that they’re covered as long as they’re disabled. This is a huge issue for employers.”

Why? Because disability costs are mounting steadily. According to Watson Wyatt Worldwide, long-term disability(LTD)costs—the main drivers of benefits cost increases—rose 27% to 1.4% of payroll between 2002/2003 and 2005. For employers providing EHC and dental benefits to employees on LTD, every day of coverage matters. Not to mention the legal issues of not having a well-defined policy.

Jones says she is continuously asked about the length of time an employer should pay out these benefits. The confusion is not surprising given the patchwork of legislation that exists across Canada and the seeming lack of information on the topic. According to Jones, the questions come fast and furious, often when it’s too late and the costs of paying out these benefits become a financial burden on the plan.

“It’s never an issue until somebody goes on longterm disability. Then it’s suddenly: ‘How long do we have to keep him on EHC and dental?’”

The answer: it’s really up to the sponsor. But certain educational steps are critical in avoiding litigation.

There are several routes an employer can take. For one, employers who have a well-articulated policy— be it in the employee handbook, HR manual or employee communications material—and what they feel is a manageable coverage period, can simply choose the education route. That means ensuring employees are always informed about just how much coverage they will receive if they become isabled.

But for a company wanting to implement costcutting measures, the option of capping the duration of coverage does exist. For example, if a firm currently pays out EHC and dental until age 65, it can cap it at one year—or even six months after the date of disability. Jones has even heard of an employer restricting EHC and dental coverage to three months, though that’s not the norm.

The key to making the change is awareness. “[The policy] should be communicated in a number of ways in the employee booklet and then reinforced at the time of claim,” says Julie Fish, a principal and leader of Morneau Sobeco’s Absence and Disability Management Solutions practice in North York, Ont.

That’s because if the change isn’t communicated and HR personnel are having trouble recollecting what that policy is(is it a year? Or are benefits paid out until age 65?)and employees are left in the dark, the seeds of litigation are sown.

“There’s always potential for a lawsuit,” says Fish. Jones adds that if an employee believes they are covered until age 65, becomes disabled and then discovers the EHC and dental coverage is only paid out for three months, they could sue. “They will win,” she grimly predicts.

Yet, Fish says that if employers carry out “due diligence,” by adequately informing their plan members of the coverage periods for EHC and dental benefits, there will be less likelihood of a disabled employee claiming they believed extended coverage was in place—and commencing a lawsuit.

So the good news is that employers can change their EHC and dental coverage period, saving themselves a lot of money in an environment where LTD costs are increasing. But they have to remember that communicating the policy or any change in policy to employees is critical in preventing future lawsuits. When it comes to EHC and dental, they simply can’t fall down on the job.

Anna Sharratt is managing editor of BENEFITS CANADA.