Typically, most group employee insurance plans provide partial coverage. They have restrictions on what health-care expenses are covered and/or limits on the value of coverage. For example: individual plan members can benefit from unlimited claims for certain expenses, such as prescriptions, while other members may not spend as much as they are entitled to for expenses that have thresholds.
If premiums paid for a group plan are insufficient to cover the actual costs (claims & expenses) incurred by the insurer of the plan, the premiums usually increase the following year; even if the claims are low, you may still see a premium increase; for various reasons. The premiums paid for extended health, drug, vision and dental care are not taxable benefits to the employee; but are tax deductible to the company for business purposes.
Our approach to employee benefits is quite different from most providers.
These days many owners-managers consider company sponsored health-care plans for themselves and their employees. We help clients consider the potential risks and costs before they decide whether to: (1) implement a group health-care plan, where the risk is borne by the insurance company or (2) a self-insured plan, wherein you (the employer) carry the risk.
In many cases, it makes sense (and saves $$$), to implement a combination of (both) a traditional Group Heath Care Plan and a Self-Insured Plan.
We provide the Life, Accidental Death and Dismemberment (and if desired, Critical Illness coverage) and Disability coverage using a traditional group plan approach.
Then, the Extended Health including Drugs plus the Dental coverage is provided by setting up a self-funded plan which can be done in two (2) ways.
(1) One option is a “private health-care spending account” or PHSP where the employer designates a set amount of money each year from which the employees can claim eligible medical expenses under the Income Tax Act.
(2) The Second option is a “cost-plus” plan where the employer contracts with an insurance company to indemnify claims by employees for certain risks defined in the plan. The employer agrees to reimburse the cost of claims plus an administration fee to the plan or insurance company. The employer can then deduct 100% of these costs as health-care expenses. Unlike group plans that include administrative expenses in the premiums, a cost-plus plan is a service contract with charges specific to the services provided. A fixed start-up fee plus transaction fees to process claims are also tax-deductible; benefits received by the employees are tax-fee. Any premiums paid by employees qualify as medical expenses.
Health care spending accounts and cost-plus plans are tax-effective ways to obtain enhanced group coverage that would not normally be eligible (or affordable) under most group plans. The Income Tax Act defines the expenses eligible for coverage but does not place a specific dollar limit on the amount of coverage.
However, every group plan is different! Therefore, we recommend that you phone or e-mail: Ken MacCoy for a comprehensive “No Obligation” review and market survey to determine if you are indeed receiving the best coverage for the most competitive premium.