Figuring out group benefits can feel like navigating a labyrinth where you aren’t sure what’s myth and what’s fact. Confusing jargon like “target loss ratio” and “pooling costs” only make it harder.

Let's shed light on the puzzling world of group benefits. Debunking myths and revealing truths that savvy business owners should know.

MYTH: "Insurance” always makes sense

This is the big one. Premium-based insurance like life, critical illness, or disability is the right tool to protect your team from major events. It doesn’t make any sense to pay premiums for transactional health and dental benefits.

A quick recap: 

Transactional benefits cover the low-cost, low-risk expenses that we’re most familiar with. Dental cleanings, monthly massages, and regular prescription drugs all fall under this category.

True insurance is when you pool many people, and they all pay a small premium in case something tragic happens to any of them. It protects against catastrophic, high-cost events such as a severe work injury, or an unexpected death.

By paying premiums for your health and dental expenses with insurance, you are overpaying the insurance company to handle plannable, routine claims.

Instead, opting for a solution like a Health Spending Account (HSA) caters to the transactional nature of health and dental expenses. With no premiums in sight, funds contributed can grow monthly. So, you can save up for those plannable dental cleanings or massages without paying a premium.

MYTH: With lower usage, comes a lower premium

Group Benefits, when managed through insurance companies, come with a catch—rising premiums. Yes, the explanation is that with higher usage comes a higher premium. The insurance company needs money in their pockets to pay claims.

So, using that same logic, if your team’s usage goes down then the premium will fall too, right?

Nope!

When your usage goes up even the slightest, it becomes the new bottom. That premium will be based on that usage and often only ever goes up.

So, what do you do? Well, you have three choices really:

1. Stick it out and find a way to pay more each year;
2. Go plan shopping every single year to avoid the higher rates; or
3. Go with a cost-efficient solution like a Health Spending Account

What will your choice be?

MYTH: Drug coverage on premium-based plans protects your team

The prescription drug landscape has changed, and premium-based drug plans haven’t been able to keep up. You don’t have to take our word for this one though. A quote from a Canada Life Representative in the 2021 Sanofi Canada Healthcare Survey said:

“I don’t think any employer envisioned a drug that costs hundreds of thousands of dollars annually on a recurring basis. Our benefit plans were not designed for that...”

If drugs were fully covered and someone needed a high-cost drug these large costs would be passed on to your plan. The insurance company then sees the high usage, knows it will continue, and charges you more to pay these claims. 

Because a single employee claiming a high-cost drug would derail a plan that covered all drugs, insurance companies limit the risk by designing drug plans with significant limits on exactly what and how much your team can claim. However, these restrictive rules reduce the value of the coverage.

So, if insurance isn’t the way, then what is?

For regular prescription drugs, an HSA can take care of these smaller recurring costs (with no caps or copays).

For high-cost drugs, Government programs are better than you think. Every province has programs to help Canadians offset the costs of their prescriptions. They are income-based and can be less expensive than claiming through group benefits.

MYTH: You can’t cancel a plan until renewal

This is one of the most common myths in the industry – even advisors believe it to be true! Most think that your benefits plan is a contract like you’d see with a phone plan. If you cancel early, there will be some kind of consequence (usually financial).

In reality, the insurance company has an obligation to maintain the prices charged until renewal. The business, however, only needs to give a 30-day notice of termination.

This begs the question, if you know you’re paying too much, or that your team is unhappy, why wait? Especially when there are better and more flexible options available!

If you’re ready to jump ship, give our Growth team a shout. We’d be happy to transition you into a plan your pockets (and team) will love.

MYTH: Having “skin-in-the-game" lowers premiums and makes employees more responsible

In the Group Benefits world, “skin in the game” means making employees pay part of their group benefits premiums to “take ownership” over them. We wrote an entire blog on it that dives deeper into the concept here.

The problem with this tactic is that employees will think, “If I have to pay more for a plan I better use it!” and they’ll work hard to maximize their benefits. Greater usage means higher premiums (the opposite of what you were trying to accomplish). So, skin in the game is really a bandaid solution to deal with rising costs.

In the end, your premiums will go up and your team will be spending money on their benefits when they could’ve just paid for the expense out of pocket.

Navigating future labyrinths

Understanding the nuances of group benefits is important for businesses. It's about escaping the traditional insurance mindset, exploring cost-effective solutions, and empowering teams with flexible benefit structures.

The path forward demands a shift toward strategic benefit management. Empowerment, transparency, and control over costs pave the way for a more fulfilling, value-driven, and equitable approach to group benefits.

If you want to see how easy navigating the maze of Group Benefits can be, give our Growth team a shout. Or if you want more great benefits content, check out our blog hub, Twitter (X), Facebook, Instagram, or LinkedIn.