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Employee lay-offs and stoppage of work during COVID-19: Best practices for continued health coverage and premium management
- By Howard Cheung, Account Executive, Immix Group / March 31, 2020
Making the decision to lay off employees is not an easy thing to do. More than anything, many employers just want employees to be safe and healthy, and to return to work when operations are back to normal. Unfortunately because of cash flow pressures, many employers have been forced to lay off their staff, or are considering this move. While we are hopeful that the government support programs* detailed over the past days help employers to avoid layoffs, it is inevitable many will still need to take this step.
*The Government of Canada has released details on financial aid for both individuals and businesses, including a notable wage subsidy program, as well as the Canadian Emergency Response Benefit (CERB). These programs are intended to provide immediate financial aid, and to help businesses avoid layoffs during this time. Please find details here: https://www.canada.ca/en/department-finance/economic-response-plan.html
Extension of benefits during layoff
For some, the reduction in expenses due to no longer paying wages is enough to ease the pressure. For others, benefits are also unfortunately being suspended. If you do want to extend benefits, and you’re able to do so, financially speaking, what should you be considering? There are numerous questions surrounding this:
- What is the process to do this?
- Which benefits are eligible for extension, and for how long?
- Can we apply for benefit premium reductions?
- Can we defer our program renewal?
- What else should we be doing?
To answer these questions, Employers need work with their Employee Benefits Advisors to assess the details. Here are some best practices to apply, and key guidelines to know.
*Note: This information is not specific to any one carrier as each has subtle differences. Due to the unprecedented nature of COVID-19, some of these are offered on an exceptional basis.
Typical layoff provisions in a benefits contract
In most benefits contracts, there is typically a layoff provision that allows benefits to be extended (with premiums paid) for up to 6 months. When the employee returns to work, they may be reinstated without any medical underwriting or requirement to serve the waiting period. Some carriers do not allow short-term and long-term disability to be included during this extension. And for those that do, most limit the duration of this to a shorter period than what would apply to the health and dental coverage.
Furthermore, the provision could change depending on whether it is a temporary vs indefinite (no set recall time) layoff. Clients that do not have a layoff provision should review this and request one to be added.
Reduction in work hours and the impact on benefits eligibility
Many employees may be facing significantly reduced hours instead of a full layoff, and they may be below the minimum hours required to receive benefits. This is typically around 20-30 hours per week, or, you may have set your own minimum hours at the time your plan was established.
Some carriers are making an exception to this usual rule, and are not applying the standard requirements related to the minimum number of hours worked to be eligible for benefits. This is good news for those who wish to keep benefits running as usual.
Deferral of your monthly benefits premium payment
As many Canadian businesses are facing financial strains, many carriers are offering to extend the payment grace period (normally 30 days) to 60 or more days. This means that member claims will not be suspended even if you cannot make your usual payment (up to a certain period). We believe this will continue to be offered, while business is affected in the manner we are currently seeing.
Deferral of your annual benefits renewal
For those on insured benefit plans, many carriers are helping to alleviate pressure on Canadian businesses by allowing renewals to be deferred. This means rate changes and any contract adjustments would not apply at the usually scheduled time. The deferral period varies from 1-4 months depending on the carrier, and this could change depending on how businesses are impacted going forward. So, if you have a renewal pending, and perhaps a premium increase had already been indicated (for example, for April 1st), this will not apply until later and a retroactive adjustment will not be required. This deferral does not apply to ASO (administrative services only) as these are self-insured. In cases where you are expecting a proposed decrease in rates, that could still apply so that you are not losing out on any reductions.
Partial reduction of benefits coverage
To help alleviate financial difficulties while still wanting to provide vital health benefits such as drug coverage, most carriers are allowing certain benefits to temporarily be removed. In turn, this can reduce your premium. The most relevant benefit line for which this is applicable is the dental portion of the plan, as dental offices are currently closed. Dental premiums may be significant, and even up to 50% of your entire monthly benefits premium. Please note that this change would apply to the whole group, including active employees.
Temporary suspension of all benefit lines
Some businesses may wish to temporarily suspend their entire benefits program due to economic uncertainty. If all benefits have to be fully suspended for all members (laid off and active) then some carriers are allowing premiums and claims to be temporarily stopped for 3-6 months with no administration charges for reinstating. During a period of suspension, it is important to note that any claims incurred, including disability claims, will not be covered. This is an extreme measure.
It is important to note that there will be no waiting periods nor medical requirements (evidence of insurability) to reinstate employees when it is time to get benefits back up and running.
This is the time to promote your EAP
COVID-19 isn’t just affecting employees’ physical health, it’s causing mental health issues due to job and family stress, isolation, and general anxiety about the situation. Employer-provided mental health programs like EAP (Employee & Family Assistance Programs) can have a positive impact. So don't forget about communicating the access details for your EAP if you have this included in your benefits program (a lot of plans include at least a basic EAP). EAPs can help with personal, emotional or work-related problems that affect health, mental or emotional well-being. They are available 24/7 in multiple languages!
Assess your Employee Benefits strategies
In short, businesses can continue to help support their employees’ health by continuing employee benefits via a variety of strategies to help alleviate financial pressures. Even if it is a full benefits suspension, it is essential to work with your benefits advisor to ensure the details are handled properly. With all the daily changes, keeping an active communication channel with your benefits advisor is important during this time.
As a consultant with the Immix Group, a full-service benefits firm with innovative solutions, we want to help. We are offering free consultations to any Canadian business, regardless of whether we are already partnered in business or not. We can work together to determine the best strategy for your situation.
For more information, please feel welcome to contact me: email@example.com