How Families can take full advantage of their employee benefits
Often, when both spouses are working, they each have access to employee benefits plans with their respective employers. When that is the case, there are two options:
- One spouse can waive the health and dental portion of their plan, retaining the life and disability coverage, and be included as a dependent on their spouse’s plan.
- Both spouses to opt for family coverage and co-ordinate the health and dental benefits plans. This is known as the Coordination of Benefits (COB).
What are the advantages?
When the plans are coordinated, the family can access a wider selection of benefits, higher claims maximums per benefit and/or full payment on claims where there is normally a co-payment (not including deductibles). Where each plan might pay 80% of drug costs, for example, the combined plans will pay 100% (of the eligible expense). If a plan member has exhausted their annual maximum for a paramedical service or dental, the second plan can then be accessed to the annual maximum. Where one plan offers a benefit the other doesn’t, all family members will be able to get that benefit.
How does COB work
The Canadian Life and Health Insurance Association (CLIHA) sets out guidelines as to how insurance carriers and claims payers should treat COB.
Whose plan pays first?
- If an employee is covered by a benefits plan, that plan always pays before a plan that covers them as a dependent. They must, therefore, submit claims to their own plan first then submit to the spouse’s plan.
- When there are eligible dependent children, the claims are first submitted to the plan of the spouse with the birthdate earliest in the year. (e.g. if Don’s birthday is in March and Betty’s is in June, the kids claims go to Don’s plan first (if their birthday is the same day, they default to the parent whose first letter of their name is first in the alphabet).
- In a divorce situation, the custodial parent’s plan pays first. In case of single custody where that spouse has re-married, the new spouse’s plan becomes second payor and the plan of the parent without custody pays third.
- Often, a post-secondary student fitting the plan eligibility requirements may also have a plan through their learning institution. In that case, the parental plan(s) become second (and third) payor.
How are the benefits paid?
The plan that pays first calculates the claim payment irrespective of any other plan. The second payor pays the lower of:
- The amount that would be payable as the first plan or
- 100% of the eligible expense less what has already been paid
The combined payments will never pay more than 100% of the claim. However, most carriers will now adjudicate according to reasonable and customary limits. Sometimes a pharmacy or a service provider will charge above those limits, in which case the coordinated payments may not cover the full amount paid therefore requiring the employee to pay the difference.
For example, if the R&C for massage is $85 and the employee paid $100:
- First payor (an 80% plan) pays $68
- Second plan pays $17
- Employee pays $15
Some carriers will, as second payor, simply make up the difference to what was paid in total by the employee but there are very few who still do.
Coordinating benefits can help families to widen the scope of benefits available to them, as well as reduce the cost of the benefits they use. Contact your benefits carrier or ASSOCIUM Benefits if you have questions regarding your family’s specific needs.
ASSOCIUM Benefits is a very unique employee group benefits provider, focused on supporting benefits advisors and their employer clients. We provide Brokers and Plan Sponsors with a range of solutions from traditional group benefits to more customized, cost and tax effective employee compensation. Let’s connect to find out how we can help.