Understanding Your Employee Benefits Plan’s Monthly Contribution Amounts
As Canadians, we are lucky to have access to some of the best public health care in the world. Having a good employee group benefits insurance plan will help you with the gaps in your coverage such as prescription, dental, short term and long term disability, vision care, preventative therapy and more.
With a group benefit plan typically comes contributions from your paycheque. It’s really impossible to give an exact amount on how much someone will pay, it really varies based on their plan and the amount the insured employer covers. Automated payroll is used in many workplaces and people become accustomed to payroll deductions. Money is transferred and instantly and deducted, many people rarely pay too much attention to their pay stub after a few pay periods. It’s important to have a good understanding of your plan’s deductions for both your day-to-day financial planning and for future tax purposes.
In addition to regular payroll contributions, the insured employee will most likely need to pay deductibles when benefits are utilized. It can be challenging to gain an understanding of which benefits are taxable and which are not. Some plans will require you to pay benefit costs upfront with the insurance company reimbursing the covered amount. Online accounts make this process much quicker and easier to manage.
Employees with dependents such as a spouse and/or children will generally pay a higher deduction amount than the amount a single person would pay. Again, the differences will vary based on the plan itself.
Benefits are an excellent way for a company to attract and retain talented employees. A strong plan provides a lot of value to a compensation package, also producing a healthier and happier workplace environment. Even with a public health care system, Statistics Canada estimated that the average Canadian household will spend $2,000 on health care costs and an additional $4,000 on private insurance premiums. The study found that 65 percent of Canadians have some form of private health insurance, usually in the form of an employer operated benefit plan.
The cost of group benefits plans has increased across the country and there are various factors to blame. Today’s average worker is older as more Canadians continue to work longer. An aging workforce causes more insurance claims and increases the overall amount you and others will pay. We’re also seeing a dramatic increase in the cost of prescription drugs; this too plays a big factor in the amount deducted from your paycheque for benefits.
Many Canadians are actually unaware of the value of their plan. An employer will typically make contributions which over time add up to a substantial amount of money. It’s easy to understand your salary, but it might be harder to understand the value of a group insurance plan and the value associated with each individual benefit.
We all have different needs and place a higher value on specific benefits. An employee with children will place a heavier value on a plan with strong dental and prescription coverage, allowing you to have the coverage needed for you and your family and potentially saving thousands of dollars during the course of a year. Those nearing retirement will want to have a plan more designed for their own path. Perhaps you like to travel; you will want to ensure your benefits plan has a strong travel coverage option. There are hundreds of hypothetical coverage scenarios out there, and a plan’s ability to address each element important to you could potentially save you a lot of money and stress.
There are many things to consider when evaluating a new job offer. Salary is usually the main factor, but it’s also important to take a detailed look at an employer’s group benefits plan. You’ll want to break down the various benefits included and the potential financial impact the coverage will have for you and your family. A well-designed benefits plan carries a lot of value and should be considered at the same level as your potential salary. Every plan will come with some out-of-pocket expenses; don’t be afraid to ask for a summary of these fees when evaluating your offer.
A missing piece on contributions is the employer and employee shared responsibility. While the employer may be holding up their end of the bargain, they should have regular education sessions with their plan advisor to ensure the employee’s get full value for their program. The reciprocal is true. Employees even though they typically take a benefit plan for granted, need to understand they have some proverbial “skin in the game”. If they abuse or don’t manage their claim costs they should expect the plans costs which will include both their portions they contribute as well as the employers, will rise. Too often there is an attitude that “this is my benefit amount I better use it before it’s gone”, instead of using what you need and just that.
In addition, looking at things like drug costs and helping to manage these by selecting either generic or therapeutic equivalents can have major impacts on claims experience and future rates. There is value in having both the employer and the employees come to regular sessions about managing the costs of their plan. Both sides need to take some ownership and your plan advisor is the best individual to talk to in this regard and in most cases more than willing to come out at least annually to provide this kind of dialogue.