Why Have Normal Benefits When Times Aren’t Normal?

This past year our lives have undergone extraordinary change, thanks to the COVID-19 pandemic that has shaken the globe. As a result, the world of healthcare has changed drastically, with this global health crisis flooding emergency rooms and standard medical consultations taking place virtually rather than in-office. These changes have affected how people use their benefit plans.

An employee benefit plan is essentially a promise between an employer and a group of employees. Considering the unprecedented state of the world in this past year, how have benefits been adapted? Has the COVID-19 pandemic affected the world of employee benefit plans? Should it?

What’s Happened So Far?

Since March 16, 2020, the province of Ontario has been in and out of various levels of restrictions that have affected our businesses, personal lives, healthcare practices, and finances. With much of the past year having been spent in a state of province-wide shut down, insurance claims have been significantly reduced.

The majority of large businesses follow an Administrative Services Only (ASO) plan. Under these restrictions people have been unable to visit their doctors, dentists, physiotherapists, and any other non-essential healthcare service. By extension, insurance companies have been receiving significantly fewer claims, approximately 50% of the standard pre-covid reports. This means that corporations have been able to contribute 50% less to their employee benefits plans, without breaking their original promise.

For small and mid-sized employers, however, traditional benefit plans have not been working well in these extenuating circumstances. The plan sponsor often has little to no control over the costs, and many small businesses have experienced a reduced cash flow. This has created a great deal of strain amidst a period of uncertainty, as employers have still had to pay full premiums for employee benefits plans. Sure, insurance companies have provided premium credits for small businesses, but these credits came too late and left too soon, leaving small business owners struggling. Despite claim levels having decreased significantly, clients are still paying their full premiums.