Why you may want to opt out of your employer’s health benefits

TORONTO — Health benefits such as massages, eyeglasses and prescription drugs are often seen as must-have employee perks, but many Canadians may be unwittingly paying for their benefits twice and might want to consider opting out, experts say.

Those who have extended health and dental coverage through a spouse, partner or parent may not need coverage from their own employer — which isn’t always free.

“It doesn’t make sense to have double coverage,” said Rubina Ahmed-Haq, a personal finance expert. “So if there is an option to opt out, and you’re still covered… Why would you pay extra if you don’t have to?”

While most basic medical treatment is covered under Canada’s universal health-care system, additional services such as dental care and naturopathic medicine are often covered under a employer-sponsored benefits plan for employees and their immediate families.

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But organizations don’t always foot the entire bill — employees who split the cost of their benefits plans can pay nearly $1,000 per year for family coverage.

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Annual premiums for one full-time employee costs on average $2,102 for family extended health care coverage, according to a 2015 Conference Board of Canada report. For a dental plan, the average annual premium cost $1,419 for family coverage, the report showed.

More than one-third of Canadian companies split the cost of extended health care and dental family coverage plans with their employees, paying on average 73 per cent and 71 per cent, respectively, according to the Conference Board.

That means that each year, employees that share the cost of their benefits could contribute as much as $568 and $412 for extended health and dental family coverage, respectively. Together, that’s enough for a mortgage payment in some Canadian cities, a pure-bred puppy or a week-long cottage rental.

“If you are looking for ways to save money, that might be one way to make sure your dollars are being used efficiently,” said Ahmed-Haq.

There is also a trend towards more benefits plans requiring employee contributions, said Grace Tso, a partner at Mercer Consulting.

Roughly 57 per cent of organizations allow employees to opt out of all or some components of their group benefits plans under certain conditions, according to the Conference Board.

The main conditions include proof of comparable coverage elsewhere, most often through a spouse, the report said.

But children’s extended health care costs are typically covered until they reach age 19 if not a student, and age 22 if they are still in school, said Lorne Marr, LSM Insurance’s director of new business development.

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University and college students are usually given the option to opt out of the students’ union health and dental plan if they are still considered a dependent under a parent’s plans.

Employees are most often able to opt out of extended health care and dental plans, with roughly 86 and 85 per cent of organizations surveyed by the Conference Board saying they allow it.

If an employee is paying into a plan that does allow opt-outs, then couples and families should take a close look at their extended benefits plans for overlap, said Ahmed-Haq.

Group benefit plan contracts typically include what’s known as a co-ordination of benefits provision, which sets out a plan for how insurers handle payments for those who have coverage under more than one plan.

That includes issues such as who pays first but also stipulates that an individual can only claim as much as a combined maximum of 100 per cent of eligible expenses.

For example, an individual may have coverage for items such as prescription drugs at 80 per cent under both employers’ benefits plan, but the first insurer would pay 80 and the second payer will dish out no more than 20 per cent, said Marr.

Reimbursement won’t exceed 100 per cent, even though their contributions are going toward plan coverage that totals 160 per cent, he added.

While some benefits plans allow employees to combine the allotment for services such as massages and eye care between both employers’ plans, that’s not always the case, he added.

Take a close look at the contracts, as the overall amount a person can claim towards these services may be limited to a stipulated maximum annual or per-visit maximum between the two benefits plans, Marr added.

As well, compare the cost of the employee contributions to the actual benefits you are using, said Ahmed-Haq.

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“Is it costing you more than $500 a year? Would it be cheaper to get the extra massages and pay out of pocket?” she said. “It depends on how much you use that service.”

Its also key to evaluate how much a couple or family spends on medical and dental care, and if there are unique needs, such as high prescription costs or orthodontics, said Tso.

“This exercise helps to determine which employer plan fits their unique needs,” she said in an email. “In some cases, it may be that one employer plan is sufficient. For others, participating in both plans… for maximum reimbursement may be the answer.”

Choosing to opt out is seldom irrevocable, said Tso. If an individual is on their partner’s plan but their partner loses their job, employees have 30 days to notify their employer about the change and rejoin the plan.

However, opting out does come with an element of risk.

If your circumstances change, such as being diagnosed with a serious illness, it may be difficult to opt back in.

Plan members may be required to do a medical examination and provide other medical evidence when applying for coverage at a later date. Those with a pre-existing medical condition are unlikely to be approved, said Marr.

“If you developed a health issue in the future you may need to try re-qualify for the coverage. That’s one of the big risks.”

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