A Benefit Plan Shouldn’t Only Benefit Your Broker and Insurer

by Brent | Jul 30, 2025 | Uncategorized

A group insurance plan is a key component of competitive compensation packages and plays a vital role in both attracting and retaining valuable staff. As an employer, you offer a benefits plan to staff as a way to reward them for the amazing work they do each day in the community on behalf of your organization. Or perhaps you would love to offer staff a program but currently do not because you’re unsure if the organization can afford one. Group insurance coverage helps to protect staff in the event they incur health and dental expenses required to maintain good health, or in the unfortunate circumstance when they become ill and are unable to perform the duties of their job.

Insurance companies charge monthly premiums to the employer in exchange for providing benefit coverage to employees. There are many factors which come into play when insurers calculate billed premium rates, including:

• Census demographics (age, gender, salary, occupation etc.)
• Plan design (coverage levels provided to staff)
• Historical claims utilization (relationship between paid premium and paid claims)
• Inflation/trend factors (adjusting historical paid claims to account for the unavoidable rise in future claim costs)
• Plan expenses (broker commission & carrier expenses)

Why your plan expenses matter

When comparing providers, if everyone is looking at your same census demographics, plan design and historical claims utilization results, then how are real savings generated? There is a reason why the word ‘real’ is highlighted – so keep reading to better understand why!

You probably wouldn’t hire a contractor to renovate your home without knowing what they charge, yet when polled, most nonprofit benefit plan decision-makers do not have a good understanding of what their broker and carrier are getting paid to administer their plan. This can be a costly error of judgement as not all providers were created equally. It’s not uncommon to see a 10 to 15% variance in expense factors between providers – all to offer the exact same plan design to your staff.

Understanding the Target Loss Ratio (TLR)

Have you ever heard the term Target Loss Ratio (commonly referred to as the ‘TLR’) referenced in any of your insurance discussions? It’s a term that is often glossed over but it’s actually extremely important, as it’s the foundation on which your insurance house is built.  The Target Loss Ratio represents how much of each paid premium dollar is used to offset employee’s claims vs. how much is retained by the insurance company and broker as plan expenses – essentially it’s their breakeven position.

Think of it this way – when the insurance company receives a premium dollar, they first want to retain their expense component to offset operating expenses, pay claims, print booklets/drug cards and earn a profit. They then also have to carve out the broker’s commission and send them a cheque. Once carrier expenses and broker commission are taken, they are left with a pot of funds from which they pay eligible claims. In many cases however, at renewal time the insurer will advise that they didn’t receive enough premium to pay employee’s claims and therefore need an increase. Clearly if the providers took less for themselves and applied more to the employee’s claims, then by default the renewal rate action would have looked more favourable to the employer.

Economies of scale dictate that smaller groups will pay a higher expense factor as a percentage of premium because there are less dollars at play. For example, it wouldn’t be unrealistic for a small nonprofit, purchasing coverage on a standalone basis through a for-profit broker, to have a 70% TLR – meaning carrier and broker expenses are a whopping 30%! By comparison, a mid-sized organization might see an 80% TLR (or carrier and broker expenses of 20%). Large organizations can often secure a TLR in the 85% range and in some cases, providers which pool organizations together can offer an even greater TLR.

Don’t be fooled by the bait and switch!

It may come as no surprise that an unfortunate reality of the group insurance industry is that some providers will invest in artificially low rates to win new business, and then hike the rates at future renewals – the ol’ bait and switch! Thankfully not all providers do this, which is why it’s so important not to just focus on the quoted rates and offered savings being presented, but also on what expense factors are being used to calculate the rates themselves.

The truth is that any provider can offer savings which will evaporate down the road (that’s the easy part). The harder part is creating real savings through reduced plan expenses, as these reductions would therefore apply every single year. Every dollar less that your providers take for themselves, is one more dollar being reinvested back into making your benefits plan sustainable over the long term.

Health Spending Accounts

by ojtbfadmin | Dec 19, 2016 | Uncategorized

Having a Health Service Spending Account (HSSA) offers plan members the flexibility to use health care dollars where they need them most. When it comes to health care needs and costs, no two individuals are the same. Out of pocket expenses for you, your spouse and children or even other adults dependent on you for support can be quite costly. A Health Service Spending Account is a useful tool to help manage those costs. The information provided below is designed to help explain how an HSSA can work either on its own, or in conjunction with your Group benefits program, to maximize reimbursement to you.

Benefits vs. Health Service Spending Accounts ‑ What are the Differences?

In a typical Group insurance benefits program, money is paid into the plan either by the employer, or through a cost sharing arrangement between the member and employer, in the form of premiums. The premiums are then used to pay eligible claims submitted by covered members, in addition to the insurer’s expenses to pay those claims. Conversely, funds placed into your HSSA are deposited by your employer strictly for the use of you and your eligible dependents.

While Group insurance benefits programs are designed to meet the needs of all covered members within the group, an HSSA is designed to meet your needs exclusively because you ‑ and only you ‑ decide how that money will be spent.

Who is eligible?

The Income Tax Act of Canada establishes the criteria for determining eligible dependents. In general, these definitions are broader for an HSSA than for a traditional benefit plan. In addition to coverage for yourself, your spouse and children, an HSSA, for example, allows you to cover health related expenses for family members who qualify as a dependent of yours for income tax purposes.

What is considered an eligible expense under an HSSA?

In general, expenses are eligible for reimbursement if they qualify as a medical expense tax credit under the Income Tax Act of Canada and Canada Revenue Agency (CRA) regulations.

For more information about eligible expenses, consult your personal tax advisor or visit the Canada Revenue Agency website at http://www.cra-arc.gc.ca/ and enter Medical Expenses into their search engine.

What are some expenses not eligible for reimbursement under an HSSA?

Some examples of items not covered under an HSSA include, but are not limited to, the following:

• Provincial Health Care premiums
• Extended Disability Benefit premiums
• Life Insurance premiums
• Interest charges on eligible expenses
• Fitness equipment or gym memberships

Are there tax advantages of an HSSA? 

Not only does an HSSA provide you with additional choice for managing health care costs, it also makes every dollar go farther. This is because an HSSA uses pre-tax dollars to pay for eligible expenses ‑ funds deposited into an HSSA are not factored into your personal income for income tax purposes. To illustrate the tax advantage, we have provided the following example:

Mark works full time as a Counsellor. Mark’s dependents include his wife Cindy and their two children, Caitlin and Brittany. Cindy is self employed and does not have a Group benefits program of her own.

Mark’s employer deposits an HSSA credit of $1,000 for the 2009 year (using an HSSA plan year of January to December). Mark and his family incur out of pocket health expenses not covered by either provincial health care or Mark’s Group benefit plan as follows:

To illustrate the tax advantage, here is what the real cost of these expenses would look like when paid with and without an HSSA.

How to maximize reimbursement and minimize out of pocket expenses

When you incur health care expenses, whether you’re paying dispensing fees at the pharmacy or funding your laser eye surgery, you have to choose where to submit those expenses. Depending on what you choose, you can be taking full advantage of your benefit plan and HSSA and minimizing your out-of-pocket expenses.

First, Check Your Group Benefits Program

If you are covered under a Group benefits program, you should send the expense through your benefit plan first ‑ before you submit it through your HSSA.

This ensures the benefits plan (funded by the premiums being paid) is being utilized before exhausting your HSSA dollars. Using your benefits program to pay for expenses covered under the plan allows you to save your HSSA dollars for expenses that are not covered under the benefits program.

Next, Check Your Other Coverage

If you are also covered as a dependent under your spouse’s coverage, there may be an opportunity for you to submit your expense as a claim under their program. Submitting unpaid expenses for reimbursement under a spousal program is referred to as Coordination of Benefits (COB). Click here to read more about COB.

Coordinating your benefit coverage gives you another opportunity to use a Group plan funded by paid premium dollars before using your personal HSSA dollars to pay for your expense.

Then Send the Expense to Your HSSA

Once you have exhausted all benefit options available to you to reimburse your out of pocket expense, you would then tap into your HSSA for payment. It is important to remember to keep documentation of your out of pocket expenses and any payments made to you through other benefit options.

Submitting a claim to your HSSA

Once you have exhausted all benefit options available to you and you still have an out of pocket expense, you should submit the remaining expense to your HSSA for payment consideration.

For example, if you had a Chiropractic expense at a cost of $90 for which $50 was reimbursed through your Group benefits program and $20 from your spouse’s plan ‑ the remaining $20 would be eligible for reimbursement from your HSSA.

How to submit a claim to your HSSA:

1. First submit your Health/Dental claim with the original receipt to the Primary Carrier (refer to the Coordination of Benefits bulletin on our website for a detailed explanation of this process). Be sure to keep a copy of the original receipt and then allow the claim to be adjudicated through the Primary Carrier’s benefits program.
2. If you are still out of pocket after the Primary Carrier has adjudicated the claim, submit a claim to the Secondary Carrier (if any) with a copy of the original receipt and copy of the Primary Carrier’s Explanation of Benefits (EOB) for reimbursement.
3. If you are still out of pocket after the Secondary Carrier has adjudicated the expense (or you do not have a Group Health/Dental plan of your own or through a spouse), you would then complete a Health Service Spending Account Claim Form and submit either the original receipt if you are not coordinating with another plan, or a copy of the original receipt along with copies of relevant EOB’s to SSQ Financial for reimbursement.

Carry Forward & Forfeiture Rules 

Under the Income Tax Act of Canada, an HSSA must include an element of risk in order for it to maintain its tax exempt status. As such, your unused HSSA credits will be carried forward one HSSA year. If you do not use these credits in the second HSSA year, you will lose them. This is known as forfeiture.

Example: carry forward of unused HSSA credits

*Using the principle of first in, first out ‑ the carried forward 2009 credits are used first. Please note that expenses incurred within the plan year and not submitted within that plan year or its 30 day grace period cannot be reimbursed nor can they be carried forward.

Example: forfeiture of unused HSSA credits.

*Using the principle of first in, first out ‑ the carried forward 2009 credits are used first. **(i.e. 2009 carry forward of $400 minus 2010 eligible expenses of $350 = 2009 credits forfeited of $50)

Termination of Employment 

HSSA coverage ends on your date of termination from the employer and no further HSSA deposits will be made after that date. You do however have a “run-off period” of 6 months to submit expenses incurred in the plan year up to the date of termination. After that time, any unused credits remaining in your HSSA will be forfeited.

Example:

In the Event of Your Death 

Your HSSA terminates on the date of your death. You will not receive additional HSSA credits after that date. Your dependents or beneficiaries have a run-off period of 6 months to submit expenses incurred up to the date of death. After that time, any unused credits will be forfeited.

Coordination of Benefits (COB)

by ojtbfadmin | Dec 19, 2016 | Uncategorized

Due to the growing availability of Group benefit plans and the increasing number of two-income families in today’s society, more and more individuals are being covered under both their own plan and that of their spouse.

A common provision found in most Group contracts is known as “Coordination of Benefits”, which allows an employee to claim under two or more Group benefit plans for up to 100% of a covered expense. However, benefits under all plans are “coordinated” to ensure that the total reimbursement from all plans does not exceed 100% of the eligible expense.

When explaining the process, terms such as “Primary Carrier” and “Secondary Carrier” are often used. The Primary Carrier is the insurance company responsible for making the initial payment toward the eligible expense, and the Carrier to whom the claim should be submitted first. The Secondary Carrier is the insurance company responsible for paying the balance of the eligible expense. Every insurance carrier adheres to the same rules as it pertains to Coordination of Benefits, and the following guidelines will help establish the accepted process for members to follow:

Which plan is Primary Carrier?

• The Primary Carrier is the carrier that covers the individual: as an employee or member (i.e. not as a spouse), or as a dependent child of the covered parent whose birthday falls first in the calendar year (not the oldest, but the earliest birth date in the year).

• The Secondary Carrier is the carrier that covers the individual: as a dependent spouse, or as a dependent child of the covered parent whose birthday falls later in the calendar year.

Here’s How it Works

Forward your claim to the Primary Carrier as defined above, and attach all original receipts for the expenses incurred. Be sure to also keep a copy of all receipts.

The primary carrier will evaluate the claim and make payments based on your eligibility and the expenses covered by the plan. Along with payment, the primary carrier will provide you with an Explanation of Benefits (EOB).

Should 100% of the submitted expenses not be reimbursed, you would then submit a claim to the Secondary Carrier, along with the EOB from the Primary Carrier and copies of all receipts.

The secondary Carrier will evaluate the remaining expenses based on the plan insured by that carrier and will make payments accordingly for up to 100% of the expenses incurred (in combination with the primary carrier’s payment).

It is important to note that in order to take advantage of Coordination of Benefits, the member and/or spouse and any children must be considered eligible dependents under the other’s Group plan (i.e. a member cannot coordinate with their spouse’s plan if they both have elected single coverage).

Dispensing Fees and Health Benefit Costs

by ojtbfadmin | Dec 19, 2016 | Uncategorized

Dispensing fees can have a significant effect on drug plan costs, as they ultimately play a role in determining the rates charged to policyholders and their employees. Encouraging plan members to be smart consumers, in addition to considering a dispensing fee cap as part of your plan design, can help mitigate rising drug benefit costs.

Pharmacists independently set the fees they charge to dispense medication ‑ some have lower fees than others. There are often variations in pricing throughout a province or even within a larger city. While there are exceptions, chains like those listed below, tend to be relatively consistent in their pricing.