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Your Group Insurance Guide: Start to Finish

By: Benefits by Design | Tuesday February 18, 2020

Updated : Thursday August 5, 2021

This is your Group Insurance Guide, taking you through the entire process of sourcing, researching, quoting, implementing, maintaining, and renewing a group insurance plan.

Use the Table of Contents to your left to skip ahead to the stage of the process you’re in, or if you’re new to group insurance, just start reading.

#1. What is Group Insurance?

What is Group Insurance?

Group insurance provides a specific group of people (i.e., employees of a workplace, association, or union) with benefits coverage. Insurance protects against the financial consequences that may occur in the event of illness or death.

How is group insurance different from individual insurance?

Employers, a workplace, or even a society or association offer group insurance. Group insurance provides coverage for a group of people and often their dependents, such as spouses or children. 

An individual can purchase individual insurance. Individual insurance is generally more expensive, as the risk of a claim cannot be spread across a group of people.

What benefits coverage can employees get through group insurance?

Coverage available to employees varies based on the employer. The employer is the one who decides the coverage. Some of the most popular group insurance products include Health Insurance, Dental Insurance, Life Insurance, and Disability Insurance, either Long Term or Short Term.

What are the benefits of group insurance?

For employers, offering group insurance leads to:

  • attracting and retaining top talent in the workforce;
  • being competitive in the marketplace for potential job-seekers;
  • protecting the health and wellbeing of employees and their families; and
  • increasing productivity, engagement, and job satisfaction of employees.

For employees, having group insurance means:

  • lower costs than purchasing individual insurance;
  • financial security in the event of an illness or injury; and
  • protecting the health and wellbeing of themselves and their family.
#2. How does Group Insurance Work?

How does Group Insurance Work?

Before choosing a group insurance plan, you’ll want to a better understanding of risk.

What is risk?

Risk exists when there is uncertainty about the future. Individuals are at risk due to potential loss that may occur from unexpected illness or death.

From a group insurance perspective, insurers can afford to be financially responsible for the risks of the individuals they insure (or risk pooling).

Insurers know that not everyone who is issued a life insurance policy will pass away. For example, a policy may have 100 covered employees, but only a small percentage will make a life insurance claim. By collecting premiums from all insured individuals under that policy, insurers spread the cost of the few claims among all insured persons.

How do you typically finance your group insurance program?

Plan financing determines who pays the various costs incurred to provide benefits. The employer may pay for the entire cost of the benefits plan, or they may require that the employees contribute. If the employee pays a portion of the premium, this is known as a cost-sharing arrangement.

Employees may also contribute towards their benefits plan by paying a fixed out-of-pocket amount for a service incurred. For example, an employee may have 80% coverage for their dental insurance. When the employee visits the dentist, their insurance will cover 80% of the cost, and the employee will pay the remaining 20%. This arrangement is known as a co-pay or coinsurance.

#3. Get Started with Group Insurance

Getting Started with Group Insurance

Before you even begin thinking about choosing your benefits coverage, you should determine your benefits philosophy and find the right Advisor.

Determining your benefits philosophy

Determining your benefits philosophy goes deeper. Employers providing insurance need to ask themselves why they’re offering employee benefits. The “why” helps an employer make informed decisions about the kinds of coverage to provide to achieve those goals.

If your goal is to attract and retain top talent, you might consider offering an employee benefits plan that includes coverage for services like massage. Massage falls under a branch of services known as paramedical services. Alternatively, if your goal is to protect your employees from unforeseen expenses that might leave them financially at risk, you might prioritize catastrophic coverage instead.

Employers with a firm understanding of their benefits philosophy will be more successful in implementing their benefits plan. They’ll reduce money spent on coverage that employees either don’t want or won’t use.

#4. Finding the Right Group Insurance Advisor

Finding the Right Group Insurance Advisor

At this point, you probably realize that group insurance can get very complicated very quickly. Fortunately, there is a person who can navigate the group insurance landscape, answer questions, and help you find the right coverage. This person is a group insurance Advisor.

The role of the Advisor

An Advisor’s purpose is to assist employers through the group insurance process. Advisors act as consultants, offering their expert business or technical advice on employee benefits plans. They also act as a Broker or Agent, representing your organization to the various insurers, and advocating for the best benefits plan design within your budget.

Don’t have a group insurance Advisor yet? We know some of the best! Let us connect you with one from our network of 1,000+ Advisors.

Find an Advisor
#5. Finding the Right Coverage

Finding the Right Coverage

With your benefits philosophy in mind and an Advisor by your side, it’s time to find the benefits coverage that will work for your business.

Cost of benefits: value vs. price

Although it can be attractive to shop around for the best deal, employers taking the cheapest group insurance coverage may be doing more harm than good. Many insurers reduce or lower their rates for the first year of an employee benefits plan. These insurers may remove those discounts when the plan is up for renewal, which can lead to a significant rate increase and an unsustainable benefits plan.

At Benefits by Design (BBD) Inc., we believe that a benefits plan should be sustainable for the long-term. There are many advantages to keeping your benefits coverage with the same carrier over the years. Not to mention you won’t have to select a new insurer and then re-enroll all your employees.

We understand that the cost of benefits is an essential factor to consider, which is why it’s our recommendation to start small and build a benefits plan alongside your business.

Start small and build

When offering an employee benefits plan, it’s much better to start small with essential coverage and add more benefits later. Why?

  • Employees don’t like losing coverage. Starting out with a comprehensive insurance plan sounds smart in theory. However, you may come to realize that the cost of such a plan is unsustainable. It’s more important to know what your employees need and will use so that they don’t lose out on coverage.
  • You’ll have room to grow. As your organization grows, your benefits plan can grow with it. That could mean adding or expanding coverage or even just adding new employees.
  • It’s less costly. Starting small allows you to spend money on the essential benefits. If your plan has too much, you may pay for benefits that are not used.

In cases where the cost of benefits or the volatility of claims is a concern, options like a Health Care Spending Account (HCSA) can provide coverage to employees and cost-containment for employers. HCSAs are a great way to start small!

#6. Quoting Process

Quoting Process

Once you and your Advisor have determined what coverage you’re looking for, your Advisor will approach different insurers to secure a quote. These insurers require necessary information about your business, your employees, and the type of coverage you’re looking for to provide a quote:

  • Business name
  • Industry
  • Length of time in business
  • Whether or not you have prior experience with an insurer (if so, you will need to provide claims history and rates)

Coverage requested, including:

  • Specific coverage requested, and any additional information required to quote the requested coverage

Employee information and demographics, including:

  • Age
  • Sex
  • Marital status
  • Occupation
  • Salary
  • Province of Residence
  • Whether or not they are seeking coverage for themselves only (Single coverage), themselves and one dependent (Couple coverage), or themselves and their family (Family coverage)

With this information, the insurance company will be able to generate a quote accurately. Once your Advisor has all of the quotes, they will present them to you and discuss the merits of each.

Remember, finding the right coverage isn’t always about the lowest price (although the cost is an important factor). It’s about meeting your goals and fulfilling the benefits philosophy you determined with your Advisor.

#7. Your Benefits Plan

Rolling Out Your Benefits Plan

Once you’ve chosen your coverage, your insurer will begin the implementation process. Then, it’s time to start thinking about how you’re going to announce the changes to your employees.

Rolling out benefits coverage is an important step, and a poor rollout strategy can set the stage for an underutilized and poorly understood benefits plan. After all, if employees don’t know what coverage they have, they won’t use their benefits plan.

Run an employee onboarding session

One of the first and most helpful things you can do as an employer unveiling a new benefits plan is to host an employee onboarding session. This allows employees to ask questions and learn about their coverage. You can ensure employees understand their coverage and your benefits philosophy.

Take the time to talk employees through the process of enrolling in the group benefits plan. It’s important to get their enrollments in on time to avoid being a late applicant. Late applicants may be required to submit medical evidence or back-pay premiums, and as a result, may have their coverage partially affected or denied entirely.

Speak with your Advisor about options for an employee onboarding session and whether they’d be willing to help educate employees and answer questions.

Employee onboarding

Each eligible employee will need to enroll themselves and, if applicable, their dependents into your new benefits plan. Communication and follow-up are essential for a successful employee enrollment process. It’s important to remember that the responsibility of enrolling employees and updating information ultimately lies with the Plan Administrator.

As new employees join the company, keep in mind that they’ll also need to enroll in the plan.

Free Download: The Employee Benefits Communication Package

Other tips for employee onboarding

Make resources available

Let employees know where to go for more information. Make it clear who their primary contact in the organization is for questions about their benefits plan.

Communicate year-round

Communication is key to a successful benefits plan. Keep promoting your benefits throughout the entire year.

Maintaining Your Benefits Plan

As time goes on, your business will grow and change, and your benefits plan will, too. Let’s take a look at some common examples of day-to-day changes to your benefits and how to approach them.

An employee leaves the organization or is terminated.

When an employee leaves your organization, you will need to inform your insurer so that the employee can be removed from the plan.

It’s crucial to update this information as soon as possible. If the employee is left on the group insurance plan after leaving the organization, they’ll still be able to use the plan and make claims.

An employee gets married or divorced.

If an employee’s marital status is changing, and their coverage is changing, the information must be updated with your insurer. For example, if an employee is getting married, they may wish to add their new spouse to the plan.

Something else that often goes hand-in-hand with a change in marital status is a change in legal name, which will also need to be updated with your insurer.

An employee has a child.

When an employee is adding someone new to their family, they’ll need to update the status of their dependents. Otherwise, a dependent may be a late applicant, which can negatively impact their coverage.

They may also wish to update their beneficiary designation at this time as well.

An employee’s salary changes.

Many benefits are based on an employee’s salary, so when salary changes, the insurer needs to know. Otherwise, an employee or their designated beneficiary could receive less than they’re entitled.

For example, Tim is hired as an entry-level employee and starts at $40,000/year. Over five years, he is promoted a couple of times and now makes $60,000/year. However, his salary was never updated with his insurer. If a claim is made on a salary-based benefit, such as Life or Disability Insurance, Tim and his family will not receive what he’s entitled to.

#8. Group Insurance Renewal

Group Insurance Renewal

The group insurance renewal is the final step in the benefits lifecycle before everything begins again or renews.

What is a renewal?

When a group insurance plan is first set up, it is done so for a pre-determined length of time. Once that period is up, the plan comes up for renewal. The insurer will review several factors to determine that the plan is being properly funded, including (but not limited to):

Employee Demographic Changes

Employees of different ages and sexes are rated differently, as the risk of claim varies based on these factors. For example, consider the risk of health complications in a 63-year-old smoker compared to a 22-year-old non-smoker. If the business demographics have changed significantly since being set up or their last renewal, rates may be affected.

Claims Experience

When a plan is first put into place, the insurer estimates the cost of claims and, based on that amount, determines the premium rates that will be charged. If the actual cost of claims varies widely from this estimate, rates may be affected.

An insurer uses that experience to project future claims when they quote an employer with previous experience. Although past claims are not always a guaranteed indicator of future claims, it does provide a good baseline.

In cases where a business has not had insurance coverage before, claims can be challenging to predict, as there is no previous experience to base off of. In such cases, insurers will utilize standard rates, called “book rates,” and take into account things like group size, demographics, etc.

External Factors and Trends

Various external factors can affect a renewal as well, such as economic changes (recession), inflation, or legislative changes (i.e., OHIP+). Another consideration in recent years has been Canada’s aging population. As the average age of a Canadian worker increases, typically, so do the number of insurance claims.

Many other factors affect renewals, but the above are the most significant.

Why is a renewal necessary?

Businesses don’t remain the same over time. Many grow larger or decrease in size, or experience demographic changes to their employees. As companies change, their rates need to be adjusted. Additionally, external factors such as legislative changes, inflation, or other economic changes are taken into account.