Group Insurance Late Applicant: Everything You Need to Know
By: Benefits by Design | Tuesday August 31, 2021
Group insurance provides employee benefits to eligible employees without the requirement for submitting medical health evidence. That’s one of the significant advantages to group insurance!
But what happens when an employee or dependent isn’t added to the benefits plan in a timely manner? What are the consequences for both the employee and the employer?
What is a Late Applicant?
A late applicant is a person who enrolls in a benefits plan more than 31 days after their eligibility date. Both employees and their dependents can be considered late applicants.
For example, let’s assume a new employee has just joined your company on January 1st. They are set up with a waiting period of 3 months for benefits, and become eligible on April 1st. You then have 31 days to enroll the employee in the benefits plan to avoid them becoming a late applicant.
Late applicants may be required to submit health evidence to the Insurers before they can be enrolled, and benefits are subject to approval. Depending on the insurance company, some may allow employers to back-pay premiums in order to avoid the employee having to submit health evidence.
Dependents can also be considered late applicants. When an employee gets married and does not add their new spouse within 31 days, the spouse is considered late. Or if an employee is living common-law, and their common-law partner reaches the date of eligibility (which for BBD is 12 months of cohabitation) if they are not added within 31 days, they are late.
When a child is born or adopted, they must also be added accordingly within the 31 day time frame. Likewise for any dependent children that come along with getting married or becoming common-law, such as stepchildren.
What is a Life Event and Why It’s Important to Update Your Information
Common Reasons for Late Applicants
There are three common situations that can lead to late applicants. Plan Administrators who want to avoid potential liabilities (more on that below) should be on the lookout for these!
#1. Incomplete Employee Enrollment Form
No surprises here — if the enrollment form isn’t complete, then employees can’t enroll on time. Certain industries may be more prone to this than others based simply on availability, communication, and even access to computers.
For example, limited access to a computer may simply mean that employees miss your email about enrollment. Likewise, employees who are tough to get a hold of because they’re constantly on the move for their job or perhaps work from home, may be more prone to missing their enrollment windows. It is the responsibility of the Plan Administrator to ensure that all employees enroll on time.
Tip: Consider having employees complete their enrollment form during their onboarding process. Then it’s a simple matter of submitting it after their eligibility date.
#2. Didn’t Submit Enrollment Form On Time
If an enrollment form is not submitted to the Insurer within the 31 day window, the employee may still be classified as a late applicant, regardless of when the form was completed.
In order to ensure this does not happen, consider setting reminders to ensure the enrollment is processed on time. It should be noted that many Insurers will accept paperwork for new employees in advance of their date of eligibility (their benefits just won’t be active until they’ve fulfilled their waiting period).
#3. Employee is a Dependent of Another Employee
This happens more often than you’d think!
Employees can be covered under a spouse’s plan, but when your spouse is covered by the same plan, what happens? In this case, both employees are encouraged to fully enroll in their benefits plan, especially when coverage includes benefits that do not cover dependents, such as Life Insurance and/or Disability Insurance (and more!).
Alternatively, they could opt for coordination of benefits, whereby the claim could be submitted under both plans for full coverage.
Coordination of Benefits: Can I Have More Than One Benefit Plan?
Plan Administrator and Employer Liabilities for Late Applicants
Enrolling employees on time and avoiding late applicants is the responsibility of the Plan Administrator (and, by proxy, the employer).
Employees who are classified as late applicants can be made to back-pay premiums, or have their coverage negatively impacted through limitations, or even denied entirely. Employees are rarely thrilled at this prospect.
When a late applicant submits health evidence, the benefits are subject to approval from the Insurer, and coverage would be effective from the date of approval, rather than their date of eligibility.
There may be certain restrictions and limitations as well. Specifically for BBD, and common for many Insurers, is a $250.00 Dental restriction. This limits the individual to $250.00 worth of Dental coverage for the first 12 months of coverage, and can be applied to either the employee, the dependents, or both, depending on who is late. This is set in place to ensure that employees do not sign up for the benefits plan only because they suddenly have expensive dental procedures that need to be claimed.
Employer and Plan Administrator Liabilities
Another situation is that the employee is denied coverage altogether. This could be for any number of health reasons, but regardless of why, it could hold implications for the business depending on the reason the employee is late.
There could be repercussions for a business if an employee becomes late through no fault of their own (ie: the Plan Administrator forgot to send in the paperwork) and they are denied coverage. Should the employee then fall ill and the illness would have been eligible for a claim if the employee had been covered, the business could be liable to pay out the amount of the claim instead.
Back-Pay of Premiums
For this option, rather than the employee submitting health evidence, the employer can choose to back-pay the premiums owed instead. This would mean they would be required to pay all premiums from the employee’s original date of eligibility. Depending on the length of time since their eligibility date, this could be a hefty sum.
It is always best to check with your Insurer to confirm how far back you are able to pay for premiums for a late applicant. Some benefits lines may even be different from others.
Stopping Late Applicants is Easy
For all of the above reasons, it is so important to ensure that employees are enrolled in the benefits plan within the 31 days of their date of eligibility. This ensures a smooth onboarding for the employee and allows them to enjoy their company benefits without the hassle of submitting medical evidence.
One of the best times to do that is during an employee’s onboarding into your company!