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The Valley Echo • May 19, 2010
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Group Benefits Options
WORDOFTHEWEEK Group Benefits ‘Group benefits’ is largely a North American term. Britain, Germany, the USA and many other nations have a large number of different ways to describe and design these types of arrangements. Before group benefits came into widespread use, everyone was expected to pay out-of-pocket for medical expenses. This is known as the ‘fee-for-service’ model. On the whole these plans began as evolutions of other forms of insurance. As we have seen before, insurance is a very old arrangement. Group benefits started to evolve in the late 1800s, with hospital and medical expense policies first showing up in the first half of the 1900s. As time passed plans became much more diverse.
ASK THE EXPERTS… I have an individual disability plan to cover me outside of work and a group disability plan that covers me at work, is there a way I can get even more disability coverage? Disability insurance is coverage that protects your income stream in the event of an injury or illness. It ensures that you will be able to maintain your standard of living if you are no longer able to bring in a paycheque. One common misunderstanding with this type of insurance is that more is always better. This is not the case because the insurance companies put a cap on the amount of coverage that you would be permitted to collect. They usually max out at around 2/3 of your pre tax income for all policies combined. This ensures that you are not making more money while sitting at the beach ‘nursing’ that injured shoulder than you did when you were putting in a full days work. Therefore, by stacking multiple policies on top of each other, you could be in a situation where you are paying for coverage that you will never be permitted to collect from. For that reason, it is very important that you always seek professional advice when putting together a disability insurance portfolio, and that your advisor fully understands all policies that you currently have in place. To enter for this month’s draw of a $50.00 gift certificate for GAS at Lucky Strike Gas, all you need to do is visit www.cmkwealth.com or stop by our office and ‘Ask the Experts’ at CMK Wealth Management.
Having a job ‘with benefits’ is very different to having ‘friends with benefits.’ The latter will not be dealt with in this column anytime soon. The former is the subject of today’s piece. ‘Group benefits’ is the catch-all term used to describe many different plan designs. The idea behind group benefits, also sometimes called group insurance, is that many people will pay into a plan, and will also be able to draw benefits from that same plan. The idea makes economic sense in much the same way usual insurance does. If a large enough group of people pay their premiums, and folks draw from the plan as needed, then the law of numbers means that the plan will be able to continue. If too few people pay into the plan, or if there are too many claims, then the group plan will likely find itself in difficult financial waters. Everything you have read thus far relates to ‘traditional’ group insurance, or group benefits, plans. Yet there are two other ways to cover your (and your employees’) health-related expenses. A second option available to everyone is: pay for health care out-of-pocket. This is the route where you pay your BC MSP premiums every month, and you are responsible for the great majority of the cost of prescription drugs, dental care, vision care, and all of the cost of visits to chiropractors or massage therapists, for example. The third option is a significant de-
parture from ‘traditional’ group benefits. There are references in popular TV shows and movies going back decades of getting a job “with benefits.” We all know about friends or family who work for huge companies, or government, and who have good benefits plans. But what if ‘traditional’ group benefits are not for you and your organization? This option is known by several names: cost-plus plan, private health services plan (PHSP), health care spending account (HCSA), etc. The idea is relatively new, and quite simple: an employee goes to the doctor/dentist/chiropractor/optometrist/ naturopath/etc. and pays for the service or product they receive (say $100). Their employer pays the company who provides the PHSP or HCSA $100 (plus an admin fee, typically). The PHSP or HCSA provider pays the $100 back to the employee. Benefits to this option are many. The $100 the employee receives back is taxfree. The $100 (and the admin fee) the employer pays is tax-deductible. And the list of services covered is typically much, much larger than the list covered by ‘traditional’ plans. If a group benefit plan tailored to your organization’s specific needs is on your to-do list, please do not hesitate to contact us at CMK Wealth Management. We will design a plan to meet your specific needs and desires. Consider us your ‘advisor with benefits.’
Live in the moment, Plan for the future! 526B - 13 Street, Box 429, Invermere, B.C. V0A 1K0 250-342-5052 • 1-877-342-5052 • Fax 250-342-5519
www.cmkwealth.com
Denise Mesenchuk
Jason Elford, CFP®
Michael McDonald, BA