MONDAY, JUNE 24, 2024 LawsWorkplace Today AdvertisingContact

Take a look at Workplace Today® for workplace news. Each month you'll benefit from well-researched legal information, detailed case studies on timely issues and concise reporting on today's labour trends from the best in the business. In short, a wealth of fresh information for today's managers and supervisors. Subscribe today!

Online Magazine
This Month
Free Preview

Click here for permission to reprint this article

Renew your Online Subscription!

The Current Plight of Small Business Owners and Their Benefits Plans
Robert J. Crowder

We all know the Covid pandemic has been brutal for small business. But it’s been particularly brutal for small businesses with employee health and benefits plans. And that means the majority of them. Why? They have been paying full premium for services that haven’t been used. What’s more, as the economy reopens they can expect to be paying full tilt into the future as well.

Robert J. Crowder
About 75% of small businesses in Canada have employee benefits plans. In the past three months – March, April and May – they paid out approximately $1.6 billion in premiums for benefits coverage. However, for the most part, no service at all has been provided. People didn’t go to the dentist. They didn’t see their physiotherapist or their chiropractor. Still, the premiums had to be paid. And this at a time when small business has been suffering, and that’s putting it mildly, through a pandemic.

Over this period the number of claims for health and dental services was down 50% and some components, such as dental visits, were down 95%. This should come as no surprise. The offices of dentists, chiropractors and other healthcare providers have been closed except for emergencies. But small businesses continued to pay full benefits premiums.

Restrictions are now being eased for such services and things are starting to open up, but it’s not going to be like before. For example, dental offices will be restricted to how many patients they can see in a day and must be equipped with PPE which means added cost. The result? People will go to the dentist less frequently but each trip, and each service, will be more expensive.

In June some small businesses started to receive a credit from large insurers but they should be prepared for rates to return to pre-Covid levels. And this while usage of such services remains low.

Big businesses, on the other hand, generally use an ASO (Administrative Services Only) model for their health and benefits plans. These are self-funded so the organization has more control over the plan. And if the organization does use a large insurer for benefits, it has enough size and scale to negotiate changes with the provider.

But small businesses with health and benefits plans provided by major insurers have no such flexibility. And most of them do not even remotely understand the math used by the industry to determine annualized premiums, and premium increases. I know. I’ve been in this business a long time.

A new industry term now making its appearance is the ‘Covid Adjustment Factor.’ What does it mean? That depends on whom you talk to. From my perspective the ‘Covid Adjustment Factor’ is a way to effectively ignore how this pandemic has impacted the number of claims over the past three months; fewer claims should have meant lower premiums. But that is not happening.

What will happen is that premiums will revert to the same ‘full’ level as before, even though the number of visits to the dental office will not be like before.

The bottom line here is that small businesses have little or no control over traditional benefits plans provided by big insurers. Their only option is to change the funding model so it accurately reflects reality.

Here are some tips for small business owner-managers:

  • Make sure you clearly understand what your funding model is and if there is something you don’t understand, don’t be afraid to ask your insurance provider.

  • Consider a budgeted ASO plan which works on estimates for the number of health and dental claims, and gives you a fixed monthly contribution towards expected claims. This means your contributions are directly related to your claim levels and any surplus premiums you may have paid out will be returned to you at the end of the year.

  • Ask your insurer what will happen in the event of a second wave of Covid.

    Back in the 1980s when he was negotiating a nuclear disarmament deal with the Soviet Union, former U.S. President Ronald Reagan once said, “Trust but verify.”

    Small business owners would do well to apply that sound advice to how they deal with the providers of their health and benefits plans.

    Robert J. Crowder is Founder and President of The Benefits Trust.

  • This Month
    Working at Home but Not Alone

    The On-going Importance of Professional Development

    Catch the Next Wave in Employee Health Benefits: Virtual Care

    Ontario Ruling Changes Approach to Termination Clause Enforceability

    Teacher with Disabilities Did Not Have the Right to Transfer Schools

    Tribunal Dismisses Discrimination Claim Because of Binding Settlement

    The Current Plight of Small Business Owners and Their Benefits Plans

    Four-day Work Week Possible by 2030 Without Sacrificing Income, Living Standards

    Half of Small Businesses in Canada Now Fully Open

    Future Skills Centre Funding Supports People Transitioning to New Jobs

    Canadians' Security and Privacy Must Be Protected in the Race to Trace

    Youth Leaders Help Build Inclusive Workplaces

    People Analytics Program Addresses Urgent Skills Gap

    Employment Barriers for Indigenous People in Banking/Financial Sectors

    Indigenous Entrepreneurs on the Rise

    COVID-19 Causes Unprecedented Jobs Crisis Worldwid

    BC: Minister’s statement on May Labour Force Survey results

    AB: Transforming Alberta’s Post-Secondary System

    AB: Continuing Support for Albertans During COVID-19

    SK: Saskatchewan’s Minimum Wage To Increase In October

    MB: Province Launches Initiative to Get Manitoba Back to Work This Summer

    ON: New Toolkit Helps Employers Create Safer Working Environments during COVID-19

    ON: Prov. Supporting Indigenous-Owned Businesses During COVID-19

    PE: Program Connects Islanders with Jobs in Seafood Industry

    NL: Gov't Announces Plan to Develop Agriculture Sector and Create Jobs

    Survey: 47% of Workers in Canada Second-Guessing Careers Amid Pandemic

    The Power of Our Words

    Warning: No part of may be copied or transmitted by any means, in whole or in part, without the expressed written permission of the Institute of Professional Management. Workplace Today®, HR Today®, Recruiting Today®, and Supervision Today® are trademarks of the Institute of Professional Management.

    For permission to reprint, please click here.

    © IPM Management Training and Development Corporation 1984-2024 All Rights Reserved
    IPM Management Training and Development Corporation dba IPM- Institute of Professional Management