Many of the amendments are intended to provide more financial flexibility depending on individual’s chosen retirement path and to encourage Canadians to work longer before drawing from government pension.
The facts are clear, people are living longer.

Did you know that changes to government social programs have been taking place around the world? This concept has already been adapted in other countries where they have changed their retirement standards from the arbitrarily chosen age of 65 – and Canada has to jump on the bandwagon.

Though change is not easy, Canada has to take necessary steps to ensure that we remain competitive on the world stage.

While life expectancy continues to increase (from age 72 in 1980 to 81 years old in 2011) it is putting more strain on our government social programs. With future generations being pressured by the public cost of retirement and a decreasing workforce – there is now more than ever a need for these changes to be implemented.

So what does all this mean to both employees and employers?

Many of the changes will reduce barriers to employment for older individuals in Canada, which may also benefit employers who have an opportunity to access the skills and experience of older workers.

Employee Impact - Click here

Employer Impact - Click here

CPP amendments are the first of the changes scheduled for Canada’s public retirement system with the government already discussing changes to Old Age Security (OAS).

While it is foreseeable that more questions will be raised, an increase in communication will help employees understand how they are impacted and what they need to do.

For additional resources on the CPP changes, the following document is available on the Service Canada website that describes the amendments in detail which may help you gain a better understanding on the topic: Changes to the Canada Pension Plan. You can also visit the Service Canada website for additional updates.

One aspect of Bill C-13 that amends the CPP is that employers who provide disability benefits to their employees through self-funded or administration services only (ASO) arrangements (with no insurance principles) must deduct CPP contributions from such benefits.

The CPP amendments do not impact insured short-term disability (STD) and long-term disability (LTD) plans.

This amendment makes the Canada Pension Plan Act consistent with the Employment Insurance Act, which requires that employers and employee Employment Insurance (EI) premiums be made on ASO disability benefit payments.

Effective January 1, 2012, however exact implementation date is unknown.  As a result of these changes, deduction and remittance of both employee and employer CPP contributions on disability payments made under self-funded or ASO arrangements is required.

Employer Impact: Employers should check to ensure that the CPP deductions are made in accordance with these new requirements.

Employee Impact: Employees who are currently receiving disability benefits will see payroll deductions as a result of the implementation of Budget Bill C-13.

Depending on the size of your organization you may feel the impact of changes in the economy differently. While changes over the past two years have adversely affected many businesses, few have taken the time to consider the impact to their benefit plan.

Studies have shown that in times of economic uncertainty, occurrences for some benefit claims increase such as Long Term Disability (LTD), dental care and prescription drugs. Employees often feel insecure about their future and the stability of their company (or job). This factors into increased claiming patterns as an employee may feel the need to maximize their coverage.

Fluctuations in Demographics and Benefit Claims

As decision makers for businesses we are often concerned with the financial well being of our company during times of economic instability. For many employees the concern is also for their own financial future. As a result, employees tend to utilize benefits out of fear that the benefits may no longer be available to them, therefore overall claims increase in times of uncertainty which leads to higher costs for the plan and additional financial strain on the employer.  

For example, if your company is forced to temporarily reduce production or employee hours, claims will almost certainly increase. If these reductions lead to lay-offs, the services of younger workers tend to be terminated before those of older tenured employees and as a result the demographics of your group may change to represent an older population.

This causes two key issues, 1) the chance of high claims increases with age, and 2) pooled benefits such as Life and Disability are based largely on your group’s demographics. By increasing the average age of your employee population you can increase your risk of large claims significantly which will lead to higher rates for all benefits at time of the renewal.

For small groups, insurers may not accept your individual claims experience as credible since additional claims for one employee (or lack of claims within your organization) could have a large impact on the performance of your group. In these cases the insurer may apply their “manual” rate factor to your plan at renewal. The “manual” rate is essentially the average for that insurers’ block of business and could be of benefit or detriment depending on the performance of your plan.

Long Term Disability (LTD) and Low Interest Rates

The incidence of LTD also increases in many industries during times of economic uncertainty. Employees face additional financial pressures at home which often lead to family stresses, resulting in greater absenteeism costs for the company.

In addition, interest rates can have impact on the rate for disability benefits, if an employee submits a claim and is approved for disability the insurer is required to establish a fund called a ‘Disabled Life Reserve’ (DLR) to pay all future expected claims. The DLR periodically decreases in value through payouts to the employee and earns interest over time, however when interest rates are low the DLR does not receive as much interest.

Therefore to ensure the DLR is sufficient to pay out the employee’s claims the insurer must put more money in the DLR at the time of claim to make up for the lower interest rate received. The insurer then passes along this additional cost to the employer through higher LTD rates.

Consumer Price Index (CPI) vs. Trend

On a regular basis insurance carriers review historical trends and anticipate future costs based on new legislation and products/services offered. The result is a trend factor which is applied at renewal and can differ between carriers. The trend factor is the expected rate of cost increase for your plan over the next year, and has been significantly higher than CPI inflation for each of the last ten years.

Based on the increased occurrences of claims for high cost drugs and costs associated with older employees in the workforce it is anticipated that this factor will continue to outpace CPI inflation for the foreseeable future.

Don’t get caught in a tough situation by only budgeting for a benefit increase equal to the CPI inflation rate. Be prepared by using The Benefits Budgeter.

Creating a plan design that limits your exposure to areas where outside factors impact your benefit plan is a strategic approach to help keep your rates and claims below the average. Only an elite advisor like BHH Benefits can investigate your plan and help to minimize losses and maximize savings regardless of the outside influences.

Cameron Campbell is the Vice President of Group Insurance at BHH Benefits in Stoney Creek. He can be reached at 1.800.514.4944 or at c.campbell@bhhbenefits.com

The introduction of legislation brings them a step closer to reality. But will they have much of an impact?

More details are required to give anything more than a general opinion. But there are a couple of reasons to believe the impact of PRPPs will be minimal.

First of all, the proposed federal legislation will apply to federally-regulated businesses—chartered banks, airlines, television and radio stations, as well as Crown corporations. Most companies are provincially regulated, so until the provinces introduce and pass similar legislation the majority of companies will not have a decision to make on PRPPs.

PRPPs are another registered tax deferral method available for individuals to save for retirement. However, it doesn’t help with the capability of Canadians to save more for their retirement. On average, Canadians already have about $18,000 of unused RRSP contribution room.

As more information becomes available we will be able to offer further insights. But for now PRPPs have limited availability and limited appeal.

As you examine your company’s competitiveness, identifying the risks you face is a key part of the analysis. One area often overlooked is the risk you are exposed to in your company’s employee benefits plan.

But failing to examine the potential financial exposure your company faces—from expensive drug claims, from out-of-country claims or from disability claims—your benefits plan can have a substantial impact on your company’s profitability.

Suppose your company has an employee who needs a biological drug like Remicaid or Humira to treat their rheumatoid arthritis. These drugs carry an annual price tag of about $40,000. What effect would a claim like that have on your plan?

The answer to that, of course, depends on a number of variables, such as your plan design, your underwriting method and your stop-loss provision. Your benefits advisor should be able to not only answer this question, they should also be able to tell you how to minimize your exposure to this very real possibility.

Similarly, what are your out-of-country vulnerabilities? A heart attack while on vacation in Florida can produce tens of thousands of dollars in health care bills. Your carrier will pay these up front then seek reimbursement from OHIP. But any amount not deemed medically necessary by OHIP will not be reimbursed. It’s at that point that it matters how your stop-loss pooling is structured.

So which arrangement makes sense for your company? Again, that depends on a number of factors, like how much out-of-country travel your employees do, the demographics of your workplace and your risk tolerance (because first dollar pooling carries a higher premium than a stop-loss of $10,000 or more).

When it comes to long-term disability claims, speak with your legal counsel to determine how long a disabled worker has to remain on your company’s benefits. The best defence is a good offence. Be proactive by setting up an Employee Assistance Program (EAP). One dollar spent on a well-designed EAP with a credible provider typically saves more than three dollars in absenteeism and lost productivity.

In an effort to trim expenses many companies have increased their risk exposure by increasing their stop-loss levels and/or changing their underwriting. They have been reluctant to make the kinds of changes that will deal effectively with the underlying problem of plan design.

The root of the problem is that most benefits plans were set up decades ago and they have not evolved to meet the demands of an aging and changing workplace. When most plans were designed, the typical prescription cost less than $5. That doesn’t cover the dispensing fee any more.

The challenges of an aging workforce, government downloading and skyrocketing drug costs driven by an increasing proportion of biologics were the subject of a recent BHH White Paper (The 2012 Benefits Budgeter™: Get ready for budget season) which is available at bhhbenefits.com.

In order to ensure you aren’t taking on more risk than your company can afford, you need to have an expert advisor examine your plan and understand your specific challenges. The result will be a plan that provides the acceptable level of protection at a price your company can afford while providing benefits that your employees value.

This is the type of work that requires the expertise of an advisor like BHH Benefits that is a recognized leader in the industry.

Cameron Campbell is Vice President of Group Insurance at BHH Benefits. He can be reached at 1-800-514-4944 or at c.campbell@bhhbenefits.com

Around this time of year managers, controllers and company presidents start feeling a little more stress. Year end is approaching. This year’s budget variances are being examined and next year’s budget is taking shape.

Making accurate forecasts and monitoring performance are vitally important to your company’s success. When it comes to employee benefits programs the renewal increase your company sees may seem arbitrary. It really isn’t. It is based on industry trends and your claims.

There are tools available to help you forecast your next renewal. An accurate estimate of your company’s benefits cost will ensure your next renewal doesn’t shock the company’s budget.

Why are benefits costs rising?

There are tremendous inflationary pressures on employee benefits. The most significant reason is that the population is aging. The oldest Baby Boomers have just turned 65. As people age they require more medical care—more chronic conditions leading to more prescription drugs and more surgeries leading to more short- and long-term disability claims.

Another significant factor is government offloading. Faced with rising costs from this aging population the federal and provincial governments have cut back on public programs. These de-listed services are either added to private plans (increasing their cost) or are dropped, leaving employees to pay the cost on their own. As people age they require more medical care—more chronic conditions leading to more prescription drugs and more surgeries leading to more short- and long-term disability claims.

A third source of increasing costs is prescription drugs. The current suite of prescription drugs includes an ever-increasing proportion of biologics. These drugs contain live cells and often have to be tailored to the individual. They are more effective and far more expensive than typical drugs.

Even the with recent spate of high profile blockbuster drugs entering the realm of generics, the cost of prescription drugs will continue rising because our population is getting older and sicker. And it’s not going to improve: after 2013 the number of drugs coming off patent protection falls off a cliff. These have actually been the “good old days” of prescription drugs.

How BHH can help

When you know your costs up front you can plan accordingly. Check out our Benefits Budgeter. This tool projects the average benefits increases over the next 12 months based on the latest industry information.

The accompanying Benefits Budgeter worksheet takes you through the step-by-step process of estimating your upcoming renewal increase based upon your company’s individual claims experience.

I encourage you to download these sheets. These are effective tools that will provide an accurate estimate of your budget line figure for your employee benefits in a matter of minutes.

If you want to take even more control of your benefits costs then get in touch with BHH Benefits.

We are recognized in the industry as elite advisors. We can improve your plan or design a new one that delivers the benefits your employees want at a price your company can afford.

I would also recommend that you read our White Paper “Controlling the Rising Costs of Benefits” which provides more detail on the challenges and solutions available.

Taking control of your costs will not only relieve budget time stress, but will also improve your company’s competitiveness.

Brian Hansell is a Partner in BHH Benefits, a full-service benefits and pension advisor located in Stoney Creek. For 30 years BHH has been focussed uniting the well-being of companies and their employees. Brian can be reached at 1-800-514-4944.

You are starting your own business.

First of all, congratulations. You are turning your dreams into a reality. The entrepreneurial spirit is the driving force behind the Canadian economy. It creates jobs, opportunities and wealth.

These are heady times for you as you strive to meet your customers’ needs, try to attract new customers and build your business. There will be a lot of sweat equity invested in making your business venture successful.

There is also a lot of risk involved which, if managed effectively, will turn into financial equity.

What risks do you have?

You have either rented or purchased space, equipment and furniture. You may have hired employees. You have a line of credit from a bank or credit union.

Undoubtedly you have life insurance and another insurance policy to cover your business property and contents. But does your policy cover the damage a fire or accident would have on your production capacity and cash flow?

Perhaps you have a business partner. If one of you were to become critically ill is there a succession plan? If one of you dies can the survivor pay the deceased’s estate the value of the company? If not, the future of the company may not remain in your control.

You have risks and you have had no choice but to deal with different advisors for each different risk. As a result, your advisors are only getting part of the picture of your entire risk scenario.

Large companies are positioned to address these challenges: they either have an in-house risk manager or they can pay for the services of the large consulting houses. Those firms are just too expensive and they are not interested in small or medium-sized companies.

Without affordable expertise you have had to rely on several different advisors. You haven’t had a choice—until now.

Integrated Risk Management

Companies like yours are the backbone of the Canadian economy and they face the same risks as large companies. They shouldn’t have to settle for anything less than best-in-class service when managing these risks.

Recognizing that small and medium-sized companies are not getting best-in-class service, a group of elite advisors has come together to provide a one-stop, integrated risk management solution. We can provide the expertise you require at a price your company can afford.

By speaking to one person who can identify your company’s specific risks there will be no gaps in your coverage, plans or strategies. By talking to one advisor you can have all your specific risks identified and quantified. That advisor has the support of an Integrated Risk Management team that provides detailed analysis.

The result is that your company understands and prioritizes the unique risks it faces, and has an appropriate and affordable strategy in place to meet them.

This can help you make sure you continue meeting your day-to-day business challenges. After all, a risk foreseen is half avoided.

Ron Hansell is the President of BHH Benefits, a full-service benefits and pension advisor located in Stoney Creek. For 30 years BHH has been focussed uniting the well-being of companies and their employees.

Please complete the form below so a member of our team can contact you to begin the Integrated Risk Management analysis.

Imagine asking your waiter for the daily specials and he tells you the macaroni and cheese is the same price as the filet mignon. Which would you order? That’s the way it is with ordinary and elite pension and benefits advisors because they are typically paid the same percentage.

Elite advisors do more than save you money on your benefits renewal premium and ensure there are no fiduciary liabilities associated with your pension plan. Elite advisors add value to your company.

BHH is independent and elite. We are among the 1% of advisors that are invited to the major carriers’ annual strategy sessions to learn the latest industry developments before the other 99% hear about them. We have elite status with many of the smaller carriers.

Elite advisors don’t react to a crisis. They proactively manage your plans for optimal outcomes. Wayne Gretzky excelled because he didn’t follow the puck. He skated to where the puck was going. Likewise, elite advisors see how the market is developing and make recommendations that help your plans work for both you and your employees.

Elite advisors don’t just slip in when your pension plan is out of compliance. They help you develop the good governance model that keeps you compliant and minimizes fiduciary liabilities in the first place. They also ensure you meet your fiduciary responsibilities and get you back into compliance in the event of unforeseeable circumstances.

They don’t parachute in at renewal time and deliver your benefits carrier’s demand. They help you ensure your costs don’t spiral out of control. They have the industry standard credentials and have a team of underwriters and support staff to help you with all aspects of your pension and benefits plans’ management and usage.

The amount you pay your advisor is pretty much the same no matter who you choose. So are you ordering the filet mignon or the macaroni and cheese?

By Brian Hansell

According to a soon-to-be released report by Deloitte, 60% of Canadians would be willing to leave the country for medical care if it was covered by insurance. Medical tourism is an estimated $60 billion dollar industry that has blossomed in response to long waiting times for medical services in Canada and lower prices for surgeries in developing countries. Understanding the costs and the benefits involved will transform potential medical tourists into informed consumers.

Not a new phenomenon

Medical tourism is not new. In ancient times the sick traveled to the temples of Asclepius, the Greek god of medicine. Today those who can afford it travel to places where they can get care cheaper or faster. Most of Canada’s medical tourists head to the United States, taking advantage of our strong dollar and prices reduced by the recession.

For those looking further afield, the quality of care in the developing world is increasingly meeting our standards. More than 60 hospitals in developing countries are accredited by the Joint Commission International. As well, an increasing number of physicians, many of whom have trained in western medical schools, are opting to stay home rather than try to become certified in Canada.

The time savings can be substantial. The current minimum wait time for abdominal wall hernia surgery in Ontario is 46 days. Nine out of 10 patients receive the surgery within 130 days. For $3,800 (U.S.) you can get it done in Costa Rica as soon as you can get there.

Do you really need to travel for treatment?

Dr. Ray Rupert, the founder and president of Rupert Case Management (www.rupertcasemanagement.com), advises caution before booking a medical excursion. “You have to be careful when buying foreign medical treatment. Five thousand dollars for a knee replacement may sound good, but if you develop complications your costs can escalate,” he says.

He has surprised numerous clients by getting them into Canadian hospitals with top surgeons, oftentimes in a matter of days or weeks instead of months. He has even changed the course of treatment for some patients.  A case in point: one of his patients was ready travel outside Canada for what would be his fourth back operation. One doctor had examined him and recommended spinal decompression surgery. A second recommended decompression and the fusion of several vertebrae. Dr. Rupert referred him to an expert spinal surgeon who determined the patient’s back pain was caused by his hip. Instead of spending $40,000 in the United States for surgery he didn’t need, the client had hip replacement surgery in Canada.

Is it right for you?

Medical tourism has the potential to speed up access to care for Canadians awaiting treatment. But it isn’t a panacea. If you are considering traveling outside Canada, get a second opinion before making a decision. As Dr. Ray Rupert cautions, patients can access information but they are not the best judge of the medical treatment they need. You may discover that the care you need is available in Canada much more quickly than you originally believed.

After looking at all the facts if travelling abroad for care is the best option then pack your bags. Now more than ever the world is your hospital.

The full version of our white paper can be found here, Medical Tourism: the risks and rewards

Brian Hansell is a Partner with BHH Benefits in Stoney Creek. Brian is Team Leader and Strategist of BHH Benefits’ Integrated Benefits Strategy team. BHH is a full service benefits advisory firm headquartered centrally within the Hamilton-Halton-Niagara peninsula area.

Most regular health and dental claims can be submitted electronically. If the plan member has pre-authorized direct deposit then they will not be inconvenienced. If they have not enrolled in this service, this can be done online or by calling your carrier’s toll-free number.

For plan administrators, consider scheduling regular courier pickups with your carrier to collect reimbursement payments for your employees. Otherwise payment might be delayed during the work stoppage.

The last labour stoppage at Canada Post, in 1997, lasted two weeks. If the current impasse lasts as long, regular courier pickups can also be used to send premium payments.

If you require more information, or have not heard from your carrier, please feel free to get in touch with your BHH advisor.