What Does 'Opting Out' of Employee Benefits Mean to You?
By Cindy Danielson
April 28, 2022
You’re an employee joining an organization that offers an employee benefits plan (lucky you!) but you already have coverage through your spouse’s employer. You may be thinking “I already have coverage, I don’t need more!” BUT there are several important considerations to be aware of before you opt-out or waive coverage.
Here are some important things to consider before waiving coverage through your employer’s sponsored benefits plan:
Employer Benefits Plans Are Mandatory (only Health & Dental coverage can be waived): In Canada, all employees are required to participate in a group benefits plan if/when an employer chooses to offer one (not all employers do). This means that 100% of employees must enroll in the plan for employers to obtain and maintain coverage through the insurance provider [Note: some exceptions may apply so consult your employer's Plan Administrator for details]. The reason for this is two-fold:
Employers Care: Employers that offer benefits care about their employees and want to help them achieve good health and/or support them in the event their health changes (nobody plans to get sick right?).
Keeping Premiums Affordable: Mandatory plans set premiums based on the entire employee population to spread the overall risk. If an employer’s plan only insured those employees that needed health coverage, then premiums could skyrocket and be unaffordable.
Compare Plans Closely: It’s great that you have two plans to choose from; however, before you consider waiving coverage, it’s important to closely compare the two to see how they differ.
Compare overall maximums (e.g. $5K prescription drugs per year per person or no maximum)
Co-pay amounts (e.g. does your plan reimburse 90% of drugs while your spouse’s plan reimburses 80%?),
Paramedical maximums (e.g. does your plan cover 80% of massage with a maximum of $300 per practitioner while your spouse’s plan covers 90% to a maximum of $1,500 for all paramedical practitioners?).
Look at both booklets and compare the details.
Understand your family’s needs and make sure you coordinate both and/or choose the plan that best suits your needs.
Waiving Health & Dental Only: Mandatory plans do let employees opt-out / waive health and dental coverage only.
If you have health and dental coverage elsewhere, you can choose to forgo the health and dental coverage offered through your employer’s plan. You do so by following the insurer-required process, which might have you provide proof of coverage through another plan by indicating the insurer's Name and Policy #, and/or filling out an employee benefits waiver form. This is critical because if you lose your spouse’s coverage then you can still enroll in your employer’s plan within 31 days of coverage termination.
If you lose coverage and don’t enroll within the 31-day timeframe, then you will be classified as a Late Applicant which requires medical evidence and causes a lot of hassle. Learn more about Late Applicant Status.
Quick Tip: It is the responsibility of the employer’s Plan Administrator (this is a great time for employers to seek the guidance of a Benefits Advisor) to educate employees about waiving options.
Why Employees Need to Enroll Regardless of Opt-Out Status
Employees That Don’t Enroll: some employees just don’t enroll in their employer’s benefits plan because they are misinformed and/or their Plan Administrator isn’t ensuring all employees enroll.
In the event an employee doesn’t enroll and does not formally Waive all Coverage (see details below), then the employer could be held liable in the event an employee needs health coverage but doesn’t have it because of negligence by the employer.
Coordinating benefits plans can be especially helpful if you have multiple dependents because families tend to have higher health care expenses (e.g. child needs braces, spouse needs specialty drugs, or has a chronic condition like Diabetes).
Coordinating benefits is a great option depending on your personal situation.
Employer or Employee-Paid Premiums: Typically employees waive benefits because they don’t want to pay some or all of the monthly premiums. Some employers pay 100% of the premiums for both health and dental coverage so there is no direct cost to you which is great for your wallet PLUS, you can coordinate benefits, maximize your coverage and decrease out-of-pocket expenses.
Remember:The cost of premiums is a major factor for employees to decide if they waive health and/or dental coverage. It’s important to understand who is paying the premium to make an informed decision.
Don’t Miss Out on Important Benefits: You may not realize that you still need to enroll in your employer’s plan, even if you waive health and dental, because your spouse's plan won’t likely provide you with coverage for:
Life Insurance* - upon your death, your beneficiaries will receive a cash benefit paid to them if you have Life Insurance through your employer’s benefits plan. But, if you don’t enroll in your employer’s plan, then no benefit will be paid.
Your spouse’s plan may offer Dependent Life Insurance (not all plans do), but the death benefit is typically a lower benefit amount (e.g $5K, 10K) than the coverage through your own employer’s plan (e.g. 2x your salary, Flat $25K).
AD&D* - in the event you’re in an accident and lose your life or a limb then your spouse’s AD&D coverage will not provide a benefit for you. Most benefits plans include standard AD&D coverage so you can protect yourself (and your family) in the unfortunate event you need it.
Critical Illness* - if you’re diagnosed with a critical illness (e.g. cancer, heart disease, etc.) and you’re covered through your employer’s plan with Critical Illness coverage then you will receive a payment (based on the policy rules). It’s important to know that many group plans do not provide Critical Illness coverage (so if yours does, that’s a real plus!), and even fewer offer Dependent Critical Illness Insurance which is the only way you would receive a benefit if you are reliant on coverage through your spouses’ plan.
Disability - This is an important benefit you don’t want to accidentally miss out on if your employer’s plan provides coverage! If you need to be off work for an extended period of time due to injury or illness, you’ll appreciate disability coverage (short and long-term). A spouse’s plan will NOT provide you (as a dependent) disability coverage and there is no such thing as Dependent Disability coverage.
Group Disability is a valuable benefit as you are automatically approved to receive a benefit without providing any medical evidence (up to a maximum determined by your pay and insurance provider). This is a HUGE advantage because if you apply for an individual disability policy, you will be required to provide in-depth medical evidence through questionnaires and historical records.
*Note: Some employer-sponsored benefits plans offer Voluntary Benefits (aka Optional Benefits) to employees that want to increase coverage as a top-up to their standard group plan or personal policy. Employees are responsible for paying all voluntary premiums (typically through employee payroll deduction). Read about How Do Voluntary Benefits Work?
Waiving All Coverage: Lastly, if you understand all these considerations and still want to waive all coverage, the Plan Administrator and insurer will require you to sign a formal Employee Benefits Waiver Form which clearly states that you are waiving all available coverages and are not eligible to re-enroll at a future date.
It’s important to understand all the consequences of waiving coverage to ensure you don’t miss out on valuable benefits and to ensure you can enroll in the future if/when you need it.
Speak with your employer’s Plan Administrator and/or your Group Benefits Advisor.
If your benefits plan is with Simply Benefits, please contact our Support Team for help with waiving coverage or any questions about your plan.
Simply Benefits is Canada's newest fully digital Employee Benefits provider that partners with advisors to deliver group health benefits 100% digitally to Canadian employers. We’re a Third Party Payor (TPP) with a platform that provides three portals to enable Benefits Advisors to manage all client plans online, Employersto efficiently administer employee coverage, and Employeesto view, update and use their benefits 24/7 via desktop or smartphone app. We help ENGAGE Employees Anytime, Anywhere, SIMPLIFY the benefits experience, and EVOLVE an Advisors’ benefits business. To learn more, visit our website or connect with us on LinkedIn, Twitter, Facebook, Instagram, and YouTube.