Cost savings – group benefit alternatives

In today’s competitive business environment where all additional costs are scrutinized and reduced in order to remain profitable, employee Group Benefits coverage usually ends up being reduced or is never made available to employees.

Group Benefits are traditionally medical and dental benefits given to employees, where the employer pays all or a part of the monthly premium and the employee may contribute part payment to the Group Benefits coverage. These annual premiums may increase as Group Benefits use increases, which is usually the case. As a result, most companies are forced to reduce employee Group Benefit coverage, have employees pay part of the coverage or get rid of the Group Benefit coverage completely.

If you are looking to reduce Group Benefit costs here are some alternatives to traditional Group Benefits that can save your company thousands of dollars on an annual basis:

Government Paid Drugs – The Ontario Drug Benefit Program (ODBP)

Most companies are completely unaware that the government provides drug prescription coverage to anyone in the province of Ontario who does not have Group Benefit coverage or does not have 100% prescription coverage. The program is called “The Ontario Drug Benefit Program” (ODBP) and information on the program and application forms can be found online at:

http://www.health.gov.on.ca/en/public/programs/drugs/programs/odb/opdp_trillium.aspx

It is important to note there is a deductible based on your annual family income.

How to Use The Ontario Drug Benefit Program

The ODBP can be used strategically in several areas:

(1) Employers Without Group Benefit Coverage – If you are an employer that does not provide Group Benefit coverage, you can let your employees know that the government provides prescription coverage and provide your employee with the link or application.

(2) Employees With Partial Group Benefit Coverage – If your company has a Group Benefit program where the employee pays for a portion of the Group Benefit coverage, the employee can apply to the ODBP. Once the employee’s prescription bills exceed their yearly deductible they will receive reimburse through the ODBP.

(3) Employees With Full Drug Benefit Coverage – If your company provides 100% coverage of prescription drugs under your Group Benefit plan and you have an employee using a high dollar amount of prescription drugs the Ontario Drug Benefit Program can be strategically used to keep your Group Benefit premium rates from soaring in the next year due to high Group Benefit use. In this scenario, the employee should register through the ODBP, and for  prescription purchases above the employee’s Ontario Drug Benefit deductible, these bills should be submitted to the ODBP.

Administration Services Only (ASO) Group Benefit Coverage

An alternative to traditional premium based Group Benefit is Administrative Services Only (ASO) Group Benefits. An ASO system works as follows:  you only pay for what the company uses, plus an administrative fee to the ASO provider of usually 10%. If an employee does not use the Group Benefits coverage over the course of the year, it will cost the employee nothing.  If the employee uses the Group Benefit coverage, the employee will be charged the cost of the prescription drugs or dental fees, plus 10%.

In addition to minimize your exposure to any employee that uses a high dollar amount of prescription drugs during the year, a “Stop Loss” policy is purchased. A Stop Loss policy limits the amount of Group Benefits exposure you must pay for any one employee. For example, your company can buy a $2,000 Stop Loss policy. For each dollar an employee uses for Group Benefits over $2,000 will be paid by the Stop Loss policy. Therefore, if an employee used $16,000 worth of prescription drugs in a year, your company would pay $2,000 + the 10% ASO fee, and the Stop Loss policy would cover $14,000.

In order to determine if ASO Group Benefit coverage will benefit your company an analysis is done of Group Benefit use over the last two years. Remember it does not cost you anything to speak with your Group Benefits provider and ask for an ASO quote, it could save your company thousands of dollars annually.

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Bonny Koabel CPA, CGA is President of AKR Consulting Canada a Mississauga, ON firm specializing in Government Grants, Subsidies, Tax Credits, Refunds and Rebates since 2003.