Are your clients putting employees on pregnancy leave at risk?
BY Dave Patriarche | March 14, 2017
Do you have clients with employees who elect not to maintain their premium contributions to your employee benefit plan while on leave? Do these employes then terminate their coverage (as is their right) until the employee returns to work (often one year later)?
If so, that employee may be at risk, not just for the time period they are on leave, and without benefit coverage, but potentially for years following. This risk may then be transferred to he employer, if the employee were to incur a Long-Term Disability (LTD) claim.
In Ontario, under the Employment Standards Act, an “employer must continue to pay its share of the premiums for any of these (benefit) plans that were offered before the leave, unless the employee tells the employer in writing that he or she will not continue to pay his or her own share of the premiums”. If the employee fails to make their contributions, then most employers will remove the employee from the benefit plan and reinstate them upon return to work.
Why do employees choose to cease benefit coverage at a time they need it the most (prior to an impending health event that will likely require a hospital stay and that comes with its own risks)? They typically do so because the reduced income that they will receive while on maternity leave. Because they will only be receiving Employment Insurance (EI) payments, every dollar counts for them — as a result, the premium costs saved each month can appear significant.
The problem that most brokers and employers realize is that the employee who terminates their benefit coverage has no life insurance, LTD or health benefits for themselves, or their newborn when they may need it. This choice is a poor decision at best. A further complication that they often do not realize is that they are also allowing some insurers to reset the “pre-existing condition clause” on their LTD coverage when they return.
What this means is that a health issue in the last three months of their leave, could result in no LTD benefits being paid for claims incurred in the year after returning to work. As an example: if an employee suffered from postpartum depression during the term of their leave and then returned to work, only to have the postpartum depression progress into chronic postpartum depression resulting in an inability to work, no LTD claim would be paid due to the pre-existing condition clause.
Insurerance policies are not always clear in these circumstances. A random poll had many insurers unable to provide clarity on how they would adjudicate claims under these circumstances. Those that did respond had differing answers: some would re-set the pre-existing condition clause and some would not.
It is interesting to note that some provinces (such as Alberta) require that there be no loss of coverage by stating the following; “Employees returning from maternity or parental leave must be reinstated in the same or a comparable position with earnings and other benefits at least equal to those received when the leave began.” Resetting the pre-existing condition clause could possibly be viewed as a loss to the employee and in contravention of the law, creating problems for both the employer and insurer.
Based on the legislation and the insurer responses, we asked the Canadian Life and Health Insurance Association Inc. (CLHIA) to help establish a national guideline for their members that would keep their members (the insurers), employers, employees and their families whole upon return from a maternity and parental leave.
It is always the best choice for both the employer and the employee to maintain benefit coverage through a leave. Knowing what they could give up both during and after the leave makes this choice even more important.
Dave Patriarche is the president of Mainstay Insurance in Thornhill, Ont. and the founder of Canadian Group Insurance Brokers Inc.