As an employer, do your group benefits expose you to legal risk?
Technological innovations have made group plan administration easier than ever. With online enrolment and online claims processing and billings, both you and your employees can interact and manage your benefits plans anytime, anywhere.
But with this evolution, there has been a shift in where the burden of responsibility and liability lies. While employers have empowered their people to self-manage many aspects of their benefits plans, employers still maintain responsibility should any issues arise, and naturally, there can be legal implications. The shift to a do-it-yourself model has been great, but you are still responsible for ensuring your people know how to use their benefits plans and what their coverage entails.
There are many responsibilities to consider, but for this article we have focused on the following three main areas:
- Enrolment forms
- Life events
- Staying current
Always get complete, accurate enrolment forms
It may sound simple, but having every employee complete an enrolment form is a critical piece of the administration puzzle. This one document ensures the employee is enrolled, registers a legal beneficiary in the event of death, and binds the carrier to insure all those listed in the document. Without this document properly completed and submitted within 31 days of being eligible for the group plan, there can be carrier denials that may cause the employee to pursue legal action, depending on the situation.
Stay on top of life events
A “life event” is a term insurance carriers use and is a key rule within a group insurance plan. Life events allow an employee to make changes without any medical questions asked, such as a change in marital status, an addition to the family, or when a spouse has a job change that affects benefits. Carriers will allow these changes to be made as long as they are considered a life event, by the carrier’s definition, and they were advised within 31 days of the change. Failure to provide proper notice can result in denial. When this occurs, the employer can be at fault and could be legally liable. It’s for this reason that employee education is important: it ensures that employees are aware of the requirement, and protects employers as it confirms that they have done their part to assist employees in managing this detail.
Keep employee and beneficiary information current
Enrolment forms include both the beneficiary and the income, two key pieces of information that should be updated regularly. The income reported on group insurance plans can affect the level of insurance for life insurance, AD&D and short- or long-term disability, if applicable, and requires regular updates to ensure there are no errors concerning employee information. Errors can cause an issue at claim time that is easily avoided if administration updates are part of the employer’s process. All employee beneficiary designation forms should be updated regularly to ensure they reflect the employee’s current intent. Making this a part of an annually scheduled process to remind employees of their responsibility to update their beneficiary goes a long way in reducing any legal liability for an organization.
It’s surprising just how important that enrolment form is! If you’d like to discuss this or any of the other due diligence items we regularly review with our clients, please contact Steve Marsh at Business Insurance Services or 905.777.9990, ext. 200.