Canadian life insurers are cutting millions in group benefit insurance premiums for small- and medium-sized businesses as the number of employee dental and health care claims declines during the COVID-19 pandemic.
On Friday, Canada Life Assurance Co. will announce it is paying back about $35-million in health insurance premiums for its employer-sponsored non-refundable group benefit plans for the month of April. (Clients with non-refundable plans pay a flat annual rate that does not change when the number of employees fluctuates.)
“Every business in Canada is facing certain challenges right now, and issuing premium credits is the fastest way to give group customers immediate relief,” Jeff Macoun, president and chief operating officer of Canada Life, said in an interview.
Beginning in May, Canada Life will adjust premiums retroactively for the month of April to provide all business customers that have fewer than 400 employees with a 50-per-cent reduction for dental coverage and a 20-per-cent saving for vision and extended health care, excluding prescription drugs.
Some larger companies may qualify.
The cost savings will be applied to May invoices for all 26,000 of Canada Life’s small-to-medium business clients. While the reductions are temporary, Mr. Marcoun said they will continue for “at least” May and June – with each month cutting an additional $35-million in revenue for Canada Life.
“If [the coronavirus] goes on for a while, we might adjust [rates] even more significantly,” Mr. Macoun said. “These adjustments are calculated monthly and will go forward until such a time that we believe that the economy is back in a place where the small-to-medium-sized businesses can handle it.”
Sun Life Financial Inc., Canada’s second-largest insurer, will also reduce April’s premiums for its small-business group-plan clients as the use of dental and extended health care benefits has declined during the pandemic.
The April rebate will appear on June 1 invoices, and the reductions will be assessed monthly. Sun Life will provide a 50-per-cent reduction for dental benefits and a 20-per-cent reduction for extended health care benefits, excluding prescription drugs.
Despite an increase in Sun Life’s volume of virtual care across paramedical providers, overall use of benefits is still down within its group plan customers, Sun Life spokesperson Gannon Loftus said in an e-mail.
“The premium credits we’re providing reflect this lower usage – and we hope this can help Canadian businesses with their cash flow needs,” he said.
Earlier this month, several home and auto insurers announced they would automatically pay millions of dollars in car insurance rebates for Canadian customers, regardless of their financial situation, during the outbreak of COVID-19.
The cost reduction for small and medium businesses offers financial relief during a time when many have turned to the government for assistance. More than 200,000 companies applied for the Canada Emergency Business Account launched last Thursday, which provides interest-free loans up to $40,000.
Mr. Macoun says the premium reductions for group benefits will help give the owners of small and medium-sized businesses financial relief in maintaining health and dental coverage for their employees – including those providing benefits to those who have been laid off.
Unlike premium deferrals, Canada Life’s reductions do not need to be paid back, Mr. Macoun said, reflecting the fact that many health care service providers have shut down – prompting a decline in the number of claims.
Canada Life began to see a drop in its health and dental group claims in mid-March, around the time provincial governments began to order the closing of non-essential services – including most dental offices.
Dental claims account for the second largest benefit use by plan members at Canada Life, after prescription drugs.
The premium cuts don’t include prescription drug plans as these are essential, Canada Life said, and the number of claims has not decreased.
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