Cost Plus programs are an innovative way for Canadian employers to enhance their employee benefits offerings. This comprehensive guide will explore what Cost Plus programs are, how they work, their key benefits, coverage details, and frequently asked questions.
What Are Cost Plus Programs?
A Cost Plus program is a specialized claims payment service used by employers to reimburse employees for medical expenses not covered under their existing group benefit plan.
Rather than modifying or enhancing the entire plan to accommodate specific uncovered claims, the employer pays the actual “Cost” of the claim “Plus” an administrative fee, usually ranging from 10-15%. This provides employees with additional financial support for healthcare expenses on an as-needed basis.
Cost Plus programs allow employers to fill in the gaps of their current benefits coverage in a flexible and cost-effective manner. They are an attractive value-added service that can improve employee satisfaction and retention.
How Do Cost Plus Programs Work?
Let’s break down the step-by-step process of how Cost Plus programs function:
- Employee Incurs Medical Expense: An employee incurs a medical expense that exceeds the coverage limits or is not covered at all under their group benefit plan. For example, an executive pays $4,000 for major dental work, but their plan only covers 50% of major dental costs up to an annual maximum of $1,500.
- Claim Submission: The employee submits the $4,000 claim to the insurer. The insurer processes the claim according to the standard rules of the group plan, reimbursing the employee $1,500 in this case.
- Cost Plus Option: Rather than modifying the entire group plan, the employer makes the decision to cover the remaining $2,500 balance using the Cost Plus program. The insurer invoices the employer for the actual claim cost, plus a 10-15% administrative fee and applicable taxes.
- Reimbursement: Upon receiving payment from the employer, the insurer issues a reimbursement check to the employee for the outstanding $2,500. This allows the employee to receive the full $4,000 claim amount, even though it exceeded the group plan’s parameters.
Key Benefits of cost plus program
There are several advantages to employers and employees offered by Cost Plus programs:
For Employers:
- Provides added flexibility to meet unique employee needs without altering the entire group benefits plan
- Cost-effective way to enhance benefits offering and employee satisfaction
- Eligible as a tax-deductible business expense like regular insurance premiums
- Attractive executive perk and recruitment/retention tool
- Requires minimal administrative effort to implement
For Employees:
- Receive full reimbursement for claims exceeding standard plan coverage
- Tax-free additional reimbursement results in significant savings
- Customized support for specialized medical needs
- Enhanced financial protection for healthcare expenses
- Increased satisfaction with overall compensation and benefits
What Medical Expenses Are Covered?
Cost Plus programs can provide reimbursement for a comprehensive range of medical expenses and healthcare services, including but not limited to:
- Practitioners: Acupuncturist, Chiropractor, Naturopath, Occupational Therapist, Physiotherapist, and more
- Dental: Preventative, restorative, orthodontic, and other dental treatments
- Vision: Eye exams, prescription eyeglasses/contacts
- Prescriptions: Cost of prescription medications
- Medical devices/supplies: Hearing aids, orthotics, prosthetics, mobility devices
- Paramedical services: Massage therapy, psychology, speech therapy, podiatry
- Specialized care: Treatment programs for substance abuse, mental health services, private nursing, etc.
Employers have the discretion to establish specific parameters and limitations depending on their budget and program goals. But in general, the list of medical expenses eligible for reimbursement under a Cost Plus program is extensive.
Frequently Asked Questions
Here are answers to some common questions about Cost Plus programs:
Are all medical expenses covered under Cost Plus?
No, the specific coverage may be limited based on the employer’s plan design and insurer’s policies. Employees should review documents or ask HR for details.
How does Cost Plus benefit employers?
It allows employers to enhance their benefits offering in a flexible and cost-effective way without significantly raising overall plan costs.
Are there any limitations to Cost Plus programs?
Yes, employers must evaluate their budget, workforce needs, and administrative capacity to determine if a Cost Plus program is suitable.
Can employees opt out of Cost Plus programs?
No, employees cannot opt out of employer-sponsored programs, but they can choose not to submit claims under the Cost Plus provisions.
What are the tax implications for employees?
Typically none – reimbursements are tax-free for employees in most cases.
Can Cost Plus be combined with other insurance plans?
Yes, Cost Plus can supplement other group or individual plans, as long as claims submitted are not already covered.
Implementing a Cost Plus Program
Here are some tips for employers looking to implement a Cost Plus program:
- Review your current benefit plan’s limitations and gaps in coverage based on past claims patterns
- Develop clear parameters and procedures for reimbursement under the Cost Plus program
- Determine appropriate funding levels based on expected utilization
- Consult with your insurer/TPA to establish administration and integration with existing plan
- Communicate details to employees and provide education on how to submit Cost Plus claims
- Leverage Cost Plus as a recruitment incentive highlighting your unique benefits offering
- Monitor program utilization and adjust as needed to meet objectives and stay within budget
Get A Quote
Cost Plus programs offer a customizable solution for Canadian employers seeking to expand their benefits coverage for employees. The ability to reimburse specific claims provides enhanced financial protection for employees facing costly medical expenses not covered under their standard group plan.
With proper planning and execution, Cost Plus programs can be an impactful strategy for attracting talent, increasing retention, and demonstrating an employer’s commitment to employee health and wellbeing.
While weighing factors like cost and administration, employers who embrace innovative benefits like Cost Plus are poised to gain a competitive advantage in Canada’s dynamic job market. Employees are sure to appreciate an added layer of healthcare support when they need it most.
