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Long Term Disability Costs

December 23, 2016

This is the second post regarding upcoming changes needed for our benefits plan.  (The first post is here – linked under paystub inserts on the Spectrum website).

Our benefits renewal this year was proposed to be a 16% increase overall, with the biggest increase affecting the Long Term Disability (LTD) premiums.

Please see this linked newsletter from Community Services Benefits Trust (CSBT) for more information on benefits costs across the country. In particular, see this discussion on Long Term Disability:

Long Term Disability (LTD) costs – this year these costs are rising by an average of about 22% with all carriers. We’ve even seen cases where carriers are requesting increases as high as 200%. In our first block of renewals for CSBT in British Columbia, we’re been very fortunate to keep the increases to an average of 10%. [Spectrum’s increase is projected at 38%] However, even this is very problematic when our funders are not lining up with more money. These are the key drivers of increases in social services:

  • While the industry average trend for LTD cases is 6-8 disability cases for every 1000 lives insured, the experience in social services is about 12-14 cases per 1000.
  • This year, for the first time ever, mental health claims for LTD are being included by actuaries in calculating rates (depending on the carrier, these claims are now accounting for between 25% and 45% of all claims).
  • Mental Health claims are proving far more intransigent than the exclusively physical claims we used to encounter. This means they typically go on much longer, incurring higher costs.
  • As soon as an LTD claim is accepted the carrier must by regulation, reserve enough money to guarantee the ability to pay the claim for its duration. This can mean creating a reserve of between $100,000 and $250,000 depending on age and expected length of disability.
  • Interest rates are very low. That’s great if you’re paying a mortgage. It’s bad for insurance companies that used to be able to set reserves lower and top them up from investments.

Our broker has provided us with a number of options to offset the significant increases with savings in other benefits.  The biggest change (and savings) will come from switching our Health and Dental coverage from SSQ to Manulife Financial.  This change will take effect on February 1, 2017.


 All claims incurred prior to and inclusive of January 31, 2017 must be submitted to SSQ Financial (our current Extended Health and Dental provider), no later than January 31, 2017.

Claims that are incurred before February 1, 2017, but are submitted to SSQ Financial after that date will not be paid.

Claims incurred on or after February 1, 2017 will be paid for by Manulife Financial.

Your new Manulife Financial oneCard™ will be provided to you closer to February 1, 2017. Once you receive your new card, please ensure to update any providers of service that may submit claims on your behalf such as your pharmacy and dental office.

You will also need the information from your Manulife Financial oneCard™ to register for access to Manulife’s Plan Member Secure site anytime on or after February 1, 2017. Verification of the information you provide during registration can take up to 48 hours. After your information is verified, you can start using the site to view your Extended Health and/or Dental claim information, sign up for direct deposit, e-notifications and much more. Further information on this to follow.

The challenge before us is to work out the details of how the savings from the Health and Dental change can be used to offset the LTD increases when the LTD premiums are paid by employees.  We have kept the LTD premiums employee paid because of the significant tax benefits if a person is disabled and receives LTD benefits.  These benefits are tax-free when the premiums are paid by the employee.  We are exploring a number of options and will have a survey to gather your feedback in the new year.  Please send me any questions you have about the coming changes.