March 5

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Shifting Away From The Pre-Disability Reset

Why this is a big deal for maternity leaves

Long-term disability coverage sometimes gets overlooked for its role in a benefits package, but this level of protection is a financial safety net for so many workers who really rely on this coverage to help them when they need it most. If long-term disability insurance largely gets passed by for its contribution as an important component of a comprehensive employee benefits package, then you can best believe that many of the micro components to policy certainly don’t get their time in the sun.

While this has traditionally been the case, recently it’s been making the headline rounds drawing to light a very important grey area that has exposed a loophole in the clause.

Members are seen as a new hire on paper when they re-enroll in a plan

When women would go on maternity leave from work, they would stop contributing premiums to their group and employee benefits plans. Through the eyes of their provider, they would be considered as “new employees” upon returning to work, forcing their pre-existing conditions clause to completely reset.

What has been happening is that the benefits coverage lapsed during this time away forcing their pre-existing conditions clause to reset. Basically, what this means is that if a woman were to receive any care for a medical condition, illness or prescription medications during the 90 days before returning to work, the pre-existing conditions clause would kick in and would preclude coverage for the condition/illness upon re-enrolment in the benefits plan.

That’s why many of the top Canadian insurers are no longer resetting the long-term disability pre-existing condition clause for women when they return to work after their maternity leave to close up this unnecessary loophole.

The importance of stopping the pre-existing conditions clauses

Benefits Canada outlined a clear example to help bring some clarity to this.

Consider a woman had experienced postpartum depression after giving birth, but was physically able to return to work after seeing her doctor. Unfortunately, shortly thereafter she experienced the death of a close family member that prompted a depressive episode and she needed to take disability leave.

This is considered a legitimate disability. This is why it’s important the insurance industry collectively takes into account the need for an employee to come back healthy and whole before work, with the proper coverage in place to enable that.

Earnings and benefits should be in the same position when they started

While it is common for long-term disability insurance policies to contain pre-existing conditions clauses that will reset once an employee returns to work, the industry is moving away from re-setting the pre-existing clauses for maternity leaves.

This type of language is common in a group insurance for disability insurance premiums that would specify that any disability arising within the first 12 months of coverage will be excluded if it resulted from a sickness or injury that the employee had been treated for within 90 days prior to the effective date.

Changing this practice for maternity leaves will better align with the employment standards legislation, level-set across all provinces, which states, “when an employee returns to work from a statutory leave, such as maternity/paternity leave, that their earnings and benefits are in the same position as they were at the start.”

7 major insurers are moving towards the retention of the same benefits

Recently, seven major Canadian insurers (Co-operators Group Ltd., Desjardins Insurance, Empire Life Insurance Co., iA Financial Group, Manulife Financial Corp., RBC Insurance and Sun Life) have all made a move to help level the playing field by stopping the pre-existing conditions clauses with women returning to work from a maternity leave. They are all under the belief that employees should retain the same benefits after they return from maternity leave as they had before.

There are the hopes that a new guideline will be created on this practice across the country in order to bring all insurers into alignment, and a growing pressure to communicate the benefits of this change.

How long-term disability benefits and claims are handled are 1wbeing called into question; and rightly so, because it’s a gaping hole in benefits that needs further clarity and less scrutiny. Canada has been known to have a generous maternity leave policy, and having healthy maternity/paternity leaves while knowing you have the backing from your employer is important for all Canadians.

About the author 

Chris Gory

Chris Gory is the founder of Orchard Benefits (formerly Insurance Portfolio Financial Services Inc.), a brokerage launched in 1999 that helps companies build the best benefits programs for their employees. Chris is passionate about helping entrepreneurs, and works with over 60 startup companies including Wattpad, 500px, and VarageSale. He is an advisor at the Ryerson Digital Media Zone and at the OneEleven startup hub, and he's led talks about employee benefits and insurance at several startup accelerators including Extreme Startups. Chris has also been featured in the Toronto Star and The Globe & Mail, and he's been a member of the Board of Directors of the Applied Client Network, an international association of independent insurance professionals, since 2012.


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