What to consider when workplace benefits are disappearing

What to consider when workplace benefits are disappearing

Workplace health and dental benefits don’t get as much love as they should.

To borrow a line from a 1980s hair band lyric – you don’t know what you’ve got, till it’s gone. 

Or nearly gone.

Such is the case from a reader from my site. I’ve changed the names below but their questions and concerns about their health and dental benefits is a VERY real, important consideration when workplace benefits are disappearing as part of retirement planning. See their questions and concerns summarized below.

I’ve updated this post to make it current, including any current rates available.

Hi Mark,

My husband (Bob) and I are retiring from full-time work within the next six (6) months at age 55.  We can’t wait!!

However, when we retire from work, our workplace benefits (drug, dental and other healthcare coverage benefits such as long-term disability) as part of our group healthcare benefits will cease to exist. This is a scary thought. We’re considering various options now including health insurance using medical underwriting plans or going with a group conversion plan but we really don’t understand what all this means in terms of coverage or benefits. 

Can you help?

Thanks so much for your site and blog.

Tisha

Thanks Tisha.

No doubt thousands of Canadians when they retire are in the same boat. 

Health and Dental Benefits

I have full confidence some passionate readers might also be able to provide some guidance based on what they have done.

Since I’m versed although not a pro in this area, I decided to reach out to someone who is.  Enter Brian So, a fan of this site, a life insurance agent who runs his own site, and helps Canadians with these insurance needs and more every day.

Welcome back to the site, Brian! Since we did this post last time, while the concerns might not have changed the rates and features available to Bob and Tisha might have. What options should Bob and Tisha consider now that they are stranded without any healthcare plan?

That’s a great question Mark. It can be scary relying on group benefits your entire working life and then suddenly losing them. Fortunately, they have several options.

If they are still in relatively good health, they can purchase a medically underwritten plan. This will give them the most choice in terms of the level of coverage they want. They would have to complete a medical questionnaire and any existing medical conditions will be reviewed by the insurance company to verify if they will be covered. And because the plan is medically underwritten, it will have the lowest premium out of all their options.

If their health has deteriorated, they can opt for a group conversion plan. This lets them get coverage without completing a medical questionnaire or exam. But they must apply within 60 days of the end of employment to qualify.

If they pass the 60-day deadline (associated with the group conversion plan), and they have chronic health issues making them ineligible for the medically underwritten plan, they would have to settle for a guaranteed acceptance plan. This is the least preferred choice with the most limited coverage and higher premiums.  (They should try and avoid this type of plan if they can in my opinion.)

OK, so where possible, do with a medically underwritten plan.

Brian, what about these options to ‘opt-in’ to any healthcare coverage without any medical exam?  Say, within 30 or 60 days of workplace benefits coverage eliminated? What are the pros and cons of this?  Also, should our readers be concerned with the underwriting process in that they were covered under many healthcare benefits from their group plan but now, might not be?

Mark, (and for Bob and Tisha), this would fall under the group conversion plan described above.

The advantage of this plan is it gives them guaranteed coverage without a medical questionnaire or exam – same as when you joined your place of employment.

Treatment related to existing medical conditions is covered since they don’t have to answer any medical questions. Plus, they can also start using the plan immediately, instead of having to satisfy a waiting period like with the medically underwritten plan.

The downside of the group conversion plan is you have to apply quickly since there’s a deadline of 60 days after employment ends. The premium is also higher than the medically underwritten plan.

Got it. The best option is always a medically underwritten plan. The second-best option seems to be group conversion plan, without any medical exam. Can you summarize the main healthcare insurance options for any retirees?

Sure, Mark.

Let’s look at three (3) major ones:

  1. Employer-sponsored group plans
  2. Rollover plans
  3. Individual plans.

Employer-sponsored group plans

The reality is retiree health benefits are expensive to maintain. Your parents are very lucky Mark. These plans are simply going away.

Simply, these benefits are just as they sound: employers sponsor (i.e., pay for) health insurance to retirees as an ongoing retirement benefit. The advantages of this are numerous of course. If you are able to take advantage of any employer-sponsored group plan throughout your retirement, generally speaking, go for it.

Rollover plans / group conversion plans

“Rollover” plans are for people who had group healthcare benefits through their employer or association when working. But instead of the employer sponsoring the entire plan going forward, you do. If you’re a former group plan member, you can “opt in” to a rollover plan within a specified period of time (generally 60 days) after you leave the employer. After that, no chance.

The great thing about this employer-group conversion plan is, you don’t have to complete a medical questionnaire or submit to a medical examination in order to qualify – just like when you likely joined your organization. Therefore, a rollover plan may be worth looking into. This is especially true if you already have some health problems that could make you ineligible for individual coverage.

The downside is your premiums are based on your age when you rollover into the plan, so generally speaking, the older you are the higher the costs. You can choose basic coverage or enhanced benefits – just like when you were working.

Individual plans

This is probably the most common type of health insurance plan.

There are really two types of this insurance:

  1. Medically underwritten plans where you have to complete a medical questionnaire, and
  2. Guaranteed acceptance plans where you don’t.

As referenced above, the benefit of the medically underwritten plan is you will likely get better coverage, but it might not be available if you have pre-existing medical conditions. In that case, you may opt for option #2. This way, with the guaranteed acceptance plan you are covered for existing conditions, but overall limits are lower, and the plan will be more expensive. So, with option #2, depending on your health status, premiums could be high. This is because your premiums will depend on the plan/coverage you choose, your health status, and the age of when your coverage takes effect. We’ll see more in my example below.

Also, in your province Mark, Ontario, retirees won’t qualify for the Ontario Drug Benefit Program for the most part until they are age 65 – although some exceptions may apply.

So, while your plan for semi-retirement and early retirement is great, you’ll need to consider healthcare coverage and that might come with some extra costs.

Great. Brian, I’ve assumed Bob and Tisha want to travel a bit or enjoy new experiences in their 50s and 60s during their “go-go” retirement years as some people call this phase. Is there specific coverage they should be looking at?

Because provincial health insurance only covers a tiny portion of health care costs while they are outside their province, they should strongly consider travel insurance from a private insurer. This can be an add-on to their existing healthcare plan or it can be a standalone coverage.

For our new 50-something retirees, I would suggest they get an annual multi-trip plan that covers them for an unlimited number of trips out of the country for the year. Such a plan will cover medical emergencies with a limit of $5,000,000 or $10,000,000.

Insurance companies will have a choice of maximum trip length for multi-trip plans, so they should match it up to their longest expected trip – say 15-days or 21-days, and so on. If their longest trip exceeds the maximum trip length of their plan, they can always buy a single trip policy to extend their coverage.

For example, if they choose a 15-day multi-trip annual plan and they take a 3-week vacation, they can top-up their coverage with a 6-day single trip policy.

Brian, let’s talk money. What might the typical cost for a healthcare plan be? Let’s assume both Bob and Tisha are non-smokers, in good health. This couple lives in Ontario. Should they be concerned their premiums might rise over time?

Current to the time of this post, I ran some quick numbers for them.

Since they are healthy, they can get the medically underwritten plan for better coverage at a lower price.

Below is a table showing how much they can expect to pay at different ages (These quotes are from Sun Life, just for an example. (No affiliation by My Own Advisor.) There are many other carriers.)

50 single50 couple55 single55 couple60 single60 couple65 single65 couple
$124/month$223/month$133/month$239/month$145/month$261/month$98/month$176/month

You might have noticed the big drop in prices for the age 65+ bracket. That’s because when you reach 65, Ontario Drug Benefit (ODB) covers the cost of most drugs. Also, note that rates are not guaranteed, unlike life insurance, where prices are guaranteed and locked in when you buy it. 

For the purposes of this exercise, the healthcare plan covers:

  • 70% of the cost of prescription drugs up to $7,000 per person per year and 100% for the next $93,000.
  • 70% of preventative dental care up to a maximum of $750 per person per year with 9-month recall visits.
  • $250 per person every 2 years for vision care, including $50 for eye exams.
  • $300 per person per year per practitioner for registered therapists and health practitioners (physiotherapists, chiropractors, acupuncturists, etc.). $1,000 per person per year for psychologists and social workers.
  • $5,000 per person per year for medical services and supplies not covered by government plans.
  • $1,000,000 per person for medical emergencies for the first 60 days of a trip. 
  • Miscellaneous benefits such as private duty nursing care, accidental dental, hearing aids, etc.

For the second part of the question, while the premium isn’t guaranteed and can increase every year, they shouldn’t worry about a substantial increase in premium. It usually goes up only a few dollars per year and everybody in their age group is affected so they don’t have to worry about being singled out for using their plan excessively.

Great details, Brian.

I always like to provide readers with insight on where they can learn more – for free. Any websites (no affiliation) that offer great comparison quotes for personal healthcare plans for retirees?  Any particular companies that you feel, personally, offer a good bang-for-buck? Again, no affiliation?

All good Mark, re: no affiliation.

Unfortunately, there aren’t any websites that provide comparison quotes between different providers. None that you can use without giving them your contact information, anyway.

Since different insurance companies have unique plan designs, like different limits on dental care and prescription drugs, comparing them based on price alone won’t help. I keep a table of the limits for each category of coverage as a handy reference guide.

With my clients, I’ll start by discussing their priorities and what aspects of coverage are most important to them. Based on their preferences, I can present them with plans from various insurers that provide the best coverage for their specific needs at a competitive price.

This personalized approach ensures clients get the most suitable coverage without getting lost in a sea of generic comparisons.

Excellent. You and I have worked together in the past – which has been great – so I know this from our personal experience! Finally, Brian, should prospective retirees consider working with an insurance broker (at no cost to them) to find the best personal healthcare plan?  Why or why not?

Great question Mark.

Really, there are 2 types of people: those who like to do the research themselves to make sure they have the right plan, and those who would rather save some time and work with an insurance broker to find them the right coverage.

The right answer to your question depends on what type of person you are.

I suspect many readers of your blog are the DIY-type or they want to be the DIY-type so they would enjoy doing the research. But even if they are, they should still check with an insurance broker to see if they are getting the best plan. And whether they go through an insurance broker or buy it themselves, it still costs the same, so it doesn’t hurt to have a second opinion. Besides, an insurance broker can provide ongoing service related to the healthcare plan or other insurance products.

Great stuff Brian and I think this post will help many retirees in this situation.

If you have questions for Brian, he’ll be happy to answer them below on this site and keep the conversation going.  Alternatively, if you have a specific set of questions for him – don’t hesitate to reach out.

Brian So is a life insurance agent based in beautiful Vancouver, British Columbia. He runs Brian So Insurance (no affiliation) and is committed to helping his clients find the best coverage for their needs. He takes a holistic approach to insurance, implementing life, disability, critical illness, healthcare and long-term care insurance into his clients’ risk management plan to provide comprehensive coverage for their families.

How are you navigating your loss of workplace benefits?  What is that costing you?  Did you factor that into your retirement budget and plans?  Let me know and share in a comment below.

Mark

My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I'm looking to start semi-retirement soon, sooner than most. Find out how, what I did, and what you can learn to tailor your own financial independence path. Join the newsletter read by thousands each day, always FREE.

42 Responses to "What to consider when workplace benefits are disappearing"

  1. Hi Mark – a timely post for us, thanks! I’ve been wondering about critical illness insurance – specifically coverage to age 75, modest policy of 75k. Any thoughts on CI insurance? I’ve focused mainly on Canada Life offerings. Any insights are appreciated.

    Reply
    1. My personal take on CI: if you continue to work, well into 60s+ and you have concerns about your “human capital” i.e.., the ability to earn an income to fund your lifestyle then CI is a consideration and worth a look. I have some CI with my current employer but that might not exist in a few years if I leave the workforce.

      Those are some quick thoughts and happy to have/hear Brian’s take as well from the industry-side.

      Thanks for your readership Karen. How is the investing coming along?
      Mark

      Reply
      1. good perspective, Mark, thank you. I hope Brian can add his thoughts as well. Investments are doing fine…it is soon time to start the decumulation phase which psychologically is a tough one especially as life has always been about saving. I am slowly prepping for this.

        Reply
        1. Hi Karen, thanks for your question about critical illness insurance!

          CI insurance is designed to help with the financial burden of a serious illness pre and post-retirement. These illnesses can come with unexpected costs like in-home care, home modifications, or even out-of-country treatment. The benefit payout from CI insurance can provide the financial flexibility you need to cover these expenses without having to tap into your retirement savings or go into debt.

          Of course, if you have a significant nest egg built up and are comfortable managing potential costs, then CI insurance might not be essential. However, for many people, it offers valuable peace of mind knowing they’ll have a financial safety net in place. Ultimately, the decision depends on your individual risk tolerance and financial situation.

          I hope that helps!

          Reply
  2. Not all advertised healthcare plans are worthwhile. I was offered conversion from my existing plan to a health plan that paid limited dental, prescription and eyecare costs, it would have cost me $100 per month and the maximum payout on any benefit was $1,200 a year.
    After a busy month with the dentist and optician I cancelled the plan and we now rely on the benefits that my wife receives. .

    We always buy medical insurance when travelling down to the US, we have heard too many horror stories from acquaintances that have tried to avoid the cost.

    Reply
  3. Thanks for this informative update, Mark! With all the changes happening in extended health and dental plans, it’s definitely a challenge for people nearing retirement to stay on top of their options. This is a great resource!

    Do any readers have specific questions about navigating health insurance plans as they approach retirement? I’d be happy to share some additional tips or resources in the comments below!

    Reply
  4. What I really want is a true insurance policy that only kicks in when the costs are very high, and has no maximum.
    I can finance my own dental checkups and glasses, and even the first couple of thousand dollars worth of surpises.
    Is there anything like that out there?

    Reply
  5. I know my dad is over 65 and at 65 the drug coverage limit dollar amount was reduced substantially. Thats why i’m not sure i want insurance when i retire. Is this common?

    Reply
  6. Good information. This is stuff that might get lost in the weeds with some folks when planning for retirement, after taking for granted some workplace benefits that might be lost.

    As retirees we have a plan through my wifes former employer. We spend approx $125/yr or $1500 per year now for what you see below.

    Medical family plan 100% paid by employer to age 65. The pharmacy drug portion reverts to Provincial plan at 65. Cost approx 424 annually each, plus 30% of prescription with a ~$ 400 cap vs. $5.00 co-pay currently. Expect to pay ~1500 yr. in about 5 yrs.
    Dental family plan approx $95 monthly
    Life insurance, AD&D small amount $9 monthly. Will keep until CPP/OAS starts.
    Travel insurance -unlimited # trips annually up to 35 day length $8.20 monthly. Extending to include 1 60 day trip adds ~$9.00/mth
    Travel trip interuption insur. $6.83 monthly. Extending to 1 60 day trip adds ~$1.00 mth
    The travel rates depend on age. As we age they get more expensive.

    Reply
  7. Just went through this myself. So many options. Ended up purchasing with ARTA (Alberta Retired Teachers Association) and pay under $300 per month for top dental and basic health coverage. Did not take the travel insurance as we don’t plan to travel that much and it will be cheaper to purchase travel insurance as required. It has different coverage levels and other professional groups (nurses, fireman, etc…) can also join. Check the website for more information.
    We needed specific coverage for a CPAP machine and this was the best of the ones I investigated. Also, I believe premiums are tax deductible which helps.

    Reply
    1. After a lot of research I too found ARTA to be the best plan. And yes all the premiums and many of the other medical costs are tax deductible. ARTA provides a nice end of year summary of all these costs to make it a little easier at tax time. This had the best travel coverage because it has no stability clauses in the coverage.

      Reply
      1. Is that the Alberta Retired Teachers Assoc.? – members only though right?

        That would be impressive – Joe, no funky clauses to worry about!

        Mark

        Reply
  8. I will miss the travel coverage. We have always had unlimited travel coverage, no restrictions and good for trips up to one year in length. Never had to use it, but nice to know it is there. I am away on a 2.5 month trip now.
    And I guess it would suck to be stuck in a ward room if you had to be hospitalised. But the other things? Just have to budget for them, we have good health care in Canada.

    Reply
  9. Lots of good info Brian, thanks. You never know how your health needs will change over time. I just dont want to blindly convert my employer plan without some investigation. I will reach out to you a few months before retirement.
    Thanks for the post Mark

    Reply
    1. Chuck, if in doubt, just go with the conversion. You can leave the plan later, when you have a good idea of what will work best for you. Of course, check first that you can leave the plan.

      Reply
  10. Thank you – this was timely info for me. I carried on with my employee plan as a retiree. Adequate (but not great) medical and dental coverage for a much lower premium than those in the article. Because the cost for single coverage has been going up from 5% to 10% a year since I retired, I was thinking of looking elsewhere. Now I won’t, as it would seem I am lucky.

    Reply
  11. I recently looked into optional health coverage because my contract job, that included benefits, ended. I found the monthly premiums in the ballpark of what’s quoted above, and Pacific Blue Cross was one I looked into, and not really great coverage. See above for dental – $1200/year and the patient still pays 20% of the cost up front. I don’t have prescription meds and no other health or dental concerns. I didn’t see the value of spending $150/month premium when over the course of a year chances are slim that I’d use any of the services. I’m thinking a savings account where I can set aside $100 or $150/month in a HISA for health care needs might make more sense.

    Now I might change my tune if I need expensive drugs down the road!

    Reply
    1. Thanks Cheryl for sharing. Certainly not an easy decision for any self-employed or early retiree. I think when searching, definitely search different sites for different age range packages. Not all insurance is created equal for sure and an insurance broker can help you do the heavy lifting.

      Mark

      Reply
    2. Hi

      I was lucky enough that I worked for a crown corporation for a few years and I’m eligible for the Public Service Health Care Plan (PSHCP) . It’s a 50:50 cost share plan and from what I’ve heard from retirees is the prices and coverage can’t be beat by any private plan. Unfortunately the only thing that isn’t covered is dental. Everything that’s done the research says your better off paying out of pocket instead of getting a private plan.

      Reply
        1. Hi,

          Since your doing a deep dive into health insurance one topic I’d like to see covered is ex-pat health insurance for those retirees or who don’t want to be snowbirds. I’d specifically be interested in ex-pat health insurance that excludes USA Coverage. There’s a fair bit of information on the web but not much specific to Canadians.

          Reply
            1. Excludes. There’s no USA retirement visa so even if you wanted to move to Florida for 365 days a year and could afford astronomical health insurance premiums you couldn’t stay there anyways on as there’s no retirement visa option.

              Reply
  12. Hi Brian/Mark,

    I have 2 questions:

    1) The premiums ($264 or $410/month) you provided are quite expensive to us. Can you give us estimates without dental coverage?
    2) Would the price range be similar if coverage started at 60 instead of 55?

    Thanks in advance for your insight!

    JD

    Reply
  13. Thanks for this post Mark. And Brian for your advice. I will be in this situation within the next 2 years. To confirm, a medically underwitten policy is one where we would answer the medical questions in the hopes that the premiums would be less than a conversion plan? I am 56 and take both a high blood pressure and a cholesterol pill daily. My wife is prescription free (so far!). Besides a couple of trips to the dentist annually we dont have any other medical needs. Do you know what 2 rx’s might do to those premiums?
    If say, we are in the $400 per month range for premiums, we might be wise to do the math and potentially go without insurance at all?
    Thanks again
    Chuck

    Reply
    1. Correct: a medically underwitten policy is one where we would answer the medical questions in the hopes that the premiums would be less than a conversion plan. With a sort of “no medical” group coverage, the underwriting process is after the fact, when claims are made and could be subject to more scrutiny.
      You avoid that by having the underwriting process approved free and clear up front – just life insurance in that respect.

      I’ll let Brian respond to other details. Thanks for being a fan.

      Reply

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