Recently, a plan administrator I work with called in a panic. “I think I made a big mistake!” she said.
One of her new employees had just received a letter from the insurance company stating he and his family couldn’t join the group benefits plan unless they filled out medical forms and received approval from the insurer. This came as a shock, leaving the employee and the business owner very upset. If the employee couldn’t secure benefits for his family, the job suddenly became much less valuable to him.
She asked, “Why does he need to prove he’s healthy? No one else has had to fill out medical forms. What did we do wrong?”
What is a Late Applicant?
A Late Applicant is any employee who applies for group insurance after the enrolment deadline has passed. This can have serious consequences:
1. The employee and their family may be denied coverage.
2. Dental coverage will be limited for the first 12 months, even if they are accepted.
Employees who apply on time get guaranteed coverage without any medical forms, which is a major benefit of group insurance. However, those who miss the deadline have to go through a medical screening process, risking denial of coverage.
Additional Consequences of Being a Late Applicant
Even if a Late Applicant is approved, there are still restrictions. Many insurers cap dental benefits for the first year, with typical limits between $100 to $250 per family member. After 12 months, these limits are removed, and the plan returns to normal.
When is the Deadline to Avoid Late Applicant Status?
Most insurers require employees to enrol within 31 days after the plan’s Waiting Period. Below are some key terms and an example how it usually works:
1. Hire Date: The date the employee starts work. (In our example below, this will be June 5th.)
2. Waiting Period: A 3-month period during which the employee is employed but not yet eligible for benefits. (June 5 – Sep 4)
3. Effective Date: The day coverage begins if they enrol on time. (Sep 5)
4. Grace Period: An extra 31 days after the Effective Date to apply without penalty. (Sep 5 – Oct 6)
If an employee applies after this Grace Period, they’re considered a Late Applicant.
Below is a visual timeline for the employee who was hired on June 5th.
Timeline illustration for an employee hired on June 5th.
Why Do Insurance Companies Penalize Late Applicants?
Allowing employees to join anytime would lead many to wait until they anticipate a large health expense, driving up claims costs. To keep premiums stable, insurers require employees to enrol no later than 31 days after their Waiting Period has ended.
Can an Employee’s Family Members Become Late Applicants?
Yes. If an employee initially waives family coverage (for example, because of a spouse’s plan) but later wants to add them, they must do so within 31 days of losing the spouse’s coverage to avoid Late Applicant status.
Does Late Applicant Status Apply to Group RRSPs or Health Spending Accounts?
No, this risk only applies to group insurance plans, not to Group RRSPs or Health Spending Accounts.
Steps to Avoid Late Applicants
To prevent employees from missing out on benefits, consider these tips:
1. Have Employees Complete Enrolment as Part of Their Onboarding Process
Direct employees to enrol on their first day to avoid complications later.
Early completion:
- Is simpler when the employee is going through onboarding
- Reduces chances of employees disputing a mandatory plan requirement
- Lowers the risk of forgetting to enrol them
2. Establish a Written Mandatory Benefits Policy
Include the benefits plan as a condition of employment in your company policy. This reduces resistance to joining and ensures compliance. If waivers are allowed, have a written waiver reviewed by legal counsel.
3. Explain the Consequences of Late Enrolment
Educate your employees on the risks of becoming Late Applicants, especially those who have waived health and dental coverage initially.
What if You Suspect a Late Applicant?
Stay calm and contact your group benefits broker. They might help retroactively enrol the employee, allowing for back premiums instead of denying coverage.
Never misrepresent information to an insurer by falsifying hire dates or other details, as this could lead to claim denials for critical situations and potential liability for the company.
How are Late Applicants Handled if Your Company Changes Insurers?
Switching insurers usually provides an opportunity for Late Applicants to join the new plan immediately, offering a fresh start.
The Bottom Line
Avoiding Late Applicants is one of the most critical aspects of managing group insurance. By following these guidelines, you can help ensure that all employees have access to the coverage they need without unnecessary hurdles.
Questions?
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This article is designed to provide general information regarding the subject matter covered. It is not intended to serve as legal, tax, or other financial advice related to specific situations. Always consult with professional advisors.