Ontario Blue Cross and Québec Blue Cross want to provide a solution for SME owners in their provinces who believe they cannot afford to run a group insurance program for their employees.
SME Plan would not cost small business owners a penny: Employees pay for their own benefits coverage.
Rather it is individual insurance because each member manages his or her own coverage, Jean-Gaston Baudart, Regional Sales Director, Individual Insurance, explained to Insurance Portal. The insurer has adopted this approach toward SMEs in order to meet a need that is not being satisfied by group insurance.
Two target markets
Blue Cross is targeting two markets with SME Plan, Baudart points out. The first is small businesses that do not offer group insurance coverage. The second is companies that are facing sharp rises in premiums and decide to scrap their existing benefit plan.
“When we ask SME whey they do not offer group insurance programs, they mention cost concerns. This is normal, because employers that offer their staff group insurance must fork over a minimum of 25% of the coverage. Sometimes, business owners have unpleasant surprises and face significant increases at renewal time. The unpredictability of the costs is scary,” he explains.
While a normal plan would see premiums rise by about 8 per cent to 10 per cent, some hikes can reach 40 per cent to 50 per cent, and even 150 per cent to 200 per cent in the most extreme cases.
“SME Plan is not intended to replace group insurance, but in some cases this coverage is very expensive. Additional health insurance premiums can become a burden. A family premium of $300 per month is no longer worthwhile for an employee who earns $30,000 to $40,000 per year. That's why we want to position ourselves as an alternative,” says Baudart.
Product design
Blue Cross already offers individual insurance coverage through Blue Flex. In contrast, SME Plan mirrors group insurance, but on an individual basis, Baudart explains.
“SME Plan contracts are individual with simplified issue. Its form is comparable to a group insurance plan, with a combination of coverage such as disability insurance, extended health insurance and life insurance.”
Unlike group insurance, Québec Blue Cross’ SME Plan does not cover drugs. Instead, members are covered by the Régie de l'assurance maladie du Québec (RAMQ).
Baudart says this approach differentiates the plan from competing products that offer a similar range of guarantees via separate contracts for each benefit. Blue Cross’ individual contracts can include up to 25 benefits.
“We can thus offer a group-like benefit package on a single contract. SME Plan lets employees tailor their benefits to their needs,” Baudart says.
Another advantage for a small business is that not all employees are required to join SME Plan, unlike group insurance, which must be implemented for everyone. Blue Cross requires a minimum of three employees to be enrolled in order to implement the program. The insurer also accepts family-owned businesses, which are generally ineligible for group coverage.
A version of a VRSP?
SME Plan seems to resemble the Voluntary Retirement Savings Plan (VRSP), which Quebec companies must set up but are not obligated to contribute to. Baudart agrees, but points out that the only difference is that there is no legal obligation to set up such a group plan as in investment. He concedes that the two approaches are similar in spirit.
“There is a huge market that is uninsured, not covered and to which companies are not offering benefits because costs are unpredictable. Not all employers have the budget to put a group insurance plan in place. SMEPlan lets entrepreneurs provide access to this coverage. No contribution is required from the employer and enrollment is optional for employees. Employees all have their own contracts. Participants can leave the plan at any time, increase or reduce their coverage, or keep it if they change employers, because the contracts are guaranteed renewable,” Baudart explains.
SME Plan is primarily aimed at financial advisors who provide insurance to entrepreneurs, but Blue Cross is also targeting group insurance advisors. “We want to position ourselves with advisors as an alternative to traditional group insurance. As for advisors who are not certified in group insurance, the plan allows them to approach this market because the contracts are individual,” says Baudart.
