What are the major changes that employers must comply with from 1 July 2009 onwards?
Employers’ obligations to provide information
Many companies offer hospitalisation insurance to their staff as a benefit. In order to avoid uncertainty when an employee leaves his or her job (mainly due to retirement or early retirement, but also after redundancy), the Verwilghen Act introduced the right to continue medical coverage on an individual basis. This means that every affiliate to a group plan is entitled to similar (if not identical) coverage to what he or she had while employed. Partners and children may also continue the insurance (eg after a divorce) . No medical evidence can be required for underwriting purposes, nor can a person be excluded from coverage. The only condition is to have been affiliated under the group plan for a period of at least two consecutive years prior to the request to continue on an individual basis.
In order for this to become effective, several formalities and deadlines must be met. An employee who is about to lose coverage under a group plan must be informed by the employer about the possibility of requesting an individual continuation proposal from the insurance carrier, and provided with the carrier’s contact data. The employee then has 30 days in which to inform the insurance carrier of the intention to continue on an individual basis. The insurer must respond with a proposal within 15 days. The employee then has 30 days to make a decision. Throughout this time, regardless of the final decision of the employee, coverage continues as during employment.
Employers should carefully document handing-over of information
Delta Lloyd Life recommends its clients to document the information given to the employee when leaving, and have the employee sign off that the information was received. If the employee refuses to sign this document, a registered letter should be sent to the employee’s home. The risk for the employer is that if the company cannot show that the obligation to provide information was met, it may be held liable for paying the employee’s claims even after employment has stopped.
When a proposal for individual continuation is submitted, this is done on the basis of the current ages of the persons to be insured. Particularly for older people, premium levels can be quite high compared with group premium levels. In order to cope with this, the law requires employers to inform employees when they are hired that they can subscribe to a pre-funding policy. There is, however, no obligation on the employer to effectively offer the pre-funding policy. It is purely up to the employee to subscribe to such a policy.
Delta Lloyd Life does not offer a pre-funding policy, because they believe that this type of product hampers the free functioning of the market - as it ties a corporate client to its carrier and hence creates effective exit barriers to clients wanting to switch insurers. Indeed, the pre-funding policy does nothing other than build a reserve. Furthermore, these policies can only be used to insure at the “entry-age” premium level with the insurance carrier where the employee was covered by group medical coverage. The law is unclear on how vested rights and the transferability of these reserves will be handled.
An alternative, in the form of separate funding on a group basis, does exist, however. This offers the same tax advantages as a traditional group pension plan.
Medical index still not determined
Apart from the duty of information by the employer, the adaptation of premium levels to a specific index to match changes in medical costs is an important element of the Verwilghen Act.
Over the past two years, premium levels for hospitalisation insurance have increased spectacularly in anticipation of 1 July 2009. This is because after that date, insurance carriers will have to demonstrate a technical loss on their medical business to the supervisory authorities in order to be allowed to increase premiums beyond index-linking. To date, however, the exact index to be used is still not determined. In the meantime, Assuralia, the insurance industry association, recommends its members to apply the regular CPI used to increase wages and social benefits. The story continues…