Canadian HR Reporter

www.hrreporter.com 19 has had a significant and unprecedented impact on employers' claims experience and, as a result, carriers are calculating 2020 renewals differently. During the months of the lockdown, claims activity on dental and health care decreased significantly as most service providers were forced to close or tempo- rarily stop their services. In response, most insurers offered premium relief of up to 50 per cent on dental premiums and up to 10 per cent on extended health-care premiums. This relief came by way of "premium credits" for the months of April, May and June. and dismemberment, dependant life and long-term disability coverage will change. Experience-rated benefits include health, dental and short-term disability. These benefits' renewal premiums are traditionally based on the 12 months of premiums paid versus claims paid. The claims paid through three months of COVID-19 when many services were not available are much lower than normal. This is especially true for dental. As for extended health benefits, drug claims continued through those months, but paramedical services and other services had much lower claims than normal. Carriers use different approach When carriers are pricing renewals, their goal is to set premiums at a level that will be sufficient to cover next year's claims, using prior years' claims experience for the estimate. Because 2020 has been so different in terms of claim pattern, carriers are using a different approach for this year's renewals. If a carrier were to use the claims of those three COVID-19 months just as they are, doing so could set a client up for a distorted renewal this year and an even more distorted one next year. Carriers want to avoid that scenario, so we have seen three different ways that they are dealing with renewals this year: • Some carriers are taking those three COVID-19 months of experience and ignoring them at this year's renewal. That means the renewal for this term is based on nine months of claims experience, rather than 12. This is the simplest method for employers to understand. • Some carriers are bringing those three COVID-19 months of claims up to a more "normal" level and then using the full 12 months of claims experience. We have seen two different ways that carriers are adjusting the claims in the COVID-19 months: • Actuaries determine a "factor" for each of health and dental, and then multiply the 12 months of actual paid claims by that factor to bring the paid claims to a more realistic level. The factors are different for health and dental as the dental claims were more severely affected and thus have a higher factor. • Carrier sets the claims paid for the three COVID-19 months at the target loss ratio (TLR) rather than using the actual paid claims. For example, for a group that has a TLR of 75 per cent and paid $2,000 of premium in each of those three months, the insurer would use $1,500 for each of those three months as their "paid claims." In most cases, the premium credits a carrier has given to the client for the three COVID-19 months are not removed from the "premiums paid" calculation in the renewal. Clients may or may not see how these changes are applied in their renewal. However, advisors should explain to each client how the carrier has adjusted its 2020 renewal to accommodate the COVID-19 months of claims. CHRR COVID-19 HOW WILL BENEFITS RENEWAL BE HANDLED FOR 2020-21? If a carrier uses the claims of the worst COVID-19 months just as they are, it could set employers up for a distorted renewal this year and next. To avoid that scenario, carriers are using three different methods to deal with renewals Linda Burnham is a benefits specialist at Benavise Solutions in Regina. For more information, visit www.benavise.com. In July, most provinces' econo- mies started to reopen. This resulted in dental and health claim patterns making their way back to normal or increasing dramatically due to pent-up demand for dental and paramedical services. As a result, we are seeing very different claims patterns in benefits renewals in 2020-21. Group benefits renewals are stan- dardly based on 12 months of claims experience. The demographics during that 12 months will determine how the rates for the pooled benefits such as life insurance, accidental death

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