Cost Plus

Cost Plus is a tax-effective arrangement where health or dental expenses, not usually covered by your group plan, can be reimbursed to employees and their dependents.

Advantages of Cost Plus

  • Gives the client the ability to provide additional coverage to employees
  • The client controls which employees qualify
  • It’s tax-effective – all claim amounts, service fees and provincial sales taxes are deductible business expenses
  • Cost Plus reimbursements are not taxable to the employee

Eligible Cost Plus Expenses

  • Any expense that would normally be covered under Revenue Canada as a tax-deductible expense (e.g. Orthodontic coverage or Vision Care, etc.)
  • Drugs and medications (prescribed by a physician to treat an existing illness) which are not eligible under our standard group policy

Expenses not covered by Cost Plus

  • Services or supplies that are not directly required as a result of physical illness or injury (e.g. clothing school fees, trips)
  • Medicare balances and other items that are prohibited by law from being reimbursed by a private health services plan
  • Cosmetic procedures or surgeries

How Cost Plus works

  • The company issues a corporate cheque payable to the insurance company for the claim amount, plus an administration fee (usually approximately 10% of claim)
  • The employee (claimant) receives the full reimbursement for the cost of the claim as a tax-free benefit
  • If the employer is offering the cost plus feature to an employee and the employee is still responsible for payment, there is still a tax advantage as the cost for the claim would be taken off gross earnings and the benefit is tax free
  • If the employer is utilizing the cost plus feature, they can allocate the expense as a business expense and write it off on the corporate income tax return

Employee Benefits and COB (Coordination of Benefits)

What does COB mean?

  • COB, or Coordination of Benefits means that if you have group insurance coverage through your employer for health and dental benefits, and your spouse also has group insurance through their employer for these benefits, you can claim expenses under both insurance policies.

Under each insurance plan, do both my spouse and I enrol with dependent coverage to be able to utilize COB?

    • Yes – You must have dependant coverage and your spouse must have dependent coverage.  Therefore, both of you can submit expenses under each others plans as a dependent.  If you have single coverage, this means only you are covered, not any dependents and therefore you cannot coordinate benefits.

What are the benefits of COB?

The following is an example of how COB can work for you:

  • You have a group insurance plan through your work and your spouse has a group insurance plan at work.  Each of these plans reimburses eligible expenses at 80% for Health and Basic Dental.  You have a prescription drug that costs $100.  You receive $80 back from your insurance plan (80%).  You can then submit the remaining balance of $20 to your spouse’s plan and receive a total of $100 back.  Therefore, you end up receiving 100% back of your eligible expense.

How do we submit claims and to whose Insurance plan first?

  • There are specific rules in submitting claims when coordinating benefits:  If you have a claim for yourself, the “primary carrier” (or first payer) is the insurance company that insures your benefits through your group plan at work.  Using the example above, the following would be an example of how to submit the $100 prescription claim:
  • You send your claim into your insurance carrier (primary carrier) for the $100 prescription.  When you receive the $80 back, you submit a claim to your spouse’s insurance plan (secondary carrier or payer), with a copy of your carriers Explanation of Benefits to show how much they paid.  The original receipt would go with your claim to the “primary carrier” and the “secondary carrier” (your spouse’s plan) would not require the original receipt.

If I have children, who’s insurance plan do we submit their claims to first?

The rules for COB for your children’s expenses are as follows:

  • Between you and your spouse, whose month of birth is first in the year?  (Not the year of birth, just the month is applicable)  The “primary carrier” would be that of the parent who’s birth date is first in the year. 
  • If you are separated or divorced, the plan, which will pay benefits for your children, will be determined in the following order:
    1. The plan of the parent with custody of the child
    2. The plan of the spouse of the parent with custody of the child
    3. The plan of the parent without custody of the child
    4. The plan of the spouse of the aren’t without custody of the child

What circumstances can I chose not to (opt out) participate in my employer’s group insurance coverage?

  • The only benefits where you have this flexibility with is with Health and/or Dental benefits.  All other benefits provided under the Group Insurance Benefit Package are considered mandatory benefits.
  • The only circumstance where you can opt out of Health or Dental benefits is if you have coverage under a spouse’s plan. 

How would I decide if I should have coverage under my or my spouse’s plan or both?

  • You should make this decision carefully as you can’t change your mind and enrol at a later time unless there has been a change in your coverage situation.  Some items to keep in mind when making this decision are:
  • What is the cost under each plan? (Between my plan and my spouses)
  • What are the reimbursement levels under each plan?
  • How much do I (or my family) utilize the benefits under Extended Health and Dental?

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