Clawbacks Series Part 2 - Insurance Clawbacks: Insurers Inconsistent Messaging

This article, the second in a series about insurance clawbacks, was written by Steven Muller, Vice President Litigation at Share Lawyers. Click here to read the rest of the series.

Last month, the NDP pressed the Liberal government to pass legislation to establish a universal single-payer pharmacare system in Canada. At an estimated cost of $15 billion, the single-payer system would provide a national list of prescription medicines that would be covered by the taxpayer. There is an increasing concern by insurers that the single-payer model would see individuals who have employee plans move onto provincial drug plans in lieu of their company benefits. Insurers don’t want the single-payer model to disrupt coverage for almost 27 million Canadians who have coverage through their employers. Health benefits are profitable in Canada. Canada’s Life and Health Insurers don’t want the government on their turf.

But Life and Health Insurers have an inconsistent messaging problem. Since the late 1980s, these same insurers have maintained their profits by exploiting public benefit schemes in employee plans that pay disability insurance. As a result of aggressive clawback language, public benefit schemes end up as primary payor while private insurers merely “top up” claimants’ benefits. These same insurers actively encourage claimants to apply for government programs, though the claimant receives no increase if successful to their overall benefit. The claimant may have paid premiums to the disability insurance provider and to the government program but the advantage of being approved by the government program exclusively is received by the insurer. In some contracts, these same insurance providers can deduct an amount that it believes the claimant could receive from other government sources even if no application for the other benefit is made. The continuation of this trend allows Life and Health insurers in Canada to offload their exposure onto Canadian taxpayers. The ever-increasing emphasis on clawbacks from programs such as Canada Disability Benefit, Canada Pension Plan Disability, Canada Pension Plan Dependent Disability, Old Age Security, government-sponsored plans and government programs set up a rationale for a single-payer model in disability insurance. It is only a matter of time for self-destruction. Life and Health Insurers if you don’t want the government on your turf stop clawing back all government plans and government programs in long term disability policies. It is time for us in Canada to rethink our archaic approach to clawbacks in a group long term disability scenario.

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