Still wait-and-see for EI Changes

by | Nov 27, 2023 | Take 5 Articles

For the longest time, the 16- or 17-week elimination or waiting period of a plan sponsor’s long-term disability (LTD) plan was synched with the federal government’s Employment Insurance (EI) plan, which had provided income replacement for 15 weeks.

But as of Dec. 18, 2022, the federal government lengthened EI coverage to 26 weeks. While on the surface this would appear to reduce employers’ LTD costs, for those who choose to synch with the longer EI period, a closer look suggests that costs could actually be higher in the long run due to longer durations of LTD leaves—and more employees not returning at all. That’s because half a year is a long time to wait for the case-management services available under some LTD plans, including early-intervention healthcare services proven to get employees back to work sooner, noted Tammy Phelps, Regional Vice-President of National Accounts, Empire Life, at Benefits Alliance’s 2023 Connect Conference in September.

Then there are the two other possible complications. First, there is a risk that employees could double-dip during the overlap in coverage periods (i.e., from week 16 or 17, when the LTD plan begins, to week 26, when EI ends).

Second, for plan sponsors with or considering a short-term disability (STD) plan, what’s the impact on their eligibility for the EI Premium Reduction Program (PRP)?

After almost a year, it’s still a wait-and-see situation, said Phelps. Eligibility criteria for the PRP have not changed and the government has given no indication that private STD and LTD plans need to align with EI’s new 26-week coverage period. As a result, “the vast majority of plan sponsors haven’t changed anything.”

And so far, “our claims team has not seen any double-dipping between EI and LTD benefits,” she added.

However, Phelps is concerned about what might happen if plan sponsors do tweak their disability plans. Employees with LTD plans that start at 27 weeks—after EI ceases—will be forced to live off much less. EI pays out 55 percent of earnings up to a maximum taxable amount of $638 a week in 2023, whereas LTD plans pay 67 percent of earnings on average with higher maximums that are not usually taxed.

“The 26 weeks gives us a lot of anxiety,” said Phelps. The possible financial hardship of living off $638 a week, coupled with the reason for the disability leave, could lead to a slower recovery.

Plus EI’s low intervention for healthcare services and a return-to-work strategy can further delay recovery. “If there’s no early intervention, how will that impact the duration? We certainly have seen a lot of literature on the value of early intervention,” said Phelps.

Studies also show that interventions need to happen well before the end of EI’s coverage period. “When off work more than six months, they have less than a 50 percent chance of ever returning to work in any capacity,” said Phelps.

Rather than seeing the EI changes as a possible financial boon, now is a good time for plan sponsors to consider adding evidence-based interventions to their disability plans to accelerate employees’ return to work. These interventions could include:

  • Questionnaires to improve understanding of non-medical conditions impacting a person’s return to work. Empire Life’s analysis of claims data from 2015 to 2022 has shown they can lead to a three-month reduction in disability duration.
  • Pharmacogenetic (also called pharmacogenomic) testing to help determine which drugs work best based on a person’s DNA. A 2021 Canadian study (Papastergiou et al.) found that treatment guided by pharmacogenomics can reduce mental-health claims by 10 weeks.
  • Internet-based cognitive behaviour therapy (iCBT). CloudMD’s 2022 analysis found that iCBT reduced the duration of absences due to mental health by 37 percent on average.
  • Healthcare navigation, which shortens wait times for specialists, according to a 2021 Teladoc study.
  • A program that enables earlier access to psychiatrists, who work with family physicians. Analysis by Medaca in 2020 and 2021 found that the program resulted in 83 percent of members returning to work before the end of the STD period.

For plan sponsors without an STD plan, another option is to offer the Supplemental Unemployment Benefit (SUB). The federal government approves SUB plans to top up EI payments for employees. However, plan sponsors need to take extra steps, with either a SUB plan through an insurance carrier or using a third-party disability case management firm if the SUB plan is owned by the plan sponsor, to bring in the early interventions and/or rehabilitation supports that are so critical to a successful return to work.

For the foreseeable future, Phelps recommended plan sponsors should sit tight and talk to their advisors about any changes to disability coverage. Amendments to the EI PRP are not off the table, she added. “Changes could come in 2024.”