The Different Types of Extended Health Care Plans In Canada

As a Canadian resident, there are many different extended health plans available to you in the marketplace from many different insurance companies. To the uninitiated it can be difficult to ascertain which plan is most appropriate for you and where to begin.

There are three main types of extended health care plans; medically underwritten plans, guaranteed issue plans, and guaranteed acceptance plans. This post is intended to serve as your guide for navigating toward the plan type most appropriate for you and your unique circumstances.

Medically Underwritten Plans

If you're someone who does not have any health care coverage already (either a policy you own, or coverage through your employer), this is the place to start.

As the name implies, Medically Underwritten Plans involve something called medical underwriting - this is fancy industry jargon that really means four things in this context:

• There are medical questions asked on the application form.
• The insurance company may write to your physician to obtain a copy of your medical records (the industry term for this is attending physicians statement - or APS for short). The insurance company pays your physician for completing this report.
• The insurance company will review (aka 'underwrite') all of this information collectively, and come back with an 'offer for coverage'.
• Pre-existing health conditions (if any) that you and/or your family members have will generally be excluded from coverage, and in some cases applicants are declined coverage altogether.

The process of collecting these items and completing the medical underwriting typically takes about 3-weeks on average - the slowest part being obtaining medical records from your physician - but once the insurance company has received all the requirements they'll typically come back with an 'offer for coverage' within 1-2 business days. This 'offer' may contain exclusions for any pre-existing health condition which you're already being treated for, or taking medication for.

On a scale of value ranging from high-to-low, Medically Underwritten Plans tend to offer the highest value long-term.

By this we mean that they will include the highest coverage amounts for the widest selection of benefits, treatments, and services at the lowest relative cost. In short, you get more for less. Why? Because the insurance company gets an opportunity to assess your health history.

On the plus side, this tends to mean better value for you (assuming you qualify medically), the caveat is that any pre-existing health conditions you may have will be excluded.

As with any form of insurance, it's easiest to get when you don't really need it.

When it comes to Medically Underwritten extended health care plans this is particularly true, and for this reason it is advisable to apply when you are younger and/or have limited health history - else you may still qualify for coverage but your coverage may also contain exclusions.

Considerations for those with Preexisting Conditions

Whenever there is medical underwriting involved for health insurance, you can generally assume that anything that you are currently being treated for or taking medication for will be excluded - this is called an exclusion. The position the insurance company takes with respect to an exclusion may vary depending on the nature of the underlying health condition.

Acute Conditions

If the health condition you've been diagnosed with is something that is regarded as being acute in nature (i.e. likely to be temporary), insurance companies will generally exclude that health condition initially but may offer to reconsider the exclusion after a certain period of time (e.g. 12, 24, 36, 48 months) - subject to being symptom and treatment free for the duration.

Chronic Conditions

Conversely, if the health condition is something that is regarded as being chronic in nature (i.e. likely to be permanent), insurance companies will generally exclude that health condition on a permanent basis, and often without reconsideration.

People tend to dislike (and sometimes take it personally) when they receive an offer for coverage that contains exclusions - and understandably so. No one likes to hear that they can't have something - particularly when the reason is a health condition they never wished for.

If you receive an 'offer for coverage' that contains exclusions, it’s important to consider that while the insurance company won’t cover the health conditions you have a history of being treated for, they are offering to cover the health conditions that you may yet be diagnosed with in the future.

In some cases you may find you're not comfortable with the quantity or particular conditions being excluded, or perhaps you've been declined coverage altogether - in those cases there are still options available (see Guaranteed Acceptance Plans below).

Guaranteed Issue Plans

If you're someone who is currently working as an employee within a company, but your benefits will be terminating (or recently have terminated), then this plan type is for you.

As the name implies, Guaranteed Issue plans are guaranteed-to-be-issued, meaning no questions asked, however only under certain conditions.

With this type of plan, there are no medical questions on the application, and pre-existing medical conditions will be covered provided you apply within 60-90 days of your employee group benefits terminating.

Guaranteed Issue plans could perhaps be more appropriately referred to as Transition plans as one can transition to them without medical underwriting within a pre-defined period of time. (They aren't called transition plans by the way - we made this terminology up to aid in our explanation.)

Different insurance companies will offer slightly different durations within which a person (or family) can transition seamlessly to a Guaranteed Issue plan. For example; Manulife offers up to 90 days to transition from the date your employee group benefits terminate (for its FollowMe^TM line of offerings), and the remaining insurance companies offer up to 60 days.

On a scale of value ranging from high-to-low, Guaranteed Issue plans tend to sit somewhere in the middle.

Why? Since people can transition seamlessly from their employee group benefits plans without medical questions, Guaranteed Issue plans ultimately end up being comprised of two groups of people - those with health history, and those without.

Because Guaranteed Issue plans have this blend of people, the insurance companies can design and price the plans to offer a ‘middle ground’ in terms of value – meaning mid-scale coverage amounts, for benefits, treatments, and services and at a mid-range relative cost. The plans are designed this way because the insurance companies anticipate higher claims from those with health history, and lower claims from those without.

Because there are no medical questions to worry about, and no medical records to request from your physician, coverage for Guaranteed Issue plans can be issued with minimal delay. Most insurance companies will issue your coverage such that it begins on the 1ˢᵗ of the following month after an application has been submitted.

Guaranteed Issue Plans Best Practices

It is recommended to immediately apply for a Guaranteed Issue plan if you are leaving an employee group benefits plan, and there is any uncertainty with respect to health conditions that you (or a family member) have a history of. This also includes health conditions that you may anticipate requiring treatment for in the near future. This ensures that there is some form of coverage in place.

After approval of a Guaranteed Issue Plan it would then be recommended to apply at your leisure for a Medically Underwritten Plan. Subject to receiving an offer from the insurance company that you find favorable for a Medically Underwritten plan, you would transition to that new plan, and afterwards terminate the Guaranteed Issue plan. Alternatively, if the offer is not satisfactory to you, you can remain on the Guaranteed Issue plan.

When applying for a Guaranteed Issue plan, it is also best practice to apply for the best plan that you can sustainably afford. Why?

You have 60-90 days to transition to a Guaranteed Issue plan without medical underwriting, however once that window closes, you are essentially ‘stuck’ with the plan you have selected.

You can always downgrade your plan to a lower plan tier, but you cannot always upgrade. Whenever you wish to upgrade, the insurance company will ask you to complete medical underwriting (i.e. answer medical questions etc), and depending on your health history this may preclude you from being able to upgrade successfully. For these reasons it is recommended to get the best plan you can afford over the long term at the outset, knowing you can always downgrade at a later date if necessary.

Guaranteed Acceptance Plans

If you're someone who has been declined for a Medically Underwritten plan, or the offer you received for a Medically Underwritten plan contained more exclusions than you're comfortable with, or you're outside the 60-90 day window to transition to a Guaranteed Issue plan - you have the option of applying for a Guaranteed Acceptance plan.

Guaranteed Acceptance plan means that your pre-existing medical conditions will be covered regardless of when you choose to apply.

On a scale of value ranging from high-to-low, Guaranteed Acceptance plans tend to sit at the low end.

Why? Because the insurance company does not get an opportunity to assess your health history (no medical questions on the application etc.), and they anticipate the number of claims to be high.

For these reasons, and in order to ensure the plan remains sustainable and profitable, insurance companies design Guaranteed Acceptance plans such that they include the lowest coverage amounts for the narrowest selection of benefits, treatments, and services at the highest relative cost.

Summary

To recap;

• If you're an employee who is losing your employee group benefits - as a best practice start with a Guaranteed Issue plan. Once covered, you can shop around for a Medically Underwritten plan.
• If you don't have any existing coverage - start with a Medically Underwritten plan.
• If you've been declined for a Medically Underwritten plan, or the offer you've received is unacceptable to you - go with a Guaranteed Acceptance plan.

Clear as mud?

Next steps

Aeva was designed to help make the process of selecting a health care plan as easy as possible, by asking you a few simple questions and presenting you with a curated list of choices from Canada's top insurance companies.

Prefer a human touch? You can also always chat/email/or speak with an Aeva advisor who will be happy to assist you with selecting a plan that's right for you and your family.

Give us a try at https://aeva.ca

Thanks for reading!