While the past decade has been marked by a number of events that have had an impact on both the economy and the travel industry, Canadians continue to travel. Statistics Canada figures show that the number of Canadians travelling abroad has grown year over year since 2001. The 28.7 million overnight trips that Canadians took abroad in 2010 marked a nearly 10% jump from the previous year—and an all-time high.
This sustained increase in overseas travel is due, in large part, to the snowbird effect: those age 50 and older who are owners or executive-level employees of Canadian companies and who have the financial means, available paid vacation time and desire to travel to warmer climates for the winter. These travellers are part of a growing trend of employees who expect to work longer and retire later. They are covered by group benefits plans, and they expect that those benefits will include travel insurance. In addition, a growing number of employees over age 65 at Canadian organizations are transitioning to part-time employment in an effort to work past the traditional retirement age. They, too, want to spend the winter in warmer places and expect to have travel coverage through their company benefits plan.
Employers facing this reality will need to find new ways to meet the insurance needs of these employees while also mitigating the increased plan costs of such coverage. Longer-duration trips, such as those taken by employees in this group, come with the possibility of increased claim frequency. Additionally, older employees tend to incur claims for more serious and expensive medical conditions, made even more expensive when treatment is needed abroad. As a result of these factors, insurance premiums for an employee under age 65 will typically range from $3 to $12 per month but can increase by up to four times for employees over age 65. Pricing is based on the demographic mix of each company, but the bottom line is that the more employees there are over age 50, the more employers can expect to pay for their travel insurance.
Ticket to cost containment
Employers facing this issue have a couple of plan design options to consider, which, while placing certain restrictions on travel coverage, may help strike a balance between continuing to provide coverage to older employees and ensuring the plan’s financial viability. The most common option is to place restrictions on the maximum trip duration covered. However, the average premium reduction gained through this option is minimal. A second option is to add a pre-existing condition restriction, which would exclude from coverage any plan member with a pre-existing medical condition who does not demonstrate a specified period of stability prior to every departure date. The cost savings here are more significant than with the first option but place more restrictions on employee eligibility for coverage.
In the absence of further plan design options, employers may want to consider revised cost-sharing arrangements for travel benefits. This can be achieved by assigning different rates by class of employee. For example, executive and management-level plan members—who are often in older demographic groups and are more likely to vacation for extended periods of time—could be asked to pay a higher share of premiums.
An aging labour force will continue to strain the available talent base, and continuing economic instability will force people to work past traditional retirement ages. As a result, employers will need to find creative and fiscally responsible ways to keep their valuable older workers happy and engaged while they are at work—and safe and healthy while they travel.
Angela Jorowski is an account manager with Sigurdson McFadden Benefits and Pensions. angela@sigurdsonmcfadden.com
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