Understanding Non-Evidence Maximums (NEMs) for Group Health Insurance

The world of health insurance is complex with lots of acronyms and jargon. In this blog, we will try to simplify the explanation of Non-Evidence Maximum's (commonly known as NEMs). They are important for employees to understand as they have a direct financial impact in the event of a claim. NEMs apply to group health insurance plans including: Life Insurance and AD&D, Critical Illness, Short-Term Disability, and Long-Term Disability benefits. 

Let's start with an example before we jump into the insurance lingo later on.

Employee Example for Long Term Disability Benefit

Let's determine how much monthly LTD benefit an employee is eligible to receive if/when they submit an LTD claim through his employer-sponsored group health insurance plan.

Here's the scenario:

Company Information:

• Company Name: Fun Times Engineering
• Industry: Engineering
• Benefit: Long Term Disability 
• Non-Evidence Maximum (NEM): $4,000 NEM (determined by the insurer)

Employee Information:

Dan is a 45-year old engineer currently eligible to receive a maximum LTD benefit of $4,000 per month (without providing additional medical evidence) if/when he makes a claim. However, he is eligible for a higher monthly LTD benefit based on his income if he provides medical evidence.

Here we break it down:

1. Dan earns $150,000 per year / 12 months = $12,500 monthly income
2. Dan's maximum LTD benefit is 66 2/3% (industry standard) of his monthly $12,500 income = $8,278.75 per month
3. Without providing medical evidence, Dan's maximum LTD benefit is capped at $4,000 per month because of the current NEM; however, with medical evidence, he could be eligible for another $4,279 per month (maximum eligible: $8,278.75 - $4,000 NEM = $4,279 more of monthly benefit) and receive up to his maximum benefit of $8,278.75 per month (as determined by the insurer).

So, Dan has two options:

1. Accept the current maximum LTD benefit of $4,000 per month (as per NEM) OR
2. Provide medical evidence to the insurer and potentially receive up to $8,278.75 per month. 

Only Dan can determine what's best individual coverage for him personally and financially; however, it's important that he understands both options to make an informed decision. If Dan isn't sure what to do, then he should seek the expertise of a financial planner or his employer's Plan Administrator or Benefits Advisor.

Now, let's delve deeper into NEMs to learn more.

What is a Non-Evidence Maximum?

The NEM is the maximum amount an insurance carrier will pay an employee for a disability or critical illness claim, or pay an employee's beneficiary for a Life and/or AD&D claim, without asking them to provide medical evidence. Medical evidence can be a questionnaire, blood test, or similar (as required by the insurance carrier).

Quick Tip: The higher the NEM, the better for the employee as they will receive the highest benefit possible without providing additional medical proof.

Why Group Health Insurance NEMs are a Good Thing

If you've ever applied for an individual Life, Critical Illness and/or Disability policy, you know all the hoops you need to jump through to apply and hope you qualify. Plus, if you have any existing health conditions, it can be difficult (sometimes impossible) to be approved for an individual policy because, in most cases, the applicant needs to provide in-depth medical questionnaires and/or complete additional tests to qualify.

Individual policies can be a real problem for those with pre-existing medical conditions that want to protect their earnings if/when a claim is made but aren't able to because they are declined coverage because of their condition.

Quick Tip: With group health insurance, employee health risks are shared across the entire eligible worker population so premiums are set based on the eligible population vs. on each individual.

Eliminating the need to provide medical proof is a major advantage to group life/AD&D, critical illness, and disability insurance compared to individual policies.

As someone who has personally been declined for an individual disability policy when I was self-employed (and I think of myself as a pretty healthy person), I have come to appreciate the value of these benefits as part of my employer-sponsored group benefits plan.

How do NEMs work?

When a benefits advisor asks an insurance company to quote on a group benefits plan, they provide details about the employer's business and/or industry (a risk factor) and an employee census list that includes: employees' name, gender, date of birth, hiring date, occupation, earnings type, salary or hourly wage, hours per week plus benefits class and coverage (e.g. single, couple, family).  

Insurers use both the business information and relevant employee census data to assess risk and determine a NEM for each class or group. Risk, in this case, is the probability the insurance company will have to pay the benefit to the employee (for a critical illness and/or disability claim) or his/her family (for a life insurance and/or AD&D claim).  

Summary

As mentioned above, ideally the employer group wants to qualify for the highest NEM to minimize the chance an employee needs to provide medical evidence.

Depending on the NEM, higher-earning employees could be eligible for an increased benefit than the NEM in which case the employee has the option to accept the maximum benefit as set by the NEM or choose to submit medical evidence to qualify for a higher benefit. 

Employee Seeking Help with NEMs?

If you're an employee that still has questions about NEMs or your employer's group benefits plan, contact your company's Plan Administrator or Benefits Advisor or your insurer directly - if it's with Simply Benefits, contact our Support Team for questions about NEMs, claims an beyond.

Additional Employee Resources

If you're an employee looking for help to better understand your group benefits plan, check out these resources:

• Health Spending Accounts for Canadians Explained
• Employee Health Benefits Coverage Types Explained in 5 Minutes
• How Employee Group Life Insurance Works

About Simply Benefits

Simply Benefits is Canada's newest Third Party Payor (TPP) that provides Employee Health Benefits 100% digitally through our Canadian Advisor partners. Our all-in-one digital solution provides three portals that enable Benefits Advisors to digitally manage all client plans online, Employers to efficiently administer employee coverage, and Employees to view, update and use their benefits 24/7 via desktop or smartphone app.

We help ENGAGE Employees Anytime, Anywhere, SIMPLIFY the Benefits Experience, and EVOLVE an Advisors’ Benefits Business.

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