Beware the “COVID-19 Adjustment Factor” in Your Next Renewal

Robert Crowder, founder and President of The Benefits Trust, has over 30 years of experience serving pension and employee benefits clients. In 1994, he founded The Benefits Trust as a Third Party Administrator serving small and mid-sized business across Canada. Through Rob Crowder's dedication and leadership, The Benefits Trust has grown into the successful benefits provider that it is today.

Beware the “COVID-19 Adjustment Factor” in Your Next Renewal

Last year, small businesses faced many challenges, including subsidizing big insurance companies during the start of the pandemic. Dental and paramedical service providers were shut down, except for emergency treatments. Though employees could not access these services, businesses were still expected to pay full premiums for benefits coverage. From March to May, it is estimated that small businesses in Canada collectively paid $1.6 billion in unnecessary premiums, cash outlays that were more urgently needed to stay solvent.

After the first wave of the pandemic, some insurers offered credits to mitigate the lower numbers of claims. This was too little too late.

Despite these changes, there’s another problem that will emerge in 2021 benefits plan renewals.

The COVID-19 Adjustment Factor

The “COVID-19 Adjustment Factor” (it may go by other names as well) ignores how the pandemic impacted insurance claims. Theoretically, lower than expected claims in the previous year should result in lower premiums in the following year. However, for small businesses that don’t have a Budgeted Administrative Services Only (ASO) plan, this won’t be the case. Premiums are being adjusted, reverting to the same “full” level as before the pandemic hit.

This ignores the reality that until we have overcome the pandemic and fear of infection as a society, employees will not be using paramedical and dental services as they were before. It also does not leave any flexibility in the event of another lockdown, which is already the case in Ontario, Quebec, and other provinces.

How a Budgeted ASO Plan Can Help

It’s important business owners understand their benefits funding model. Ask your insurer if they’ve implemented more flexible policies to allow business owners to adapt to fast changing conditions. If they haven’t, consider opting for a budgeted ASO funding model.

An ASO plan is self-funded. Unlike a traditional group benefits plan, which locks owners into a 12-month contract based on historical data and future estimates, the ASO plan reflects the current business environment in real time. Contributions are directly related to your claim levels and surplus premiums can be returned to the business at the end of the year. ASO plans are a flexible alternative to traditional plans that ensure your best interests are protected in the event of future economic shocks.


Though the rollout of vaccinations promises a return to pre-COVID life, there are still many uncertainties of when that will be, and how many lockdowns will be ordered before then. Many traditional group benefits providers do not incorporate flexibility within their plans, causing owners to incur full premium costs when dental and paramedical services are partially or totally unavailable. A budgeted ASO solution can offer a better alternative, giving business owners more control over their contributions.

The Benefits Trust, a budgeted ASO provider, offers benefits plans specifically designed to serve the needs of successful smaller employers. Contact us today for more information on ASO Plans.

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