An Employer’s Guide to Group Benefits in Canada

Group benefits are often thought of by employees as part of the ‘perks’ that an employer can choose to offer them. As an employer, you should understand that if you offer a benefit plan to your employees, it is a key part of how you attract new talent as well as retain and support the key employees you already have. By definition, group benefits are employer-sponsored insurance programs that are offered to employees to aid in supporting employee wellness. They do this by providing insurance that helps to offset the cost of healthcare, dental care, and potentially things like income protection in the event of a disability and life insurance for unexpected loss of life. So if you’re an employer who has a benefit plan in place, or if you’re looking at building one for the first time, I thought it may be helpful to provide a quick guide as to what a benefit plan is, how it works, what value they provide and what drives their cost.

In This Article:

• What Does a Typical Group Benefit Plan Include?
• How Does My Benefit Plan Work?
• Why Are Group Benefits Important?
• As an Employer, How Can I Set Up My Benefit Plan?
• What are Some Common Mistakes Employers Make?
• How to Build A Strong Benefit Plan

What Does a Typical Group Benefit Plan Include?

Historically, in Canada, most group benefit plans are issued by life insurance companies. The policies typically bundled a variety of different coverages into one plan for employees. The coverage would usually include:

1. Health & Dental Insurance: this would help cover all (or a predetermined portion) of the costs associated with things like:
   1. Prescription Drugs
   2. Services from ‘Paramedical Practitioners’ (think physiotherapists, chiropractors, etc.)
   3. Vision Care
   4. Expenses related to visits to the dentist
2. Life Insurance: This is a familiar concept where a named beneficiary would receive a lump-sum payment if the employee passed away while covered by the plan. It often includes coverage for a small amount for the dependents (spouse and young children) of the employee as well.
3. Disability Insurance: This protects the income that the employee makes in the event that they are unable to work due to injury or illness. There are two forms of disability coverage:
   1. Short-term disability – replaces income for short-term absences, usually covers the first 3-6 months that someone is off work.
   2. Long-term disability – replaces income for extended absences, potentially up to age 65 for the employee. 
4. Optional Benefits: Many plans are beginning to add things like the following as ways to enhance coverage for their employees:

1. Virtual health care
2. Employee Assistance Programs
3. Healthcare Spending Accounts
4. Wellness Accounts

This is just a quick listing of items that are typically included in a benefit plan that an employer provides. What you see is that the services provided invest in the health and well-being of the employee and their dependents, allowing your employee to focus on being the best that they can be for you each day at work. 

How Does My Group Benefit Plan Work?

If you are an employer looking to provide benefits to your employees, you are responsible for designing the plan. This means that you choose what is covered, how much the plan will pay and how the cost is shared between you and the employees. Once you know what you are looking for regarding the coverage options, you would contact a broker who can help you market it to various insurance companies and then determine the best option for you to implement. A few key things to remember:

• Risk is pooled for the plan. This allows for more stable rates than if each individual were examined for how they used the plan. 
• Some rates are based on demographics. For life insurance and disability insurance, the rate that you pay is based on the demographics of the group. So the age of your employees and their gender matter in determining how much these benefits will cost.
• Some rates are based on experience. For benefits like health care and dental care, the amount of premium collected by the insurer is compared to the claims they paid out, and the premium for the next year will be determined based on the ratio between these two amounts. If the insurer pays out more than they expected, the premium will go up; if the ratio is smaller than expected, you will see the premium decrease.

Why Are Group Benefits Important?

If you are an employer, a well-designed and implemented benefit plan will help you in a few key areas:

• Attracting new talent: If you are in a competitive labour market when it comes to hiring, then a strong benefit plan is essential. It can set you apart from other employers with whom you are competing, to attract highly trained, skilled employees to your company.
• Retaining existing employees: When you consider your benefit plan, remember that employees should see real value in it. This means that if they are ever recruited by another employer, one of the first things they should consider is whether the potential employer offers a benefit plan that is equal to what they have. In many cases, if that answer is no, you will see an employee stay in their current job to avoid taking a reduced benefit plan. 
• Benefits are tax-efficient: Premiums paid by employers for benefit plans are generally tax-deductible business expenses. These premiums are not considered taxable to the employees, and as a result, they don’t attract things like EI and CPP. Including a benefit plan in your total compensation package for employees is a tax-efficient way for a business to compensate its employees. 

If you are the employee of a business that offers a benefit plan, then you should see the value based on:

• Comprehensive Health and Dental Support: These benefits are designed to minimise out-of-pocket expenses for your essential care, ensuring that your physical well-being remains a priority. If you have a benefit plan in place, this makes thinking about how you will afford the covered services less worrisome. 
• By subsidising your medical and dental expenses, the company aims to reduce your financial stress. This coverage ensures you can prioritise your health and stay focused on your professional goals without the burden of unexpected out-of-pocket costs.

As an Employer, How Can I Set Up My Group Benefit Plan?

There are a few different models that you can use to implement a benefit plan for your employees:

• Fully Insured Plans: These plans have fixed monthly premiums where you pay an insurance company to take on the risk associated with the payments from the plan. 
• Administrative Services Only (ASO) Plans: This style of plan has the employer pay a third party to administer claims, but the employer is responsible for covering all of the costs, including reimbursements for expenses to employees.
• Hybrid Plans: This is a system where some areas are fully insured, and some are ASO-style reimbursements.

The risk to the employer is highest with the ASO model because they are responsible for making all of the payments for expenses that are incurred. If there are major health issues for any of the employees, there is the potential for unexpected, high costs for the employer. This is why, typically, we see employers who are very large use this model. Small to medium-sized businesses will more often use the fully insured or the hybrid model to limit the risk that they face.

What are Some Common Mistakes Employers Make?

Your benefit plan shouldn’t be a set-it-and-forget-it part of your compensation package for your employees. It should be something that your employees see value in and that they use to maintain the health and well-being of themselves and their families. As an employer, you should make sure:

• Your employees understand the value the plan provides. As an employer, if you provide a great plan but your employees don’t understand what they have, it drastically reduces the value you get from your plan.
• You are keeping up with what employees want. As an example, in the years coming out of the COVID-19 pandemic, there has been a significant surge in the use of mental health practitioners by many Canadians. Does your plan support this? If it doesn’t, you are missing out on a key service that many of your employees need.
• You are providing current benefits, such as virtual healthcare. This service drastically reduces downtime by allowing employees to consult with doctors via phone or video call for non-urgent needs. For example, a prescription renewal or a minor consultation that previously required a three-hour absence can now be resolved in minutes. This ensures employees get the care they need immediately while minimising the impact on daily operations.

How to Build A Strong Benefit Plan

As an employer, you want to make sure that your benefit plan balances what you pay in premiums with the coverage your employees need, as well as what they want. One of the best ways to do this is to work with an independent broker who can access information from multiple carriers and help you make sure that you receive the best value for the investment you are making in your benefit plan. When they’re done right, your benefit plan provides you with a strategic advantage in the workforce; it is not just another line on your expenses. If you want help designing and implementing a benefit plan that will help you achieve your business goals or to review the plan that you already have in place, reach out to the team at Strata Wellness & Benefits to provide you with the expert guidance that you need.