Health+Benefits the March 2024 issue

Canadian Health Benefits Evolve with U.S. Flavor

Group health plans can lure and retain employees unhappy with government healthcare.
By Alan Fergusson Posted on March 1, 2024

Canadian companies must attract, retain, motivate and engage employees even more, with a remote-work culture and cross-border employment on the rise.

In Canada, group insurance is intended to be second payer to the public healthcare system, which exists to offer access to free medical services that are delivered in a healthcare setting such as a hospital or doctor’s office. Canadian group insurance covers prescription drugs, eyeglasses, massage therapy, physiotherapy, orthotics and much more. With the evolution of medicine, patients can now take a pill at home or visit a private infusion clinic, which means the cost of these medications has shifted from the public healthcare system to private health plans.

Main Benefits Canadians Want and Need

In Canada, employers are not obligated to offer employee benefits, so many Canadians, especially those who work for small to midsize employers, do not have access to group coverage. Seventy-two percent of Canadians who don’t have workplace benefits would leave their job for one with a health benefits package, our research has found, and we consistently see enhanced health coverage being the top priority. Healthcare services and expenses such as prescription drugs, medical equipment and paramedical services are typically not covered by Canada’s public healthcare system, and as a result, employees highly value the benefit.

Most Canadians have no immediate or cost-effective access to mental health services. Therefore, many employers look to their employee benefit plan to provide access to services and coverage either by offering a health plan with comprehensive coverage for mental health practitioners or by providing an employee family assistance program or a program that specifically offers virtual access to mental health services. We also see a greater demand for health spending accounts, which allow the employer to set a cap on the amount of dollars they want to allocate…and give the employee the flexibility to spend those dollars based on personal needs.

Seventy-five percent of Canadians want to use virtual healthcare for primary care; 74% want mental health tools that can be used independently and at their discretion.

Benefits Canadian Businesses Most Value

Canadian employers place a significant value on dental and vision benefits. For most Canadians, oral healthcare is not covered by the public healthcare system; therefore, employers see themselves as the conduit for their employees to gain better coverage. Seventy-nine percent of employers rate dental benefits as highly valued, and 66% give the same rating to vision. A health spending account is very popular with employers, with 75% rating this as either important or very important. Employees also demonstrate an increasing demand for these as they continue to drive for flexibility and choice within their benefits.

Using Technology to Deliver Benefits

At Sterling, we have our own proprietary benefits administration technology, SCB Connect. This allows us to control the enrollment process for plan administrators and often save them a huge amount of time and energy. SCB Connect allows for front-end integration with their human resources information system. At the back end, SCB Connect connects directly through the application programming interface to the carriers. The system then handles billing for the plan administration, with all records present on a month-by-month and member-by-member basis.

Employers are starting to look for enhanced integrations around other systems, which may look at total reward for example, but we find that the technology conversation is an easy one with employers.

What’s Next for Canadian Employers

1.  There’s room to grow in mental health, gender affirmation and infertility care. Our research shows 62% of Canadian employees have used at least one mental health benefit their company offers. But even if they have it, one in three Canadians feels that the mental health support within their existing plan is insufficient.

Fifty-one percent of Canadian employers are likely to add or enhance their mental health practitioner coverage under their group health plan within the next two years, but just over 10% would look to add or enhance their infertility coverage and 7% would add or enhance their gender affirmation coverage over the same period.

As the diversity, equity and inclusion conversation continues in Canada, we see these benefits continuing to have a great importance to employers and employees. We already include infertility coverage and mental health options in many of the plan designs we offer to our clients.

2.  The Canadian healthcare system is stressed, and many Canadians do not have a family physician. As a result, virtual healthcare has come to the forefront by providing people with quick access to a health practitioner without having to leave their home or sit for hours in a waiting room. Seventy-five percent of Canadians want to use virtual healthcare for primary care; 74% want mental health tools that can be used independently and at their discretion.

3.  Interest is growing in flexible benefit plans, as today’s employees, particularly younger workers, want the ability to choose their coverage to meet their needs. Forty percent of Canadian companies that have a traditional carrier plan are considering switching to a flexible benefits plan. Currently, around 69% of the market offers a traditional benefit plan structure.

4.  Employees want digital delivery for their benefits, with 44% of Canadians interested in an app to help them find a provider or medical care. Interestingly, 26% of employees would be less likely to seek a new job if their employer offered digital health benefits, surely a trigger for many employers to invest in the technology in the future.

High-cost and specialty drugs (i.e., drugs that cost CA$10,000 or more per year) may be prescribed to only 2% of the population but can represent one third of drug claims costs on average.

Cost Drivers of Benefits

When we consider all lines of benefits, the group health plan attracts the greatest attention over cost. The cost of a group health plan is primarily driven by the drug benefit, which can represent 75% to 80% of health claims. The cost of new drugs entering the market continues to rise, and increasing pharmaceutical innovation has led more people to rely on prescription drugs.

High-cost and specialty drugs (i.e., drugs that cost CA$10,000 or more per year) may be prescribed to only 2% of the population but can represent one third of drug claims costs on average. Drugs related to autoimmune diseases, cancer and diabetes have been gaining attention. We see a trend toward generic mandatory drugs within many of our plans.

Employers face increasing spending on benefits, with smaller Canadian businesses paying about 15% of payroll and spending at larger businesses potentially being double that. They are concerned about the cost of their plans, but they also worry about losing out in the battle for talent, and although they may want to control costs, they don’t really want to do this by decreasing the benefits they offer. Twenty-two percent of employers say that their largest concern is competitiveness in the employment market.

Small Business Opportunities

The carrier market in Canada is often not keen to cover smaller employers, and those employers can find it hard to get a quote, never mind one that is competitive, and will also struggle finding a plan with comprehensive coverage that will allow a small business to compete in the employment market.

We often see a U.S. employer entering the Canadian market with a small number of employees, perhaps an executive who will lead the growth or a small acquisition, and they can struggle to create that platform for growth in their team without a great employee benefits plan.

Download Sterling’s “Employee Benefits Landscape in Canada” report.

Alan Fergusson SVP, global partnerships, Sterling Capital Brokers Read More

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