When people think of Canada, they think of a lot of things, and “free healthcare” is usually one of them.
If you have employees living and working in Canada, you may be wondering, “What does free healthcare really mean? And what does it actually cover?”
Most importantly, what do you, as an employer, need to know about providing employee benefits to workers stationed in Canada?
In this blog, we’ll go over things you need to know about the healthcare benefits landscape in Canada, so you can protect your business while taking care of your people.
Canadian Employee Benefits: How to Take Care of Employees Who Live and Work in Canada
Understand the Public Health vs. Private Health Programs
According to the Canada Health Act’s public health program, provinces must cover:
- prescriptions administered in a hospital
- doctors & specialists, and more.
Provinces don’t cover:
- most prescriptions
- paramedical services
- vision for most residents, or
- other benefits.
So most companies offer employer-sponsored benefits to help employees pay for these extra expenses.
Here are two rules to remember about coordinating provincial coverage and employer-sponsored plans:
- Company plans must complement provincial plans – it’s illegal in Canada for private plans to pay for something already available under the government program. So you won’t find Canadian employee benefit plans that cover doctors or specialists, for example.
- The government coverage is always the first-payor. (This means coverage will always come first from the government, and then from the benefits plan.) This is especially true for out-of-country emergency benefits.
It’s important to know that Canada doesn’t have a universal health care system in place—each province is responsible for running their own systems. Technically, there are 15 different systems. So it’s very important to look at each province’s guides to get the most updated information on what their public health program does and doesn’t cover.
How Do Employer-Sponsored Health Benefits Plans Work?
Typically, people enrolled in an employer-sponsored plan are permanent, full-time employees—although part-time employees and contract workers are covered in many cases. They work a minimum number of hours per week, and receive benefits after a probationary period or after working a specific number of hours. Generally, the plan’s coverage extends to employees’ dependent spouses and children.
In Canada, there are usually seven categories of health care coverage that you’ll find in almost every employer-sponsored health benefits plan.
Let’s take a closer look at each category.
List of Employee Health Benefits in Canada: 7 Most Common Categories
1. Prescription Drugs
To be eligible under a prescription drug program, drugs must:
- be a prescription from a doctor or specialist, and
- have a drug identification number, or DIN, issued by Health Canada.
However, certain medications, even when prescribed, are generally not insured.
- drugs for sexual dysfunction
- natural health products
- drugs for cosmetic purposes
Although it is becoming more common for organizations to include the first three.
Prescription Drug Costs
The cost of a prescription is divided into two sections:
- the ingredient cost, and
- the dispensing fee, which is the fee the pharmacist charges to prepare it for you.
Since dispensing fees can vary a lot depending on the pharmacy, employees have the option to choose the least-expensive pharmacies. This can help them control the costs of their claims, and as a result, their premiums. Employers can incentivize this behaviour through preferred provider networks and online pharmacies.
Reimbursement also comes in two forms:
- The old-school reimbursement style system: the employee pays all of the cost upfront and then submits the claim.
- A pay-direct drug card: the employee pays whatever their share is directly to the pharmacist. The balance of the claim is settled right at the point of sale.
Does your Canadian plan currently use the old-school reimbursement style? If so, your insurer will probably look to move to a pay-direct plan at your next renewal. This is because a pay-direct plan is more cost effective and efficient for the insurer. It’s also easier for employees, because they don’t have to deal with organizing and submitting their claims.
Prescription Drug Formularies
There are many different drug formularies in employer-sponsored plans. In the past, a plan would pay for brand-name drugs, no questions asked.
But the most common formula nowadays is mandatory generic. Under this structure, the drug plan will pay for the cost of the generic only, with the exception of two scenarios:
- There is still a patent on the brand-name, or
- There is a medically-valid reason why the employee needs the brand-name prescription.
Under a mandatory generic plan, the employee still has the right to take the brand-name drug. But they will have to pay the difference between the generic and the brand-name.
2. Hospital Accommodation
Employer-sponsored health coverage is simply a top-up to the four bed ward coverage the provincial government provides. Most plans pay the top-up for a semi-private room, and the employee has the option to pay the difference themselves, if they want a private room. When it comes to the maternity ward, It’s common in many hospitals for the basic maternity ward rooms to be semi-private. In that case, the plan would upgrade the employee to a private room if it’s available.
3. Paramedical Practitioners
Coverage for paramedical practitioners is a highly-valued benefit for many employees.
Paramedical practitioners include:
- Registered massage therapists
- Speech therapists
As an employer, you can structure the practitioner types—but there’s a set list of practitioners that are included in this coverage. Most plans have an annual maximum per practitioner type, per family member.
However, in an effort to contain costs, many plans now combine certain practitioners—for example: $1,000 per year for physiotherapists, massage therapists, and chiropractors together.
To be included for coverage, a practitioner must be licensed by the association in the province where they work. The association must be recognized as a valid association by Revenue Canada in order to qualify for reimbursement.
Employees will get claim reimbursement based on the average pricing for each geographical area. This does vary slightly by insurer. Some insurers will provide this price list to you as a policyholder, but some consider it a trade secret.
4. Vision Care
Vision benefits usually have two tiers:
- Coverage for eye exams
- A separate benefit for prescription glasses, contact lenses, or laser eye surgery.
Depending on your employee demographic and industry you operate in, if you don’t include this benefit, workers may be less-than-happy with your benefits plan.
However, the premiums paid over two years can easily meet or exceed the actual value of the benefit. So this is a great area to:
- analyze the plan usage, and
- consider other options to fund this coverage.
Doing so may give you a better ROI.
5. Other Medical Services & Supplies
Medical Services & Supplies is one of the least-used portions of a typical benefits plan. But it’s crucially important for those who need the coverage.
So how does it work?
There’s usually a standard list of items that are insured with this coverage. But if you or your employees need something that isn’t on the list, you can ask insurers if they can include it.
You would be surprised at the flexibility of this list. Insurers are often more than willing to accommodate if your employee group has a need and you ask nicely!
6. Out-of-Country Emergency
Out-of-country coverage is always second-payor to the provincial plan. What does that mean?
Here’s an example. If an employee is hospitalized and treated outside of Canada, the provincial plan still pays for the costs as though the employee were treated in Canada.
However, they won’t pay any more than they would have if the employee was treated in Canada. So this is where out-of-country coverage takes over.
Policies will pay for unexpected emergency treatment, but they do exclude treatment for a list of pre-existing conditions (as outlined in your contract.) Most out-of-country coverage also includes:
- travel assistance, and
- coverage for referral treatment, whether in Canada or outside.
It’s important for employees to keep their out-of-country card somewhere easy to find in their wallet. If they need a prescription or have to visit a walk-in clinic, they should pay for the treatment up front, and then deal with the claim when they return to Canada.
However, if they need some higher-cost treatment right away, they can call the numbers on the back of the card. There are only a few out-of-country vendors in Canada, and they contract with all 26 group insurers in the country. Therefore, they have the power to negotiate cost, and the final bill is always lower with them involved.
Here’s an important rule to remember when an employee has an out-of-country medical claim, whether they used the card or not: Since provincial plans are the first payor, they need to see the claim paperwork within 90 days of when the incident happened.
Some insurers will submit to the provincial plan on an employee’s behalf, and some need the employee to do it first. If more than 90 days have passed, the province has the right to refuse payment. This means the private insurer also has the option to back out. So it’s important to know how your provider works, and ensure employees are aware of this process.
7. Dental Care
Dentists aren’t cheap, and they can actually charge whatever they want. So employees shouldn’t hesitate to ask whether the dentist sticks to the fee guide proposed by each province. Any difference will come out of the employee’s pocket.
There are three primary levels of dental coverage under Canadian plans.
- Basic Services, as well as Supplementary, are the first tier. These cover the basics – cleanings (typically every 6 to 9 months), root canals, sealants, x-rays, and gum disease issues. They’re usually insured at 70-100%.
- Major Restorative coverage covers three main areas – new crowns, new bridges, and new dentures. It’s common for coverage to be at 50-60%.
- Orthodontics are generally insured at 50% with a lifetime maximum. Benefits can insure braces just for dependent children, or for adults as well.
Depending on the insurer, either your dental plan or your extended plan will include dental accident coverage.
A dental accident is any situation where there’s an external blow to the mouth. It’s usually covered:
- up to a certain percentage, for example from 70%-100% (referred to as co-pay) or,
- at 100%.
If an employee needs a new crown because they bit down wrong on a taco chip, coverage would be based on the percentage of reimbursement offered for this type of coverage (usually from 50%-60%). However, if the employee needs a bridge because they got hit by a softball on the weekend, then this would be insured at the accidental dental rate.
How to implement a Canadian benefits plan?
First things first: Why is it important to have a Canada-based employee benefits advisor?
When it comes to your Canadian benefits plan, the expression “think globally, act locally” couldn’t be more accurate. Make sure you find a benefits advisor who is based in Canada, and who maintains your employee data in an appropriate fashion – for example, by using a Canadian-based cloud.
Unfortunately, Canada’s privacy legislation doesn’t align well with regulations in the US. You can save yourself a lot of trouble by choosing an advisor who really understands this and knows how to manage this process.
What are the key factors to consider when designing your Canadian plan?
Selecting the right Canadian benefits plan requires some careful considerations. To ensure you are getting the best value possible, discuss the following components with your advisor:
Take into account the unique properties of the labour market where your employees work, the government programs that are already in place, and the cost of living in the market where your staff are based. Your Canadian plan should not simply replicate your domestic plan.
Make sure your advisor is aware of your corporate philosophy when designing your plan. Add in some benchmarking and market know-how, and brainstorm a few ideas for attracting and retaining the employees you need.
How to start creating a Canadian employee benefits package?
Build a Request for Proposal with Your Advisor
In order for an advisor to assess your company and craft a Request for Proposal (RFP), they’ll require some essential information. Make sure you can provide a Canadian bank account number, key employer information, and an employee census.
If you already have a Canadian benefits plan and are simply looking for a new insurer, you must disclose the details of your existing plan before moving forward. Be prepared to provide rates for all benefits and a full claims history for the last three years. But don’t worry: you can find all of this information on the last two renewals you received from your current carrier or advisor.
For a full list of items that should be included in the employee census and help compiling them efficiently, you can download our employee census template. There are a few types of employees worth noting:
- Independent contractors: These staff are usually registered as a separate class, and are usually eligible for a fixed amount of life insurance and AD&D benefits, along with health and dental coverage. However, think twice about offering disability coverage, as contractors don’t have employment income given their status as independent operators.
- Temporary foreign workers / visa holders: Make sure you note each employee’s visa information on your RFP, including when it was issued and when it will expire. In many cases, disability will not be offered to staff who are working under a visa.
- Employees on leave (disability, unpaid leave, or maternity/paternity): On your RFP, be sure to note the last day each person worked, their reason for leave, and their expected return date. Note that employees on leave may not be eligible for benefits until they are actively back at work.
Get your advisor to help you implement the benefits plan
Once you’ve discussed various proposals with your advisor, brought them to your management team, created hybrid options, and decided on a plan, how do you make it a reality?
There are several final elements that your insurer will require to implement your plan, such as a master application, payment, and employee enrolment forms. The whole process will take about 4-6 weeks, so make sure you plan accordingly.
At the end of the day, choosing the right plan starts with choosing the right advisor. Remember: finding someone based in Canada is strongly recommended, especially if you’ve never gone through the process before.
With a solid understanding of the Canadian benefits system, and the right person to walk you through it, you’ll be well on your way to success.
Unsure how to find the right employee benefits advisor for your company? Download our free webinar recording.