Are you a Canadian-based employer with staff in the US? How can you best manage your benefits plan for this special group?
In this blog, we’ll discuss how to navigate employee benefits for US workers, so you can keep your entire team happy and protected—wherever they are.
What Are the Challenges of Providing US Employee Benefits?
Designing, administering and managing benefits plans across multiple markets can be challenging. When those health plans cross borders—and very distinct health care systems—it can be especially daunting. Canadian based employers with operations in the US face unique challenges managing the benefit program for their US staff.
Why is this?
One reason is, the benefits that attract and retain Canadian workers might not appeal to US workers. In addition, benefits costs are much higher in the US than in Canada.
The US healthcare delivery system creates a great deal of cost and complexity for foreign employers. This makes it difficult to create parallel benefit plans for cross border operations. US Healthcare Reform has also increased confusion, burden and potential liability. To add another layer of complexity, the US employees of Canadian based companies are often spread across multiple states, which makes it particularly difficult to find an appropriate solution.
Despite these challenges, a good benefit program remains an essential tool when attracting and retaining US staff. Because there is no underlying government plan in the US like there is in Canada, employees in the US are even more reliant on their employers for their health insurance needs. The good news is that there are a number of options available and many Canadian employers successfully navigate the US system. The keys to success are asking the right questions and getting the help you need from the right expert.
When Does a Canadian Company Need to Provide Benefits for US Employees?
There are several different scenarios in which a Canadian company might need to manage a benefit program for US based employees. These include:
- Acquisition of foreign entity and inheriting an existing plan
- Asset purchase of foreign entity without inheriting foreign benefit plan
- Inserting a sales force in a foreign market
- Opening a plant or facility in a foreign market
The questions you should ask and the things to consider will be different depending on the scenario. Let’s take a look at an example situation in which a Canadian company begins hiring sales and service employees who will be located in the US.
What challenges would this company face? What things do they need to consider?
Let’s look closer at some potential areas to examine. Keep in mind these answers may be different depending on where in the US your employees are located.
(Related post: How to Protect Employees Who Travel and Work Abroad)
How do we want to model the new program? What are our objectives and goals?
This question should be asked in any market where a company is looking to set up a new benefit program. Your company will want to take some of the following into consideration. This will help you determine how to structure your plan.
Is there desire for equity/uniformity with the Canadian benefit plan?
Based on the company culture and/or the fact that employees in the US and Canada work closely together, some firms want as much equity with the benefit programs across the global organization as possible. The employee benefit programs can be matched very closely, but the medical/extended healthcare programs will look very different because of the different healthcare systems.
One way to create equity between the healthcare programs is to look at the relationship to the benchmark in each market. However, the structure will be totally different because there is no underlying government system in the US.
Therefore, the US medical plan will not only cover prescription drugs and paramedicals like the Canadian plan, but it will cover doctor’s visits and hospital care. Expensive procedures, such as heart transplants, can lead to claims costs of several hundred thousand, or even a million dollars. With this level of risk, we also see much higher premium costs. On average, the US medical premiums are 8-10X the normal premiums of a Canadian extended health plan.
Is it very competitive to attract quality talent in this industry or region?
Firms should be considering benchmarking data to determine what similar companies are offering for benefits, since they will be competing for the same talent. If you find you’re in a competitive industry, and it’s hard to attract top talent, you’ll need to offer a richer benefit program. This may be more important than the desire for equity between US and Canadian employees.
What is the demographic makeup of your US employees?
Are all of your US workers higher-paid sales or management employees or are they lower-paid service employees? This will influence how you structure and design your program.
Are your employees spread across the US?
This is common with many of the Canadian-based companies that are opening operations in the US. It’s typical for the US staff to be sales or local service workers that are spread across multiple states. This is important as the US system can change based on the region. Therefore, it’s essential to work with an insurance carrier whose provider network reaches across the country. This will address the needs of all employees, regardless of their location.
Is there an office address or are employees working from their homes?
This is also important, as some insurance carriers require that there be a physical office address. If there is no office address, you’ll need to explore program options that will cover employees who work from home.
How do we want to set up the cost sharing arrangement? How much of the premium should employees contribute in order to participate?
The typical cost sharing arrangement in the US will be different from what is typical in Canada. In the US, it’s is typical for the employees to cover about 25% of the benefits cost on average, but there are numerous ways to structure this. While it’s not uncommon in Canada for a company to cover 100% of the premium, this is very unusual in the US, and almost all companies ask for some level of employee contribution, especially to cover dependents.
What is the new hire waiting period in the US?
In the US, it’s typical to have a shorter new hire waiting period than the normal 90 day period we see in Canada. Because there’s no underlying government system, it’s even more important to ensure there’s no gap in coverage when transitioning jobs. Plus, you don’t have the same flexibility to waive the waiting period whenever you choose, like you can in Canada.
You must be more consistent in the US and everyone needs to be treated the same, unless you’ve established a pre-defined class. Therefore, the most typical new hire waiting periods are either 1st of the month following date of hire or 1st of the month following 30 days of employment.
These are just a few examples of what Canadian companies should be considering when making their initial entry into the US. The differing healthcare systems present challenges for an HR team that is accustomed to the intricacies of the Canadian system. And even the companies that have had operations in the US for some time should be asking these questions to determine if their current program is appropriate for the needs and goals of their organization.
Ultimately, it’s important to ensure you’re getting the advice and help you need from an advisor who has expertise in the US, and a good understanding of the Canadian system. But despite the challenges, we’re confident that with a little help, you’ll be able to structure a benefit program that’s appropriate for your organization, and meets the needs of both your employees and the company.
This is a guest blog written by Chad Rowley at NFP Corporate Services.
Download our 45-minute webinar recording, where we give you an overview of the US healthcare system and employer-sponsored programs.