Note: This guide focuses on building a health benefits plan in Canada. Employer health insurance in the US (and other countries) is a whole different ballgame.
Sure, benefits aren’t sexy. Things like four-day workweeks and home snack deliveries get all the perk press coverage these days, and the merits of different insurance plans might not exactly be a hot topic at dinner. However, the point of good People Ops practice is to build systems that support the whole human. And if that human is too sick to work, is in pain, or can’t afford their medication, we have a problem. Before we start building out the splashy, headline-making perks (which are not the focus here), we need to build a solid foundation.
While Canadian companies are not legally required to provide a health benefits plan, doing so is as much to the company’s advantage as it is to their employees. Helping our people and their families stay healthy helps them to be present and productive at work, to recover faster when they need to, and can also be a major competitive advantage in the quest for top talent. As HR practitioners, we’ve seen many candidates decline otherwise great offers because of weak benefits coverage.
For all these reasons, it’s unusual to find an organization with salaried employees that doesn’t provide health benefits of some kind. Even industries with hourly or casual employment (like hospitality), which have traditionally been hesitant to offer health benefits, have moved towards doing so as post-pandemic hiring becomes a challenge.
For something people rely on every day, the world of benefits can still be a bit confusing. Why do I need a broker? What’s a paramedical? Couldn’t they find a better acronym for Short Term Disability? If you’re a business owner, or an HR pro that’s new to benefits, here’s how to navigate choosing and buying them.
Before we get started, here are a few common terms we’ll use. For a more extensive glossary, we like Rise’s guide to group benefits terminology.
Advisor/Broker: A person who is licensed to sell benefits and insurance plans. You’re pretty much required to work with one to get access to most benefits plans.
Deductible: The amount of covered expenses that must be incurred and paid by the employee before benefits become payable by the employer.
Premium: The payment an employer is required to make for an insurance policy. Basically, this is how much you’ll be billed.
Provider: In this guide, the provider would be any company you’ve signed on with to buy workplace benefits from.
Now, it’s time to get building.
Step 1: Work with an advisor you trust
Because you can’t just walk in and buy most benefits plans directly (we tried!), you need an experienced professional to guide you through building your plan in a way that meets your needs. We’ve enjoyed working with both Orchard Benefits and Humi, and asked both for input in this guide. Your advisor (also known as a broker) should be able to work with you on a plan that is:
- Competitive, and
To do this, your advisor needs experience, data for your industry, good relationships with providers, integrity, and an ability to align with your budget and values from a plan design perspective.
Word of mouth referrals are great, but you should still take some time to interview any new advisor before you begin to work with them, to be sure they are right for you.
Some great questions to ask a potential advisor/broker:
- How long have you been in the health benefits industry? How many health benefits clients do you have?
- Can you provide some data on what benefits clients in my industry, at my size/stage typically provide?
- What other industries do you work with?
- How do you work with your clients to design a plan and select a provider to suit their unique needs and values?
- What are some good benefits to offer if I have (or want) a company with diverse employee needs? Here you’re looking to determine that they understand the inclusive benefits plans that are designed for a wider range of demographics.
- Can you explain [your most confusing piece of benefits jargon] to me? Here, you’re looking to determine that they have the patience to walk you through things and educate you enough that you can feel comfortable.
- Can I speak to some of your current or former clients?
- How does your compensation work? How does this impact your provider recommendations?
According to Chris Gory, an advisor at Orchard Benefits,
“An advisor is required to share their commission (rate) if asked. For small groups, 8%-10% is the norm, but an advisor can set it higher than that. When it's set above 15%-20% (depending on the insurance company) the advisor has to get written approval from the employer.”
Step 2: Make sure your coverage is informed by values, not just budget.
We can’t tell you what to cover, though it’d be a lot easier if we could. Data from your industry, which a good advisor will provide, is helpful in determining if a proposed plan is competitive. However, that in itself is not an indicator of a good plan, or whether it’s in line with your values. Your organization is as unique as the people in it, so what works for the next company might not work for you.
To guide that conversation, take some time to prioritize the following statements:
- I want to limit the cost to the company.
- I want to limit the costs incurred by employees.
- I want employees to be well covered in a health emergency/serious issue.
- I want employees to enjoy their benefits / feel well looked-after.
- I want to be genuinely competitive with my offering.
- I want to be able to list fun / appealing benefits in my employer branding.
Also, your priority order may change based on:
- Your finances and long term company goals,
- Your team’s needs, and
- The demographics you are trying to attract/retain on your team.
A pitfall that smaller companies may fall into is focusing a small budget on flashy perks and forgetting the basics that matter. For example, a fun startup with a young employee demographic might choose to prioritize appealing benefits like massages and travel, and put a smaller amount of budget towards less glamorous options like prescription drugs, dental, and long term disability coverage. While some employees will love these perks, the downside is that you’ll have trouble appealing to a wider range of demographics, and skimping on the basics can cause your employees (and you!) genuine hardship when (not if) something bad happens.
Another pitfall is getting rid of traditional coverage altogether and exclusively offering a Health Spending Account (or HSA), which is a certain amount of money (say, $1000) that employees can spend on anything health related each year. While those programs can seem easy and flexible, they aren’t inclusive to team members who may have extended medical needs.
So, what should you cover? Here are some common options and what they get you, jargon-free.
Step 3: Understand the Components
Some commonly prescribed drugs can easily run over $100K per year for just one person so it’s best to aim for uncapped coverage if you can. However much you cover, anywhere from 80% employer-paid coverage is considered baseline competitive.
Inclusivity tip: Check that your plan covers various hormonal or fertility therapies as well as birth control. If your employees are responsible for dispensing fees, check that your plan allows for them to fill up in bulk to save on them.
Dental coverage has two separate main areas: “Basic” and “Major” coverage. No, Basic doesn’t mean yoga pants and frappuccinos. We’re talking routine dental treatments like cleanings, ongoing/maintenance and X rays. Major coverage is for more complicated things like root canals, crowns, bridges, dentures, and things below the gumline.
Orthodontics, which include braces, casts, retainers, etc., are not included with either and must be purchased separately. Dental coverage can be expensive, so some companies opt to only cover Basic, or will cover a higher employee spending amount for Basic than they will for Major procedures.
Inclusivity tip: Orthodontic coverage is very expensive to provide and often left out, and (like the premium cable packages of the 90’s) you can’t even choose to add it if you don’t have Major coverage already. But if you can afford it, it does appeal to employees looking for a family-friendly environment.
Paramedical is the term for various health therapies that are not strictly considered medical. Typically, things like mental health therapies, social workers, massage, physiotherapy, acupuncture, naturopaths, dietitians, speech therapy, audiologist, and podiatrists fall under this umbrella.
Though it might make sense to provide these services at a set amount per practitioner (per person, per year), a larger combined maximum (or Health Spending Account) is often a better choice, as most folks will use up this budget in one or two areas vs a small amount in each.
Inclusivity tip: Ask your advisor if the list of therapists allowed on your plan covers the widest possible range of practitioners that are beneficial to your employees’ wellbeing. (Note, your group size may affect your options here.)
Other Extended Healthcare
Things like medical supplies and equipment, nursing services, semi-private (or private) hospital rooms all fall under this category.
This covers eye examinations, prescription lenses, laser eye surgery and more. This is an expensive benefit to provide, for what usually amounts to a very small amount of coverage to the employee. If you’re on a tight budget, many advisors will recommend forgoing this coverage. A work around if vision is out of your budget can be to provide a health spending account that they can use for vision care or any other uncovered expenses.
Coverage for emergency treatment and hospitalization out of the country. Most plans come with emergency travel insurance, which shouldn’t be mistaken for general travel insurance like lost baggage, missed flights, etc.
Long Term Disability
This is partial salary coverage (usually 67%) for employees who are too ill/injured to work for a prolonged period. It usually kicks in after 3-4 months' absence. This situation is more common than we’d like to think, and this coverage is essential. The premium for this coverage is paid by the employee, not the company, so that their benefit will not be taxed should they need to claim it.
Inclusivity tip: Consider a one time salary increase for employees equal to the amounts of their premiums. This will help absorb sticker shock.
Short Term Disability
Short Term Disability insurance (also known as STD) covers the 3-4 month period before Long Term Disability kicks in. As Canada offers its own Employment Insurance (EI) coverage for short term disabilities, many companies opt out of this insurance. Some offer a top up of an employee’s EI payments.
Life insurance provides a lump sum payout in the event of the death of an employee, or sometimes their spouse/child(ren). Usually the coverage is a larger sum for the employee, and a smaller sum (if covered) for their spouse/child(ren). It’s common to have this coverage.
Note: the premiums for this are considered a taxable benefit and should be added to your employee’s paystubs.
Accidental Death & Dismemberment
Coverage for a lump sum in the event of an employee’s death or loss of limb, sight or hearing due to an accident. The size of the payout varies for loss of limb, sight and hearing, depending on the impact such a loss is expected to have on a person’s life. It’s common to have this coverage.
Note: the premiums for this are considered a taxable benefit and should be added to your employee’s paystubs.
Coverage for a one time lump payout in the event an employee suffers a critical illness or injury. This coverage is certainly nice to have, but should not be considered a replacement for Long Term Disability insurance.
Health Spending Account
A Health Spending Account (or HSA) is a set dollar amount that your employees can choose to spend on eligible health expenses that are not covered (or are only partially covered) under your plan. There are many upsides to providing a HSA. Employees love flexibility, and your cost as an employer is generally set, as you’ll pay up front, along with an administrative fee. Many HSA’s allow a rollover period too, so employees can save their annual allotment and combine it with the following year if they know they have a large expense coming. Ask your advisor what best aligns with your budget and your values.
If your intention is to provide a top benefits plan, and want your money to go further for your employees, you might offer an HSA in addition to your health, dental and paramedical coverage. Your advisor can help you find the right balance for you. They can also tell you if it makes sense to shop around and keep your HSA separate from your provider.
Note: if your HSA includes wellness claims, these might be considered taxable benefits, and should be added to your employees’ pay stubs.
Employee Assistance Program
An Employee Assistance Program, or EAP, is a confidential service for employees and their families to call and get help with their life issues. Ranges of eligible issues vary but can include short term counseling, career coaching, legal advice, or help finding a therapist or other service like elder care or daycare. Some providers will assist further, almost like a concierge.
Most insurance providers offer a version of an EAP, but not all are made equal, and this is partially why utilization rates are often low. You and your advisor can shop around and find an EAP provider outside of your regular benefits plan if it better suits your budget and values. Having an EAP in place is helpful for employees who use it, and also helpful for managers who are not qualified to counsel through tricky personal issues and need somewhere to refer people to.
Step 4: Choose a plan, and collect regular feedback.
Once you launch your new benefits plan, be sure to communicate and educate employees on how to use them and remind them regularly about what’s available. It’s good to have all benefits and perks well-documented, easily accessible, sent along with offers to potential new hires, and promoted regularly.
Also, be sure to check-in and monitor your utilization rates. Are people consistently maxing out the Health Spending Account? Is anybody using the EAP? If not, you might have the wrong plan. You can also collect feedback on your new benefits plan via a survey, or by including benefits-related questions in another more general employee survey, like one focused on engagement.
How do I know if our plan will make people happy?
It’s tough to please everyone. Without an unlimited budget, your plan will certainly have gaps that mean employees will have to incur some costs themselves.
Your advisor will look at factors like your team's age, gender, etc. and compare it with insurance claims data to get a sense of what’s commonly needed for groups with your makeup. They’ll do a cost analysis, and should be able to help you find creative ways to cover as much as possible with the budget you have (now and down the line) - but you won’t be able to cover it all.
Should I survey my employees to see what they want?
Maybe, but probably not.
Surveying may feel like the right thing to do, but you’re in danger of stoking resentment if your budget is tight and you have to say no even to the most popular requests. Most employees are unfamiliar with the way benefits plans and premiums work, and the costs. If you are planning an open wishlist type of survey, you will need to be prepared to spend time educating your team on how benefits work, or you’ll need an unlimited budget to say yes to everything!
Surveying options that you might consider instead:
- Asking a general satisfaction question in your engagement survey, such as whether they are happy with the current benefits plan. You can also leave an open comment section so that you know if there are areas people are particularly concerned about.
- If you and your advisor have designed a base plan and you’re now choosing between 2 or 3 additional options that are all in line with your budget and values, you could potentially put a vote out for option 1, 2 or 3.
These options feel less like wishlists and may help contain some potential resentment from employees.
Are there any good out-of-the-box options?
There sure are! Your advisor can help you determine whether you should go with a stand-alone plan that you build yourself, or if there is an out-of-the-box plan and/or a pooled plan, that may save you money. It may also save you some tough decisions, but it’s a trade-off on flexibility in some areas. For example, many pooled plans will place a cap on the maximum spend for prescription drugs for each employee.
Can we design our plan to be flexible and let employees pick what they want?
Yes! There are many ways to add flexibility to your plan. Some out-of-the-box plans even have “cafeteria style” options for employees to decide for themselves if they want option 1, 2 or 3 based on their personal needs and preferences. Naturally, your employees will choose the option they’ll get the most use out of.
Can we have different plans for different categories of employee?
You can! Some companies want to offer a larger benefits package for executives as part of a special executive “you’ve made it” compensation package, or to help the “what would we do if this leader got hit by a bus?” problem to stay hypothetical.
Some companies have employees in a wide range of different jobs, and may decide that for folks in jobs with heavy physical demands, they’ll spend more on physio and medical supplies coverage. Maybe for folks in high stress and trauma roles, like crisis response lines, they’ll spend more on mental health coverage.
You need a minimum of 2 people per “class” of coverage. If you’re interested in classes, the key considerations are:
- Is this difference in coverage strictly job related?
- Can we be sure we’re not discriminating against a group of people whose departments skew higher in certain demographics?
- Is this in line with our values (and budget)?
For example, some organizations might feel that offering better benefits to executives makes some practical sense, but further widens the disparity between income levels, leaving lower income employees to cover bills they’re less likely than an executive to be able to afford.
What are some ways I can make my benefits more inclusive?
- Limit the amount of out of pocket expenses that your employees must pay, as much as possible.
- Ensure things like birth control, hormone drugs/therapies, fertility treatments are available.
- Offer family coverage, not just single.
- Try to make sure your mental health coverage is sufficient for at least 1-2 sessions per month, and check that the coverage is not unreasonably limited to one specific type of mental health practitioner.
What should my plan cost, and what are some ways I can control costs?
Companies can typically expect to pay around 15%-30% of their payroll amount on benefits (including PTO and government-legislated benefits) with a further cost for perks. Some of the most common ways you can keep your benefits premiums under control are:
- Deductibles, Copays and dispensing fees. Mandating that the first $X, %, or specific component of all or some claims is paid out of pocket before the rest becomes eligible for coverage. This is common but unpopular - it can feel quite confusing or unfair for employees.
- Coinsurance. The employees pay a portion of the premium. Note: it’s not common for the employee share to be more than 20%, and most providers will not allow for it to ever be over 50%.
- Start Small. Your premiums are almost guaranteed to increase year over year, and could become unmanageable. It’s so hard and upsetting to have to strip benefits from the plan when that happens. Follow your advisor’s advice on what size plan you should start with so you can build it up over time instead of scaling back.
- Your advisor will tell you that your first year with any new plan is at a great rate, and the second year usually sees a big hike in premiums (expect at least 15%!) based on usage.
- Consider if you’d like your advisor to factor this prediction into your first years’ premiums and have you pay extra. You’re effectively prepaying so that the hike won’t be a massive shock later.
- Resist the temptation to shop around for a new plan right away to take advantage of the next set of introductory rates. Providers will look at your “jump around” history whenever they’re making a determination of whether they want to quote for your business, and it could impact your pricing.
What if my solid, cost-effective plan feels boring or uncompetitive?
Your plan should put real human needs before competitor FOMO. But in reality, if you’re trying to attract and retain talent, then it does help to have a few flashy options to brag about!
If you can afford it, get your advisor’s advice on what extra benefits you can add to the plan. You could also look at some separate neat health related benefits or just general perks to augment your offering. Some of our favourites are:
- Inkblot (or similar) mental health coverage
- RRSP matching with Wealthsimple (or other)
- Professional development budget
- Personal spending account for things like wellness, fitness, green living, safety, childcare, cleaning, professional services, etc. (If your advisor recommends self-funding instead of coverage, do take employee privacy into account in your admin.)
- Home office budget
Not all perks cost hard money. Having genuine work-life balance and other flexibility options are also attractive! Consider offering:
- A minimum of 20 days vacation (rollover and termination liability can be controlled)
- Unpaid sabbaticals
- A 4-day work week
- Permanent remote working options
- More asynchronous work for team members’ flexibility
- Encouragement of steps toward an anti-colonial workplace
In a perfect world, designing a benefits plan wouldn’t involve tough decisions on which areas of employee health to prioritize. And, if your budget is currently tighter than your values, it can be hard to feel good about the choices you make. If this is you, know that any plan is better than no plan. But as you grow, be sure to prioritize the health and wellness of your employees to the maximum you can afford to, unless you can afford to lose them.