All you need to know about group health benefits in Canada

Having health insurance is important for a variety of different reasons because, well – obviously, you want to be able to pay if tomorrow you find yourself in a situation where you need medication or a doctor’s appointment… Although health insurance is not cheap, finding yourself in an unfortunate situation might take more money out of your pocket than health insurance ever would.

It’s also pretty risky to run around without health insurance if you have a history of health conditions, do physical labor, engage in extreme sports…

A solution to the perplexity of whether or not an individual policy would be worth it is to not rely on an individual plan at all – but a group plan.

Group health insurance plans in Canada are rapidly changing and rising in popularity, however, not all employers agree that a group plan is necessary.

Considering that more people than not rely on some form of group health benefits, an employer might want to re-evaluate their choices and read the rest of this article to learn more about group health plans and why they are so important.

What is group health insurance?

Group health insurance is when an employer purchases a health insurance policy for his/her employees.

In an individual plan, you have to pay for your insurance policy and all additional fees that come with it. You get to negotiate your insurance plan alone or with an agent.

When it comes to group health policies, employers offer a plan to their employees (or even family members of their employees), and the premium cost is then split between the two parties as previously agreed on.

The group health benefits come in the form of extended health care ranging from physical examination to full-on coverage of all medical expenses – depending on the specific agreements in the individual plan issued by your company.

How many employees do you need to get group health insurance?

There are two kinds of group plans; small health insurance plans, and large health insurance plans.

If your company has between one and 50 employees, you are eligible for the small group insurance plan. If the number exceeds 50, then you will need to apply for large coverage.

That being said, for a company consisting of only a few people, you will need to have at least one person working for the company who is not related to the employer in any way for your company to be eligible for group health benefits.

Health insurance is also issued by category (in an example, full-time employees).

How does group insurance differ from individual insurance?

You can purchase an individual insurance plan for yourself or one of your family members. All costs of this chosen plan are being paid by you directly. When it comes to group health benefits, your employer/company provides a plan that you and your immediate family members can partake in and pay only a small percentage as agreed on beforehand.

The pros can be considered cons, depending on your viewpoint:

• Your employer can pay some (or even all) of your monthly premiums
• Your employer can help you choose an appropriate plan
• Your employer can provide plan documents

Some people want to be personally involved in all aspects of the health insurance plan they rely on, which is why all of these points might pose problems.

Note that you can always purchase an individual plan alongside your group plan.

What are the types of group insurance?

There are many different types of group insurance based on employee number, organization, or even inclusion:

Preferred Provider Organization (PPO)

This group plans provide a list of doctors and/or facilities where your health insurance might cover less percentage, but not be fully excluded.

Health Maintenance Organization (HMO)

This group plans are cheaper but very limited – you are paying for specific services in advance – but not others, and you have to stick to the preferred provider list.

Small Employer Group

Smaller businesses may choose small employer plans which cut costs as they only pay for primary health care such as physical examination and lab tests, while all other costs are paid by the insuring company and the employer.

Self-Funded Healthcare

In this plan, the employer pays all healthcare costs from the company funds.

Fully Insured Employer Group

The employer pays only for the premiums, while the insurance company pays benefits listed in the insurance plan

How much does group health insurance cost?

Group health policies are usually cheaper than individual health insurance. Keeping that in mind, it’s not free. Your employer and you will split the bill.

If you’re on the other side (the employer) you might be asking yourself – why would I agree to pay for my employee’s health insurance plan? The answer is simple: monthly costs for most health insurance plans range somewhere between 50 and 150 CAD. In group plans, both parties split the bill as arranged beforehand.

This means that one employee most likely “costs” around 5,000 CAD on average per year, but in the broader sense of things – losing an employee over health insurance would cost much more than simply paying for it.

Can a husband and wife receive group benefits?

The answer to this question depends on different factors – if only your family members are part of your company, then you cannot apply for a group health plan at all. If, however, you have at least one employee who is not related to you, then the rest of your family members who work in your business can partake in your group health insurance plan – including your spouse.

Be sure to consult a legal specialist or a human resource specialist to avoid allegations of any discrimination – especially in small businesses. If you offer a plan for your full-time employees, then all employees in this category must have this opportunity – not just your family members.

Can my small business pay for my health insurance?

In case of plans for a shop marketplace plan (Small Business Health Options plan), one of your employees must first be enrolled in an insurance plan issued by you before you enroll yourself in the plan. The general rule is that your insurance plan cannot start with you, but not that you cannot take part as an equal member of your company.

If, however, you own an LLC (Limited Liability Company), meaning that the loss and income of the entire business are reported on the personal income tax of the employer/owner, then you cannot enroll in the plan.

If, however, you have no employees (are self-employed and work alone) then you could be considered both the owner and the worker but not an employer, in which case you may be seen as a small group of one in the eyes of the law.

Is group insurance mandatory?

While every company should offer a health insurance plan to its employees, it is not mandatory by the law and you as an employer can choose not to offer a group plan for your business. If you have a small company and/or are just starting out, maybe group health plans are the least of your worries.

Having said that, most working-class citizens of the 21st century will not agree on taking a job position if there isn’t some sort of health insurance included, and around 70% of Canadians have some sort of supplementary health insurance plans, so keep that in mind when deciding whether or not it’s worth it.

Regardless of who pays the premium, group health benefits can be compulsory and voluntary. In case of a compulsory plan, no member of the company can opt-out of the plan, while in the case of a voluntary plan the eligible employee can decide if they want to be included or not.

Is group insurance taxable?

Life insurance premiums are not taxable in most cases, meaning that no sales tax is charged or added. An employer can pay insurance premiums on behalf of their employee, which counts as a deductible. This means that you as an employer can deduct your employee’s premium cost from their paycheck before the deductible of any federal taxes.

The result is that your employees have lower taxable income meaning that their take-home pay increases, which essentially means that this kind of insurance plan also benefits the financial situation of your employees and ensures greater satisfaction.

Can employers refuse to cover spouses?

When stating above that group health plans apply to immediate family members of your employees, this does not necessarily include the spouse.

While the spouse may be automatically added to a group health plan, the employer may choose to issue a spousal exclusion, by which the insurance plan applies only to the children of your employee.

If you are an employer and are considering spousal exclusion for your business’ group health benefits plan, be very cautious. The spousal exclusion must not be discriminatory, meaning that – in the example – if you are issuing a spousal exclusion for all your full-time employees, and these are mostly male, this could be seen as a gender exclusion, and exclusions cannot be based on criteria such as gender, race, nationality or religion.

If you are still confused about employee-related group coverage, then perhaps you can check out this FAQ section with a list of short answers to complicated group benefits-related questions.