Canada’s healthcare and benefits system is often regarded as one of the most comprehensive in the world. Many employees across the country enjoy a wide range of health benefits, such as prescription drug coverage, dental care, and vision care. These benefits are an essential component of employee compensation packages, helping businesses attract and retain top talent.
Although the specifics of these health benefits can vary between companies, they all aim to enhance employee well-being. So, how exactly do these benefits work?
In this article, we’ll dive into the details of health benefits in Canada, from what they typically cover to how they function. Plus, we’ll explore how an Employer of Record (EOR) can assist your business in navigating the complexities of providing health benefits.
Ready to learn how health benefits work in Canada and how they can benefit your employees? Let’s dive right in!
The Canadian public healthcare system
Canada’s health care system, commonly referred to as Canadian Medicare, is a publicly funded, universal healthcare model that ensures all citizens and permanent residents have access to essential medical services. Funded primarily through taxes, the system operates under the guidelines of the Canada Health Act, which sets national standards for healthcare delivery across the country. Each province and territory manages its own health insurance program but must comply with the following principles to receive federal funding:
- Public Administration: Provincial and territorial health plans must be administered by a public authority on a non-profit basis.
- Comprehensiveness: The plans must cover all medically necessary services provided by hospitals and physicians.
- Universality: All eligible residents are entitled to the same level of healthcare.
- Portability: Residents can access healthcare services in different provinces without losing coverage.
- Accessibility: Residents must have reasonable access to healthcare facilities and professionals without financial or other barriers.
While provinces and territories oversee the delivery of healthcare, they receive federal funding to ensure consistency across the country. This funding helps maintain services such as doctor visits, hospital stays, and emergency care, all provided at no direct cost to the patient. In some provinces, additional services like dental care, prescription drugs, and vision care may also be covered or subsidized.
Despite these universal services, the actual delivery of healthcare can vary by region. For example, some provinces may have shorter wait times for certain treatments or offer additional services that others do not. Most provinces also offer supplementary programs for vulnerable populations, such as seniors or low-income individuals, ensuring that they have access to expanded services like home care or long-term care.
The Canadian health care system offers comprehensive coverage and lower costs compared to other nations, particularly the United States. On average, Canada spends $9,054 per person on health care each year, significantly lower than the $14,570 per person spent in the United States. This is largely because the Canadian system emphasizes preventive care and cost control through government regulation. Additionally, the absence of a for-profit healthcare model means that administrative costs are lower, leading to more efficient use of resources.
The U.S. healthcare system
The United States does not have a universal health care system. Instead, private companies, employers, and in some cases the government provide health insurance.
The Affordable Care Act (ACA), also known as Obamacare, was enacted in 2010 to make health insurance more affordable and accessible for Americans. Under the ACA, all health insurers must provide certain essential health benefits.
Unlike in Canada, where the government funds health insurance, most Americans get their health insurance from private entities through their employers. Both the employee and the employer make payments for private insurance.
Although the poorest Americans benefit from Medicaid, the many working Americans do not qualify for this government-funded insurance. Some employers also lack health insurance, making it difficult for many Americans to afford adequate coverage. Americans are also at higher risk of paying high out-of-pocket costs due to the high deductibles and copayments associated with health insurance plans.
The most common types of health benefits in Canada
While Canadian Medicare provides comprehensive coverage, there are some limitations. For instance, services like dental care, vision care, and outpatient prescription drugs are typically not covered under the universal plan. As a result, many employees rely on private health insurance to fill these gaps, and this is where employer-provided health benefits come into play.
Many Canadian employers offer comprehensive health benefits packages that include coverage for these additional services, helping to attract and retain top talent. Here are some common services covered by employer health insurance:
Extended health insurance
Extended health insurance is designed to supplement provincial health insurance plans by covering medical emergencies and everyday healthcare needs. It typically includes:
- Prescription Drugs: Approximately 55% of Canadian adults aged 18 to 79 use at least one prescription drug. While there is a publicly-funded program, not all employees are eligible for full coverage. Most employer health insurance plans offer supplementary prescription drug coverage to ensure employees can access the medications they need.
- Paramedical Services: These include health services provided by health care professionals such as physiotherapists, psychologists, chiropractors, and massage therapists. Since these services are not covered under the public healthcare system, many employers include them in their health benefits, especially to appeal to younger employees who are more likely to use them.
- Vision Care: Preventative vision care is important for Canadians of all ages. Employer-sponsored plans can range from covering basic eye exams to more comprehensive services, such as coverage for contact lenses, glasses, and visits to optometrists.
Dental insurance
Access to dental care continues to be a challenge for many Canadians. Nearly one in four (24%) report avoiding visits to dental professionals due to high costs, and over one in three Canadians (35%) do not have dental insurance at all. While 55% of Canadians have private dental insurance - often provided through an employer, a private plan, or through a university - other groups face greater challenges. For instance, only 4% rely solely on public dental insurance, and 6% are either unsure if they have insurance or are unaware of the type of coverage they hold.
Recognizing this gap in coverage, the federal government announced the launch of the Canadian Dental Care Plan (CDCP). This initiative aims to improve access to dental care for approximately nine million uninsured Canadians with family incomes below $90,000. For many employers, offering dental insurance as part of a comprehensive benefits package remains a crucial way to attract and retain talent, ensuring that employees can access the dental care they need.
Other types of insurance
Offering a robust benefits plan can help employers attract top talent and retain their current workforce. Here are additional types of insurance coverage you can include in your comprehensive benefits plan:
Life insurance
Life insurance provides financial security to an employee’s loved ones. With life insurance coverage, an insurer pays a lump sum to the beneficiary in the event of the policyholder's death. Employees can choose any individual to receive the payout, making this a valuable safety net for their families.
Accidental death and dismemberment insurance (AD&D)
AD&D coverage extends protection beyond standard life insurance. This type of life insurance pays benefits in the event of an employee's accidental death, severe injuries, or limb loss. If an employee dies due to an accident, beneficiaries receive a lump sum. For non-fatal incidents, such as limb loss or paralysis, the employee will receive a percentage of the total coverage.
Critical illness insurance
Critical illness insurance provides a lump sum payment to employees diagnosed with a serious illness. Whether or not your employee will receive a lump sum payment will depend on what the insurer terms as a serious illness.
This payment is made upon diagnosis and does not require the employee to be terminally ill. However, they may need to prove that the diagnosis has affected their ability to work.
For tax purposes, the employee generally pays the premiums for life insurance, AD&D, and critical illness insurance offered through an employer’s group benefits plan.
Disability insurance
Disability insurance protects employees who are unable to work due to illness or injury. Coverage is available for short-term or long-term disability. Short-term disability benefits typically cover 60–70% of an employee’s salary for up to 6 months while sick or injured.
In addition to short-term disability benefits, your employees may be eligible for compensation through the Employment Insurance (EI) Sickness Benefits. These government benefits give eligible employees 15 weeks of financial support if they stop working for medical reasons. Employees can receive 55% of their salary, with the highest amount being $668 per week.
In cases of prolonged illness, employees may qualify for long-term disability benefits through Canada Pension Plan (CPP).
Health spending accounts (HSA)
A Health Spending Account (HSA) allows employers to reimburse employees for qualifying health, vision, and dental expenses. HSAs offer a flexible, tax-free way to provide additional healthcare coverage and give employees more spending power when it comes to healthcare costs. Employers will only need to reimburse employees for what they actually spend. This makes HSAs a cost-effective option for boosting employee health benefits.
Employee assistance programs (EAP)
An Employee Assistance Program (EAP) provides confidential counseling services to employees and their families. EAPs help individuals manage personal challenges, such as stress, anxiety, depression, substance abuse, and relationship issues.
EAPs help employees deal with personal issues that might affect their work performance. By offering an EAP, employers show that they care about their employees’ mental health and well-being, which can boost workplace morale and productivity.
Virtual healthcare
Virtual healthcare is becoming increasingly popular in Canada. This benefit allows employees to consult healthcare providers via video conferencing, phone call, or email.
Employees can receive diagnoses, prescriptions, and referrals without visiting a physical health care facility, making it especially useful for those in remote areas or with mobility issues.
How health benefits in Canada are sold
In Canada, health benefits are typically sold through licensed brokers rather than directly to employers. Brokers work closely with businesses to identify or develop the best group health benefits plans that meet the specific needs of employees.
Employers can then compare various plans and choose the one that aligns with their business goals and budget. After selecting a plan, the broker assists with enrollment in the program and provides ongoing support, offering advice on managing cost and optimizing the benefits package.
In addition to brokers, an Employer of Record (EOR), like Thirdsail, can also help businesses manage health benefits for their global workforce. Similar to Professional Employer Organizations (PEOs), EORs hire employees on behalf of companies in different countries and manage services such as payroll, benefits administration, and compliance. Partnering with an EOR simplifies the process of enrolling international employees in health benefits plans, ensuring compliance with local regulations while supporting your team’s well-being.
How much benefits cost in Canada
The average health benefits package in Canada ranges between $5,000 and $7,000 annually, or about $420 to $580 per month. The exact cost varies based on factors such as the size of the business and the number of employees enrolled in the plan.
However, a recent survey shows that the cost of benefits is expected to increase by 7.4% in 2025, which is higher than 2024’s rate of 5%. The cost will increase because of the rise in prescription drugs, dental care, and paramedical expenses. The increasing cost is in line with the projected 10% global increase in the cost of employee benefits, and employers should anticipate annual price increases to their group benefits plan.
Benefits with Thirdsail
Providing the right employee benefits is crucial for attracting and retaining top talent. If you're unsure where to start, partnering with an Employer of Record (EOR) like Thirdsail can help simplify the process. Thirdsail offers both Health Spending Accounts (HSAs) and private health insurance, ensuring your employees are fully covered while helping you effectively manage costs.
Thirdsail assists companies worldwide in hiring employees in Canada without the need to set up a local subsidiary. We make it easy to hire quickly and enroll your employees in the right benefits plan - whether through an HSA or private health insurance - tailored to fit your budget and business needs.
