How Health Benefits Work for Canadian Employees

Health benefits for Canadian employees - what they cover, how much they cost, and what you need to know.
A health and wellness desk for employees places in an office space.
Estimated read time
Written by
Julien Roger
Published on
September 29, 2022

Employee health benefits are a common feature of employment in Canada. If you are employing Canadians, make sure they are covered.

Content at a glance

    The Canadian healthcare and benefits system is often lauded as one of the best in the world. Many employees in Canada receive a wide range of health benefits, including prescription drug coverage, dental care, and vision care. These benefits are an essential part of the compensation package for many workers and can help attract and retain top talent.

    While the specifics of these benefits vary from company to company, they all share the goal of supporting employee health and well-being. But how do these benefits work?

    This article looks closely at the ins and outs of health benefits in Canada. It also touches on how an employer of record can help your business navigate the complexities of this system. Read on for everything you need to know about health benefits in Canada.

    The Canadian public healthcare system

    Canada has a universal health system known as Canadian Medicare. It is publicly funded by the country's provinces and territories and is available to all Canadian citizens and permanent residents. Each province runs its own health insurance plan and receives funding from the federal government and operate according to the pillars of the Canada Health Act.

    While the approaches to delivering universal healthcare vary from province to province, all eligible residents receive physician and hospital services free of charge.

    The Canadian health care system offers comprehensive coverage and lower costs than the United States. Canada spends an average of $8,019 per person on health care per person every year. This is significantly lower than what the United States spends on health care, at an average of $12,530 per person.

    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

    In Canada, universal coverage does not include vision, dental, paramedical services, and certain prescription drugs. As a result, some employees receive private health insurance that covers these services. This is where employer health insurance benefits can help.

    Many employers in Canada offer health benefits packages that cover at least some of these services, including the following:

    Extended health insurance

    Extended health insurance supplements the provincial health insurance plan and covers medical emergencies and daily health care needs. It covers the following in most cases:

    Prescription Drugs: Approximately 55% of Canadian adults aged 18 to 79 use at least one prescription drug. Although there is a publicly-funded program that covers many of these drugs, your employees may not be eligible in all cases. Most employer health insurance plans in Canada offer supplementary prescription drug coverage.

    Paramedical Services: These are health services provided by health care professionals such as physiotherapists, psychologists, chiropractors, and massage therapists. The public health care system does not cover them. Most employers include these services in their health benefits to appeal to young employers who are more likely to use them.

    Vision Care: Preventative vision care is important for Canadians of all ages and some require the services of an optometrists. Employers can offer a plan that covers eye exams only, or include additional services such as contact lenses and glasses.

    Dental insurance

    Eight million, or 22% of Canadians, have reported avoiding dental care because they cannot afford it. Because dental care is not fully available in the public health system, some employees cannot afford it out-of-pocket. For this reason, most employers in Canada offer health benefits that include dental coverage.

    Other types of insurance

    If you want to attract more qualified employees and retain the ones you already have, going the extra mile with the benefits you offer can help. Some additional benefits that you can offer as part of a comprehensive benefits plan to your employees in Canada include:

    Life insurance

    With life insurance coverage, an insurer pays a lump sum to the beneficiary in the event of the policyholder's death. The beneficiary will be any individual your employee names on their benefits plan to receive a payout if the employee dies.

    Accidental death and dismemberment insurance (AD&D)

    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, the insurance will pay out a lump sum to the beneficiaries. If the employee survives an accident but loses a limb or suffers from paralysis, the insurance will pay them a percentage of the sum assured.

    Critical illness insurance

    This type of insurance pays a lump sum to the policyholder if they are diagnosed with a critical illness. Whether or not your employee will receive a lump sum payment will depend on what the insurer terms as a serious illness.

    The employee doesn’t need to be terminally ill to receive critical illness benefits. However, they should 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

    You can offer disability insurance benefits to employees who lose their working capability due to illness, injury, or an accident. The benefits can be for short-term or long-term disability. The former protects employees for an average of 17 weeks and covers between 60 and 70% of their salary.

    In addition to short-term disability benefits, your employees may be eligible for compensation through the 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 $638 per week.

    If the employee doesn’t recover within a short period, they might be eligible for long-term disability benefits through CPP.

    Health spending accounts (HSA)

    With an HSA, you can reimburse your employees for qualifying health, vision, and dental expenses. The account is a tax-free way to give employees more spending power when it comes to health care costs. Employers will only need to reimburse employees for what they actually spend. This is one of the most cost effective methods for providing additional health, vision, and dental coverage to employees.

    Employee assistance programs (EAP)

    An EAP offers counseling services to your employees and their families. The programs provide support for issues such as stress, anxiety, depression, relationship problems, and substance abuse.

    EAPs help employees deal with personal issues that might affect their work performance. Offering this program will show your employees that you care about their mental health and well-being.

    Virtual healthcare

    Virtual healthcare is a growing trend in Canada. With this benefit, employees can consult with a doctor or nurse via video conferencing, phone call, or email.

    They can also get prescriptions and referrals without visiting a physical health care facility. Virtual healthcare can benefit employees who live in remote areas or have busy schedules.

    How health benefits in Canada are sold

    In Canada, health benefits are typically sold through licensed brokers rather than directly to employers. Brokers can consult and work with employers to find or develop the best group health benefits plan for your employees.

    You can compare the plans and choose the one you think is best for your business. The broker will then help you enroll in the program and provide you with ongoing support and advice about how to best manage the cost of the plan.

    An employer of record (EOR), like Thirdsail, can also help you find and enroll your global employees in a health benefit plan. EORs are similar to PEOs (professional employer organizations) in that they hire employees on behalf of their clients in a different country and offer the employees payroll and benefits administration services.

    How much benefits cost in Canada

    The average health benefits package in Canada costs between $5,000 and $7,000 annually, or about $420 to $580 per month. The exact cost will depend on the size of your business and the number of employees you have.

    However, a recent survey shows that the cost of benefits will increase by 7% in 2022. 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 7.4% global increase in the cost of employee benefits, and employers should anticipate annual price increases to their group benefits plan.

    Benefits with Thirdsail

    Offering the right employee benefits is key to helping you attract and retain top talent. If you're unsure where to start, we suggest working with an EOR like Thirdsail. Thirdsail offers an comprehensive HSA to ensure your employees are covered and you manage your benefits costs.

    Thirdsail helps companies around the world hire employees in Canada. We help you hire employees instantly without having to open a subsidiary and get your employees the right benefits plan to suit your budget.

    Learn more about how we can help you hire in Canada. If you have questions and would like to learn more about hiring employees across borders, get in touch today.

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