Given that Canadians have universal access to healthcare, the highest priority for an employer-provided benefits program is to protect employees from significant financial hardship due to illness, disability or death. When cost is a constraint, this suggests a benefits program needs first and foremost to protect big-ticket items like long-term disability and perhaps compromise on other benefits where the cost to the employee is both more predictable and more affordable. This is the basis of the following diagram:

Provide for catastrophic coverage.

Besides life insurance and disability benefits, the benefits that fall into this category include out-of-country emergency medical care, drugs for serious health conditions, and some form of accidental dental (extensive dental coverage required as the result of an accident) plus hospital coverage beyond what the province provides. The employer may want to cover up to 100% of these types of expenses.

Incorporate flexibility with some tax-preferred compensation.

Dental care and vision benefits are very popular with employees and typically included in defined benefit form. Since these types of expenses tend to be fairly predictable, you may wish to provide coverage in defined contribution form instead, in the form of a health spending account. This puts a cap on the employer’s share of the cost, provides employees with flexibility in what they choose to cover and is extremely tax effective.

Some sharing of other high expenses.

The cost of certain services falls between the “catastrophic” and the readily affordable. Services in this category include chiropractors, physiotherapists, drugs for chronic conditions, and the more expensive dental treatments like crowns, dentures and bridges. Sharing these expenses with employees should help to motivate responsible purchasing behaviour while mitigating employees’ financial concerns.

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