While offering group health insurance to your employees isn’t mandatory in Canada, it can be a great way to support the well-being of your employees, improve staff morale, and incentivize top talent to join your organization. 

But what kind of medical expenses does group health insurance cover? How much does the coverage cost? What factors impact the premiums?

Read on to find out all you need to know about group health insurance costs. 

What affects group health insurance costs in Canada?

The cost of group health insurance plans can vary significantly. All the same, group insurance plans typically have lower premiums than individual policies, due to a risk management practice called “risk pooling.” 

Risk pooling allows an insurance company to spread out the risk among a larger group, reducing its overall liability in comparison to insuring individuals separately. As a result, premiums tend to be lower. Additionally, if there are a lot more insured employees compared to the average group plan, it may lead to even further reductions in premium costs. 

Here are some factors that can impact group health insurance costs: 

1. Group Size

This is where group insurance differs for small vs large companies. A larger number of insured employees can lower the premium cost per employee. Companies with 50 or fewer employees are typically not able to negotiate their premium costs with insurance companies. 

2. Average Age

The lower the average age of the group, the more affordable group health insurance premiums are. 

3. Gender Makeup

The gender makeup of the insured group also affects the premium costs. For example, you will likely receive higher-than-average premiums if your company has a significant number of women in their 20s and 30s. 

Insurers would consider the chances of these workers requiring prenatal and maternity care, which could lead to claims that the insurance carrier would have to settle. 

4. Type of Business

Insurance companies take into consideration the type of work your business does when determining the premiums. Specifically speaking, they look at the risk of workplace accidents.

Businesses where the risk of workplace injuries is high — transportation and warehousing, construction, and fishing to name a few — usually pay higher premiums. In contrast, group health insurance tends to be more affordable for businesses with a low risk of workplace accidents, such as banking, web designing, and software development. 

5. Medical Claims History

As part of their risk assessment process, insurance carriers look at your company’s past claims. They then use this information to predict the likelihood of future claims, which in turn affect the premium costs. If your employees have made many claims in the past, expect the cost per employee to be higher.  

6. Location of Your Business

Just like the cost of living is higher in Toronto than in a small city in Ontario — for example, Dryden — the cost of group health insurance varies depending on the region where your company is located.  

7. Policy Details

The higher the coverage limits, the more expensive the premiums. Lower deductibles and co-pays also push your premium costs up. 

A deductible is the amount of money the insured pays each year for eligible medical services before their insurer starts paying. For example, if your group insurance plan comes with a $500 deductible, an employee must pay the first $500 of their eligible medical costs before the group plan starts paying. 

A copay, on the other hand, is a flat fee the insured must pay out of pocket for eligible medical services. Different medical services usually require different copays.  For example, your group health insurance plan may require a $20 copay for a visit to a primary care physician and $50 copay for each visit to a specialist. 

What type of medical expenses does group health insurance cover?

Group health insurance plans are typically offered in tiered packages — basic, advanced, and premium — with varying coverage levels and costs. 

The following table gives a rough estimate of what features are included in these plans, along with the level of coverage offered.

Average cost of group health insurance 

The annual average cost of group health insurance per employee varies by business size and type of plan, and can range from $1,000 to $4,000.

Average cost by business size

• Small business (50 employees or fewer): The cost per employee can range from $1,500 to $4,000 per year. 
• Medium-sized businesses (between 51 and 200 employees): The cost per employee can range from $1,200 to $3,500 per year. 
• Large businesses (more than 200 employees): The cost per employee can range from $1,000 to $3,000 per year.

Average cost by plan type 

• Basic plan: Can cost $80 to $200 per employee per month. 
• Advanced plan: Can cost $100 to $150 per employee per month
• Premium plan: Can cost $150 to $350 per employee per month

Types of group health insurance plans

There are four main types of employer-sponsored health plans in Canada. 

1. Traditional Group Health Insurance

Traditional group health care coverage is the most common type of group health insurance offered by companies to their employees as a supplementary benefit. Most plans cover a wide range of health-related expenses, such as prescription drugs, hospital accommodation, paramedical services, and dental and vision care. 

The more comprehensive group health plans include additional benefits, such as

• Mental health support: Coverage may extended to mental health conditions, like anxiety, depression, post-traumatic stress disorders, eating disorders, and more. 
• Critical illness insurance: Pays a one-time, tax-free benefit if an employee is diagnosed with any of the illnesses and conditions covered by the plan. Basic group critical illness insurance covers five or six major serious illnesses, such as stroke, heart attack, kidney failure, certain types of cancer, and major organ failure. Enhanced plans, on the other hand, cover up to 26 illnesses, sometimes even more. 
• Accident insurance: Provides a lump-sum amount if an employee is seriously injured or dies in an accident. 
• Travel medical insurance:  Covers medical expenses if an employee is injured or becomes ill while traveling abroad.

2. Dental Insurance Plan

As the name suggests, this type of group health insurance covers only dental expenses.  Many employers offer dental insurance along with an EHC plan. 

Group dental insurance generally covers an employee and their dependents (spouse and children). Level of coverage varies by plan, but typically you can expect to be covered for: 

• Diagnostic and preventive services (x-rays, dental exams, cleaning, etc.)
• Basic and restorative services (e.g. fillings)
• Orthodontic services (braces for adults and children)

Comprehensive group dental care plans also cover major restorative services, oral surgery services, periodontal services, and prosthodontic services. Cosmetic dental procedures, however, are usually always excluded. 

3. Group Disability Insurance

Group disability insurance replaces a portion of an employee’s salary — between 50-80% — if they can’t work due to illness or injury. Disability benefits are paid monthly or weekly and start after the elimination period. The elimination period, also known as the waiting period, is the amount of time the insured must survive after becoming disabled before they can collect benefit payments. 

The most common elimination period is 90 days, but it can be as short as 2 weeks or as long as one year. In general, the shorter the elimination period, the higher the premiums. Disability benefits are usually paid until the end of a predetermined period (like 2, 5, or 10 years or retirement) or the insured returns to work, whichever comes first.

4. Health Spending Accounts (HSAs)

A health spending account reimburses employees and their family members for health and dental expenses that are not paid (or not paid in full) by any private or government plan. HSAs can cover copays, deductibles, and amounts over your plan maximums, as well as expenses not covered by a spouse’s plans. The list of eligible expenses includes drugs, vision care, dental services, hospital coverage, medical practitioners, attendant care, and more. 

An HSA makes for a great employee benefits package, as it offers employees more flexibility than traditional health plans and gives employers complete control because employees can only claim up to their individual annual spending limits. 

The employer establishes different categories of employees and assigns an annual spending limit to each category. For instance, executives may receive $8000 a year, Managers $4000, and Full-time employees $2,500. Next, the employer funds the HSA with a set monthly amount of their choice. The employer pays for their medical expenses out of pocket and then claims them for reimbursement. 

What to consider when choosing a group insurance plan?

Group health insurance can be a valuable part of an employee benefits package. It helps your employers supplement provincial health insurance and allows them to access quality healthcare without looking over the shoulder for funds. 

Here are some benefits you may want to include in your group health plan: 

• Coverage for hospitalization, doctor visits, drugs (prescription and generic), dental and vision care, and travel medical insurance
• Riders such as disability insurance and critical illness insurance
• Mental health support (including online or in-person counseling and treatment for common mental health issues such as depression, stress, anxiety, and post-traumatic stress disorder)

Aside from offering essential benefits, employers must determine these details before rolling out the group plan: 

• Cost-sharing: Who will pay the premiums? Will you bear the entire cost of the premium? Or will the cost be split between you and the employees?
• Premium payment schedule: Group health insurance premiums are usually paid annually, but you can check with the insurance provider if other options are available. 
• Deductible and copay: It’s important to consider the deductible amount (the amount an employee pays before the plan starts to pay) and co-pay (a fixed amount that an employee pays for an eligible service after meeting their deductible) when setting up a group health plan.  
• Family coverage: Determine whether employees will add their spouse and children to their plan at no extra cost or for a fee. 

How can employers set up a group health insurance plan?

Setting up a group health insurance plan is not as complicated as many think. Here’s how to set up a customized plan in five easy steps. 

Step 1 – Research carriers

Group health insurance pricing and coverage details can vary depending on the insurer. Thus, it’s crucial to compare the offerings and pricing of different providers. Don’t limit your research only to the most popular providers in Canada. It’s quite possible a relatively new, yet financially sound, insurance carrier may offer you a better deal. 

Step 2 – Consider hiring an independent broker

When it comes to group health insurance, comparison shopping can be tedious because many insurers don’t provide online quotes or detailed information about their products on their websites. This is where an independent broker can come in. They can do all the hard work for you behind the scenes, besides offering unbiased, transparent advice. 

Step 3 – Complete the application form

Once you have zeroed in on the best provider for you, apply for group health insurance. During the application, you’ll need to provide information such as: 

• How many employees do you have? 
• Do you have seasonal or contract employees? If applicable, please specify the percentage of such employees in relation to your total work force? 
• Are there any employees currently off work?
• How will be the premium split between you and the employees?

Step 4 – Review the contract

After the insurer has accepted your application, it will send you the contract documents to sign. The policy contract will include relevant details, such as the annual premium per employee, coverage details, network of healthcare providers, and policy add-ons. Read the contract documents to ensure everything is in order.

Step 5 – Enroll the employees and pay the annual premium

The last step is to enroll the employees in the group plan. The insurance provider will help you with the enrollment procedure by supplying the necessary forms and detailed instructions for completion. 

Who pays premiums on a group policy?

There are four main ways to cover the costs of group health insurance plans.

1. Employer-funded basic health insurance: Some companies cover the full cost of a basic health insurance policy as part of their employee benefits. In this case, employees have no out-of-pocket expenses.
2. Shared payment model: The cost of group health insurance is shared between the employer and the employee. For example, both may pay 50% each of the total cost. 
3. Additional employee costs: The employer pays for the basic policy, and gives employees the option to add extra benefits by paying out of pocket.
4. Employee-funded premiums: In rare cases, the employee pays the entire premium. This may happen when the employer sets up a group health insurance but doesn’t contribute financially.

Conclusion

Group health insurance is one of the most cost-effective ways to support your employees (and their families). A robust employee benefits package also help employers to attract and retain talent.

When you decide to set up a group health insurance plan, a specialist broker like Dundas Life can help you get the best deal.

We’ll conduct a full market review on your behalf, comparing policies from multiple providers and offering unbiased, transparent advice on the best policy for your needs. Schedule your free consultation today.

FAQs

What is the average cost of group health insurance for small businesses?

The average cost of group health coverage for small businesses is roughly $1,820 per employee per year. 

Who can enroll themselves in group health insurance? 

Generally, companies offer this workplace perk to their full-time employees. Some employers, however, provide coverage to all their workers, including part-time or seasonal employees. 

How to save money on group health insurance? 

Group health insurance premiums vary across the market. Working with an experienced, independent broker gives you the best chance to reduce the coverage cost.