What Is Group Health Insurance and How Does It Work?

In Canada, group health insurance is no longer just about health care; it has become a key driver for employee retention. According to Employee Benefits Statistics in Canada, around 99% of Canadian employers now provide supplementary health care coverage to salaried employees.

This reflects how essential these plans have become in helping businesses stay competitive and support employee well-being beyond what the public health care system covers. Whether you are an employer who is looking to offer group health insurance to your employees in Canada or someone who is simply curious about how an employee benefits plan works in Canada, this blog is for you. Read on to learn more!

What is group health insurance? 

Group health insurance, also known as a group plan or employer-sponsored coverage, is a type of health insurance that an employer purchases and offers to its employees and their dependents. This group of people is accordingly covered under a single policy, offering benefits such as:

• Dental and vision care
• Hospitalization
• Prescription drugs
• Chronic disease coverage
• Other healthcare services

Employers or organizations usually negotiate the terms of the insurance policy and may subsidize part or all of the premium costs for their employees or members. Group health insurance is typically offered to all full-time or part-time workers as part of an employee benefits program.

How does group health insurance work in Canada?

The employer is the primary policyholder of a group health plan which covers all or some of the employees in an organization. Most insurers require a minimum participation rate of approximately 75% to 100% of eligible employees, depending on the size of the group and plan design.

Group health insurance policies in Canada typically work in the following way:

• Employer chooses a plan: Employers select a plan to offer their employees and negotiate terms with an insurance provider. Plans can include core benefits like health, dental, vision, and prescription drugs, along with optional coverage such as life insurance, disability insurance, and employee assistance programs
• Employee enrolment: Employees can choose to enrol in or decline a group medical insurance plan during the specified annual enrolment period. They have the option to choose from a few plan options and coverage levels. To mitigate risk across a larger group and prevent adverse selection, most insurers require minimum participation
• Premium payments: Premium costs are usually shared between the employer and employees. Employers pay the insurer directly and deduct the employee’s share from payroll
• Coverage for dependants: Employees can extend coverage to eligible dependants, such as spouses and children, typically at an additional cost
• Using the benefits: Once enrolled, employees can access covered services as needed. To reduce the drug costs, many insurance companies, including Manulife, Desjardins, Canada Life, and a few others, directly settle the drug expenses
• Annual renewal: Plans are reviewed and renewed each year. Premiums may be adjusted based on factors like claims experience, group size, and overall usage
• Plan administration: Employers may manage the plan internally or work with insurers or third-party administrators to handle claims processing, support, and ongoing plan management

Employee enrollment process for group health insurance

To ensure a smooth administration of group health coverage, employers should follow the steps mentioned below:

• Inform the employees about the available health plans, coverage options, and enrollment period
• Employees should select their plan and if they want to add dependents, if applicable
• Employees will have to fill out a form with the designated coverage options as well as their personal information
• Employees will submit the forms to the employer or HR department within the pre-discussed timeframe
• Once the enrollment procedure and verification are complete, employees will receive confirmation and health insurance cards

Employee eligibility criteria for group health insurance in Canada

• Employment status: Employees must be actively employed, either full-time or part-time, by the organization offering the group plan. Depending on the plan’s requirements, temporary, contractual, or seasonal workers may also be eligible
• Minimum hours worked: Employees typically need to work a minimum number of hours per week, often 20-30 hours, to qualify for the group plan. Some plans may have different minimum-hour requirements
• Residency requirements: Employees generally need to be Canadian residents eligible for provincial health coverage. Individuals with valid work permits may also qualify under many plans. Please note that citizenship or permanent residency is not always required; eligibility is typically tied to provincial healthcare coverage
• Age limits: Group plans typically cover employees up to the age of 65 or 70. Dependent coverage may be available for spouses and children up to a certain age, often 19-25 years old
• Pre-existing conditions: Group plans mostly include coverage for pre-existing medical conditions. However, there can be limits on the coverage
• Minimum group size: Employers must have a minimum number of eligible employees, often 2-10, to qualify for a group medical insurance plan

How much do group health plans cost?

The cost of a group health plan varies depending on the type of package an employer purchases, with options such as basic, advanced, and premium offering different levels of coverage. Each package offers different coverage, and depending on who is covered, the premiums can vary. For small businesses, a benefits plan can cost about 5-15 percent of the total payroll on an annual basis.

In the following table, we have included representative average premium costs for a group health insurance plan based on who is covered, the plan type, and coverage options: 

How is group health insurance different from individual plans?

While group health insurance is purchased by an employer and covers the employees of an organization, an individual health insurance plan, as the name suggests, is purchased independently by an individual for their own needs. Individual health insurance plans, also known as personal health insurance or private medical insurance, vary based on the individual’s age, medical history, and lifestyle (whether they’re smokers etc.). The table below outlines the differences between group health insurance and individual health insurance:

Benefits of group plans for employers

Offering group health benefits is an effective way to promote employee well-being and morale. It also:

• Helps organizations attract and retain talent 
• Can be written off as a business expense, hence saving tax for the organization
• Encourages employees to seek preventive care, promoting a healthier and more productive workforce
• Depending on the location of the organization, offering health insurance coverage to employees may be required by law. Providing group health insurance ensures compliance with applicable regulations

Group health benefits for employees

With a group health insurance plan in Canada, employees also get:

• Access to a wider range of medical services like dental care, vision care, prescription medication, emergency travel, life insurance, etc.that are not covered under provincial plans
• Lower premiums as compared to other individual plans
• The option to add family members and current and future dependants to their policy
• Coverage for pre-existing medical conditions
• Incentives for preventive care and wellness programs, motivating employees to adopt healthier lifestyles 

What do employee benefits cover?

Group health policies and employee benefits, although distinct, are often used interchangeably. A group health insurance plan is part of an employee benefits package, offered by employers to their employees. While group health insurance is a significant component of employee benefits, it is not the only one. Other common employee benefits may include life insurance, disability insurance, paid time off (such as vacation days and sick leave), wellness programs, and more.

Depending on the plan an employer chooses, group employee benefits typically include a variety of health and other non-medical benefits.

Pros and cons of employee health insurance