Get to know Olympia’s very own Daniel Gillis, Benefits and Insurance Specialist in a brief Q&A where he explains why you do not need to buy insurance for your health and dental expenses in Canada. Gillis has been in the financial industry for over 15 years, and he has a few things to say that may save you some trouble now, or down the road. Here are a few nuggets of sage advice about insurance and health benefits that one may argue are worth more than just a couple cents…
What is the most common question you get about Health Benefits from Small Business Owners?
"What annual limit should I provide for employees in their health spending account?" Employers want to know the amount they need to provide to be competitive in the market place with other employers. The amount to provide is a budget and affordability issue. Most employers already have a number and budget in mind which is the best place to start the discussion.
What are some things that sound like good financial advice but aren’t?
- Buy health and dental insurance. When it comes to paying for health and dental bills for yourself and family, this is the worst piece of financial advice that’s always touted as the best solution. Don’t be fooled by the expensive advertising. They need your money (via premiums) to pay for the ads, not your health and dental bills.
- Thinking you can time the market when it comes to investing and growing your savings. The more you change things, the more you risk. This is the fastest way to zero. It’s like rubbing a bar of soap, the more you rub it, the smaller it gets. It’s time in the market not timing the market that counts.
In Benefits or Insurance news, what’s the most interesting thing you’ve read or seen this week?
The Fraser Institute just came out with a report highlighting the good work the Canadian provinces do providing drug coverage and assistance to help Canadians pay for prescription drugs. The programs kick in at varying levels and degrees to help support the cost of drugs when it’s most needed. This speaks directly to the ability of small family businesses and employers to confidently implement a cost effective benefit plan using a health spending account. They know the provincial drug plan back stops high cost prescriptions drugs.
What is one pitfall a small business can avoid in the land of insurance and benefits?
Don’t get sucked into the rhetoric that there is such a thing as health and dental insurance. This is smoke and mirrors and most often leads to disappointment and worse, being trapped in a plan that you cannot escape.
What options does a small business in Canada have to offer health benefits? What are the pros and cons?
Small businesses in Canada have three options if they want to offer health benefits, a traditional insured type of plan, a Health Spending Account (HSA), or a taxable benefit.
Starting with the last point... if the employer does not set up a formal plan, any money paid out to employees for health and dental benefits will be taxable to the employees. If the employer sets up a traditional insured plan, health and dental benefits are tax-free to the employees but both the employer and the employee lose control of the benefit intended for the employee (typically lost in Premiums). If the employer sets up an HSA plan, the benefit is tax-free to the employee and the employees receive 100% of the benefit to use as needed for themselves and family. The employer also retains control of the benefit dollars and there is no cost to the employer until the employee files a claim for a health or dental event.
After being in the benefits and insurance world for 15 years, what is the biggest misconception about health insurance?
The biggest misconception is the belief that health and dental benefits are 'insurance' and that insured health and dental plans are something to aspire to. The truth is, a traditional type of plan is not good for the employer or the employee. Health and dental benefits are benefits, not insurance. A benefit is something provided by one person to another person, or party to another party - such as an employer to an employee. Insurance companies market and sell health and dental plans as plans of insurance. They are a benefit plan sponsored by the employer. Premiums are adjusted to pay for all claims each year. If you think about it, true insurance is for unplanned catastrophic financial events - like a house fire. Health and dental benefits are not catastrophic events - they are planned and unplanned maintenance events. Treatment for catastrophic health events in Canada, are covered under provincial health plans. Insurance should really be purchased for critical illness, disability and death. Everything else like dental, vision, most prescription drugs, chiropractic, massage and so on, are maintenance events. The income tax act encourages employers to provide health and dental benefits for maintenance events by making the benefits tax-free to employees and an expense for the employer (an HSA is the best way to achieve that).
As a small business owner yourself, what is the number one piece of advice you would give to yourself if you could go back in time to when you first incorporated?
The number one piece of advice is to insure for catastrophic events - those things that can wipe out a person or family - such as death, disability, critical illness and insurance on your home. Use a health spending account to pay for your planned and unplanned health and dental bills. Never buy into a health and dental 'insurance' plan - these plans will consume the resources you could have used to simply pay your bills as they come due. Save the money you would otherwise pay in a health and dental premium in a bank account each month and use it to pay your health & dental bills. As an incorporated business owner, use a health spending account to reduce the cost of your health and dental bills.
On December 11, 2018, Dan Gillis will be a featured guest on the first episode of The Small Business Mastermind, a podcast by Olympia Benefits Inc. This episode will take a comprehensive look into insurance for small businesses, answering frequently asked questions and avoiding common pitfalls. Be sure to tune in.