In Canada, it can be difficult to find cost effective health insurance plans for small groups of employees. From an insurance company's perspective, the smaller the group, the higher the risk. So premium costs go up dramatically as the size of a business gets smaller. In simple terms, group health and dental insurance works on a basis of multiple people contributing to a healthcare pool which then provides funding for health and dental claims.
So if a business has 1,500 employees, there would be 1,500 people paying premiums on a monthly basis into the funding pool. A good number of the employees will not make any health or dental claims, so the premiums paid each month for this group of people will go towards paying claims for other employees. At the end of the day (or the plan year), the insurance company has sufficient information on claims experience to determine whether or not to increase premium prices.
So for a small group of employees looking into health insurance for their company, there may only be five employees contributing to the plan. If even one of the employees has major dental bills or a medical emergency, the insurance company ends up paying for large expenses while only receiving a small amount of premium dollars. So with decades of claims experience, statistics and averages behind them, insurance companies can estimate in advance how much of a risk each group will be. Based on historical data, small group plans have become expensive!
So what are the options for providing group benefits for small companies
A unique alternative to traditional health insurance is a Health Spending Account. These plans provide employers with the opportunity to deliver cost effective health benefits to their employees, while maintaining complete control over their costs. There will also never be a cost increase unless the employer decides to increase benefits for their staff. There won't be the usual anxiety and nervousness attached with the dreaded annual renewal meeting.
