If you own a small business, you may be paying for prescriptions, dental care, glasses or other health expenses yourself and wondering whether there is a better way to handle those costs through your company.
Or perhaps you have started hiring employees and are asking a different question. Are we big enough for benefits?
Health insurance for small business owners in Canada is not one specific product. Depending on your business, your options may include personal health insurance, a Health Care Spending Account, group benefits or group insurance.
The useful starting point is figuring out which situation looks most like yours.
I Mainly Need Health Coverage for Myself or My Family
If you are self-employed or run a very small incorporated business, your first instinct may be to purchase individual health insurance.
Individual plans can provide coverage beyond provincial healthcare, but they are only one option.
Some incorporated business owners may also consider an Unlimited Benefits plan or Health Care Spending Account, commonly called an HCSA. An HCSA provides a set amount that can be used for eligible medical and dental expenses rather than relying solely on predetermined insured coverage.
The right structure depends on factors such as your business structure, eligible participants, anticipated expenses and budget. Business owners should get advice before choosing a plan based solely on potential tax treatment.
I Have a Few Employees and Want to Offer Health and Dental Coverage
This is where group benefits become more relevant.
Group benefits are provided through an employer and may include health, dental, prescription drugs, life insurance, disability coverage and other benefits depending on the plan.
You do not necessarily need a large workforce before you start asking whether benefits make sense.
For a small employer, more practical questions are:
- What coverage will my employees actually value?
- What can the business reasonably afford?
- Can I control how much the company contributes?
- How much administration will this create?
- Can the plan change if I hire more people?
That last question matters. A benefits plan that works for three people should not become a problem when the company grows to eight or 15.
What Can a Small Business Health Plan Actually Cover?
Extended health benefits generally refer to health expenses that go beyond services covered through provincial healthcare.
Depending on the plan, coverage may include prescription medications, paramedical practitioners, vision care, medical equipment, travel medical coverage and other eligible expenses. Dental benefits may also be included.
A small business health plan can also be designed around the benefits you want to provide to your employees. At The Benefits Trust, we help businesses customize their plans based on their workforce, budget and priorities, rather than starting with a standard package that may include coverage they do not need.
Coverage limits, employee contributions and eligibility can vary considerably.
That is why comparing plans based only on the monthly premium can be misleading. An inexpensive plan that does not address the needs of your employees may provide less value than a carefully structured plan with clearly defined costs.
What if I Want Predictable Benefits Costs?
For many small business owners, the concern is not whether benefits sound worthwhile. It is whether costs can be controlled.
An HCSA may be one option because the employer determines how much money is allocated to eligible employees. A customized group benefits plan may provide another approach by balancing insured coverage with the company’s budget and employee needs.
This is also where flexibility becomes important. Small businesses do not all need the same benefits package.
Your plan may need to look very different from the plan of another company with the same number of employees.
When Should I Consider a Structured Business Benefits Plan?
Consider moving beyond personal health coverage when the decision is no longer just about your own medical expenses.
For example, you may be:
- hiring your first employees
- competing with larger employers for staff
- looking for another way to compensate and retain employees
- spending significant amounts personally on health and dental expenses
- planning to grow your workforce
- finding that your current arrangement no longer fits the business
At that point, the question changes from Which health insurance should I buy? to How should benefits be structured through my business?
That is a more useful question because it considers both the owner’s needs and where the company is going.
Are Health Benefits Taxable in Canada?
Tax treatment depends on the type of benefit and how the arrangement is structured.
The Canada Revenue Agency states that employer contributions to a qualifying Private Health Services Plan, such as certain medical or dental plans, are not a taxable benefit to employees. Other types of insurance benefits can be treated differently.
If tax treatment is an important part of your decision, we have covered the subject separately in Are Employee Benefits Tax Deductible for Small Businesses in Canada?
Business owners should speak with their benefits advisor and tax professional about their specific circumstances.
Which Option Makes Sense for Your Business?
Before choosing health insurance for your small business, ask yourself five questions.
- How many people need coverage?
- What expenses matter most to them?
- What can the company comfortably budget?
- How much administration do you want to handle?
- Will the plan still work if your business grows?
If you are only looking at your own coverage, an individual plan or HCSA may be worth investigating. If employees are part of the equation, group insurance or a customized group benefits structure may offer a more practical path.
The Benefits Trust works with Canadian small and mid-sized businesses to structure benefits around the company’s workforce, budget and plans for growth. Plans can be customized rather than selected from a standard package, with independent administration and ongoing support as business needs change.
Not sure which type of coverage fits your situation? Speak with The Benefits Trust to compare your options before choosing a plan.
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