Extended Health Care (EHC), also known as supplementary or major medical benefits, are an important component of employee benefit plans in Canada. They provide coverage for medical expenses not covered under provincial health insurance plans.
What is Extended Health Care (EHC)?
Extended Health Care plans supplement provincial health insurance by covering additional healthcare services and products. They reimburse expenses like prescription drugs, paramedical services, medical equipment and travel health insurance.
EHC plans help fill the gaps left by provincial health insurance plans and provide employees with enhanced medical coverage. They are an essential part of most employee benefit packages in Canada.
Why Do You Need EHC Coverage?
There are three main reasons every Canadian needs strong Extended Health Care coverage:
Covers Critical Expenses Not In Provincial Plans
Prescription medications, dental work, vision care, and paramedical services account for the majority of most Canadians’ annual medical costs.
But provincial plans like OHIP and RAMQ provide very limited coverage in these areas:
- Only specific groups like seniors get help with prescription costs
- Dental and vision care are largely excluded
- Paramedical services like physio and chiro have limited funding
This means the average Canadian could easily pay $2,500 to $5,000 or more out of pocket on uncovered medical expenses per year.
Helps Pay For Ongoing, Predictable Costs
Expenses like prescription refills, dental cleanings and fillings, new eyeglasses and orthotics, and physiotherapy visits are regular, predictable costs that most Canadians pay every year.
Rather than cover 100% of these routine costs yourself, EHC plans cover 50-80%, depending on the specific service.
This cost-sharing through EHC saves the average person $500 to $2,000 or more per year in routine medical expenses.
Protects You From Large Unexpected Costs
EHC also protects you financially by covering large unexpected medical expenses.
For example, if you suddenly needed extensive dental work, such as crowns or bridges, specialized orthotics, or eye surgery, having EHC could save you thousands in costs.
Key Features of Extended Health Care Plans
Here are main features and benefits provided under Extended Health Care plans in Canada:
Prescription Drug Coverage
- Covers cost of prescription drugs and medicines
- Usually includes generic, brand name and over-the-counter drugs
- May use Drug Formulary listing drugs covered under the plan
- Provides option of pay-direct drug cards for direct billing
Paramedical Services
- Covers appointments with healthcare practitioners like physiotherapists, chiropractors, psychologists
- Each service has an annual maximum claim limit (e.g. $500 per year for chiropractor)
Medical Supplies and Equipment
- Covers cost of prescribed medical supplies and equipment
- Includes items like wheelchairs, hospital beds, braces, prosthetics
Out-of-Province/Country Emergency Medical
- Pays for emergency medical treatment while traveling out of province/country
- Typically provides coverage for up to 60 days per trip
Other Health Services
- May cover extra services like ambulance, private nursing, accidental dental insurance, vision care
- Added benefits to expand coverage beyond provincial plans
What Are The Options For EHC Coverage?
There are three main ways Canadians get Extended Health Care coverage:
Group Benefit Plans Through Work
Many employers provide group benefit packages that include Extended Health Care. EHC coverage is commonly included as part of the overall compensation package.
Employers will often cover 50% or more of the EHC premiums on behalf of the employee.
If your work provides benefits, make sure to understand exactly what the EHC plan covers and excludes. Group plans vary significantly in their details and limitations.
Buy Individual Private EHC Plans
Self-employed Canadians or those whose work doesn’t offer benefits can purchase private EHC plans directly from employee benefits providers like Sun Life, Blue Cross, and others.
When buying individual plans, shop around to find the right mix of premiums, deductibles, and coverage that fits your situation. Look for a plan that covers all the services you need but doesn’t cost more than necessary.
Use a Health Care Spending Account (HCSA)
Health Care Spending Accounts (HCSAs) allow incorporated individuals and businesses to get tax-free coverage for medical expenses, including costs normally covered under EHC.
HCSAs provide more flexibility than group or individual private plans since you control the amounts and coverage details.
There are no monthly premiums with an HCSA. Instead, you contribute annually to the account based on your expected medical costs for the year.
Premiums and Cost Considerations
EHC premiums are paid by the employer, the employee or shared between both parties. Overall cost depends on factors like:
- Plan design and breadth of coverage
- Demographics of employee group like age, gender
- Claims history and utilization rates
- Provincial healthcare costs and fees
- Premium taxes and administration expenses
With rising healthcare costs, many employers are using strategies like deductibles, co-payments and coverage caps to control EHC premiums.
Tax Treatment of EHC Plans
The tax treatment of Extended Health Care plans depends on who pays the premiums:
- Employer-paid plans: Premiums are a tax-deductible business expense for the employer. Benefits received by employees are non-taxable.
- Employee-paid plans: Premiums paid by the employee are not tax deductible. Benefits received are non-taxable.
- Cost-shared plans: The employer’s share of premiums is tax deductible as a business expense. The employee’s share is paid from after-tax income. Benefits are non-taxable for the employee.
Advantages of Extended Health Care Plans for Employers
Offering Extended Health Care coverage provides important benefits for employers:
- Recruitment and retention: EHC plans are an attractive benefit that helps recruit and retain talented employees.
- Increased productivity: Healthier employees miss less work and are more productive. EHC improves access to healthcare.
- Tax deductions: Premiums paid by the employer are tax deductible as a business expense.
- Customization: EHC plans allow employers to customize coverage based on their budget and employees’ needs.
- Provides supplemental coverage: Fills gaps in provincial plans and provides employees with more complete coverage.
Advantages of Extended Health Care Plans for Employees
Extended Health Care plans also provide advantages to employees such as:
- Lower healthcare costs: Employees save money as the plan covers expenses they would otherwise pay out-of-pocket.
- Access to care: EHC provides faster access to prescription drugs, paramedical services and medical equipment.
- Travel coverage: Out-of-province and out-of-country emergency medical benefits provide important protection while traveling.
- Flexibility: Employees can select coverage tailored to their specific healthcare needs and budget.
- Supplemental coverage: Fills gaps left by provincial group health benefits plans.
- Ease of claims: Many plans provide pay-direct drug cards for easy pharmacy claims payment.
How to Design an Extended Health Care Plan
Employers looking to implement Extended Health Care coverage should follow these steps:
Assess Employee Needs
Conduct an employee survey to understand their needs, expectations and priorities for healthcare benefits. This provides insight into what to cover under the EHC plan.
Set Objectives
Determine the objectives and budget for EHC coverage like enhancing recruitment, reducing absenteeism, controlling costs. This guides the overall plan design.
Select Plan Administrator
Choose an insurance carrier or third-party benefits administrator experienced in managing EHC plans. Get proposals from multiple vendors.
Design the Plan
Work with the administrator to design a plan that aligns with employee needs and corporate objectives. Define covered services, deductibles, co-pays, annual limits.
Communicate Details
Inform employees about their new EHC coverage, the services/products covered, how to submit claims, who to contact with questions.
Implement and Review
Put the plan into effect on a specified date. Periodically review utilization data, employee feedback, claims trends to identify any needed modifications.
The bottom line
Extended Health Care plans play a vital role in protecting the health and financial well-being of employees. They fill gaps, enhance provincial health coverage, and provide tax-advantaged medical benefits.
With thoughtful design tailored to corporate and employee needs, EHC plans enable employers to attract talent, improve productivity and offer a highly valued benefit. They are an essential component of a competitive employee benefits program.
FAQs about Extended Health Care in Canada
What are Extended Health Care Benefits?
Extended Health Care Benefits, also known as major medical benefits, supplement existing provincial hospital and medical insurance plans. They provide for reimbursement of expenses and services not covered by standard government plans.
What categories are included in Extended Health Care Benefits?
Extended Health Care Benefits include hospital coverage, prescription drug coverage, medical supplies and equipment, paramedical services, out-of-province coverage, and additional health care benefits.
What additional medical expenses are covered under Extended Health Care plans?
Additional expenses that can be covered include private duty nursing, accidental dental coverage, convalescent hospital care, ambulance service, and optional vision care.