Small teams specialist outlines what smaller Canadian employers are doing to manage, and the lessons they hold for larger organizations
Aviva Abraham secures group benefits for small teams. The insurance and group benefits advisor at Creative Planning Financial Group prefers to work with small business owners, helping them manage the challenges of balancing attraction and retention with rising costs and the day to day running of a business. All her clients have less than 150 employees, and over 60 per cent of those clients have under 50.
Abraham offered a small business view into the rapidly changing benefits environment. She explained where costs are rising for her clients and outlined how they are managing them. She highlighted some of the hard choices business owners are making in this environment and why larger corporate and public sector employers should be paying attention to the smaller end of the market.
“I’ve had some clients where costs have been going up at renewal at somewhere between five and fifteen per cent, and those are easier conversations to have. The harder conversations are where we get a 20, 30, or 40 per cent renewal,” Abraham says. “Some clients understand that they’re using the plan, its an expense, and their team needs it…But there’s no guarantee for the future and a 30 per cent jump in price really hits their budget in a big way.”
Looking at expenses by category, Abraham notes that there has been a huge spike in mental health related claims and psychotherapy. She attributes this rise largely to the pandemic and its aftereffects. The rise of GLP-1 drugs has also been a major cost driver. Among the insurers she works with Abraham only sees them covering this now for diabetes. Employees who want to use a drug like Ozempic for weight loss, or even to control pre-diabetes symptoms, are left to rely on the health spending plan or paying out of pocket.
She notes, too, that expenses are rising as small businesses also look to improve their attraction and retention efforts through the benefits plan. She notes that more employers are offering health spending accounts to help their employees customize coverage, and they’re looking at group RRSP with employer matching to enhance their benefits package.
Despite rising costs, Abraham says its very hard for employers to cut back on their group benefits plans. In her advice to small business owners, she often recommends implementing a more balanced mid-market plan, something that incorporates elements that will attract and retain employees, but without adding massive expenses. That’s because a pullback in the benefits plan is viewed very negatively by most teams.
The only instance where Abraham has seen any benefits trimmed was with one client who offered 100 per cent coverage. That plan — which Abraham inherited — is being pulled back to 90 per cent in a very difficult decision for the client. Instead of cutting back on benefits, Abraham will shop for better pricing and can usually secure better pricing from a competing provider
Small businesses, Abraham notes, don’t have the scale to implement a la carte benefits plans that other larger employers do. While those options have become increasingly popular with larger groups, her clients generally implement a mandatory plan for all employees and — if the organization is big enough — an upper class plan for more senior employees.
As small companies face issues of scale in the benefits space, Abraham emphasizes both the similarities and the differences between large and small employers. She notes that large and small businesses alike will be facing high renewal costs as claim volumes continue to increase. One advantage that small teams have, however, is that those with high claims are pooled with other similar groups to spread the cost increases among many businesses. She believes that employers with scale and plan sponsors for large organizations need to look at these small businesses to understand the totality of the Canadian landscape.
“I think we’re all in the same boat. Don’t think that what happens with small business doesn’t affect you, because we’re all affected,” Abraham says. “Big corporate Canada should care what's happening with small business, because everything that's happening with group plans will affect them, maybe not to a big degree, but to some degree.”
