In the absence of a robust universal healthcare system in which both publicly funded healthcare operates in conjunction with privately funded ones, employers are often mandated to provide supplementary health plans and benefits.
Employers in Countries That Do Not Have to offer Health Insurance to Employees
Among the countries that aren’t mandated to offer healthcare insurance to employees but where most companies nevertheless choose to offer employer-sponsored health benefits and plans are Canada (single taxpayer system), the UK (similar to Canada, most eligible services are government-covered), and Hong Kong (a mix of public and private healthcare available).
Taxpayer dollars, largely from personal income taxes, go to fund the public healthcare systems in these countries. However, to supplement the cost of eligible healthcare services or increase the availability in obtaining public healthcare services where waiting times are often long (e.g. Hong Kong), employers in these places often offer healthcare benefits and plans to employees.
Employers in Countries That (Do) Have to offer Health Insurance to Employees
In contrast, countries including the US, China, parts of the Middle East, and Africa do not have universal healthcare, and employers in the US and China, for example, and therefore are legally mandated to offer health benefits that each meet a minimum threshold.
In the US, this is because one of the two social security taxes pertaining to health, the Medicare Tax, that comes out of an employee's earnings each paycheck does not provide a safety net for employees and the majority of the working population. Instead, it assists eligible individuals including those who are 65 or older. Likewise, the federally and state-withheld (eligible states) personal income taxes of employees, which fund social and economic programs including healthcare among others, do not translate into public healthcare for employees or those in lower income brackets. While the Affordable Care Act (AFA) requires employers with more than 50 employees to meet the “minimum value [of] at least 60% of the total allowed cost of benefits that are expected to be incurred under the plan,” in the many jobs that many lower-earning workers are not covered by their employers, millions of Americans are still left uninsured. In China, where near-universal healthcare exists with 95% of the population being able to access public healthcare, the coverage of multiple areas is still not extensive enough for individuals.
Rules for Offering Health Insurance to Employees
Here are the rules as well as common practices for the countries that are legally mandated to offer employer-sponsored healthcare.
The U.S.
Employers typically offer:
- A type of High Deductible Health Plan (HDHP) alone or
- An HDHP with only one but not both of the following benefits: an FSA or HSA (Flexible Spending Account or Health Savings Account)
This is because an employee can contribute only to either one of FSA or HSA but not both. There are total annual HSAs and FSAs contribution limits (employers’ and employees’), HDHP minimum deductibles, and out-of-pocket maximums. Where employers offer health insurance, they, like their employees, are not obligated to contribute but typically do. The shared costs include health insurance plan premiums and matching employer contributions into FSAs or HSAs. If an HDHP does not offer dental or vision coverage, two healthcare services employees find great benefit in further to those of other covered services, an FSA or HSA, tax-free upon withdrawal, aim to help employees partially supplement the costs of their high deductibles, copayments, coinsurance, and additional out-of-pocket costs, all of which often exceed the cost of the eligible in-network healthcare services they seek.
Up to certain limits, total premiums (employer contribution and employer-withheld employee contribution) for HDHPs and pre-tax HSA contributions (not subject to social security [FICA] taxes: Social Security Tax and Medicare Tax) are tax-deductible for employers, lowering their overall corporate income tax liability. Likewise, with limitations, employees make pre-tax payments to their portion of premiums for HDHP and contributions to HSA and FSA, reducing their personal income tax liability. According to Aon, the total plan cost per employer not including HSA and FSA benefits was US $13,020 in 2022 and is estimated to rise to US $13,800 in 2023. These amounts change on a yearly basis as per the Internal Revenue Service.
China
Employers must offer medical insurance, one of five types of social security, by matching employee contributions. Chinese companies typically contribute 9.8% of an employee’s salary while 2% is the employer-withheld amount for employee contributions. Employees’ out-of-pocket costs are in part covered for illness and non-occupational injuries serviced at in-network providers, reimbursable by the employer’s chosen health insurer. Medical insurance is tax-deductible for Chinese employers. The cost to employers in China offering health insurance to foreign workers is an average of ¥28,500 ≈ US$4,127 (as of this writing) per employee.
There are also rules for employers who usually offer supplementary health plans and benefits.
Canada
The rules for Canadian companies doing so are:
- Companies must offer plans and benefits outside of services already available through the government
- The government is always the first source of coverage, followed by the employer’s health insurer of choice
This means employers don’t provide coverage for visits to their general practitioner (GP aka family doctors) and a wide range of medical specialists, diagnostic tests, and procedures, among many other services. Employees do not need to contribute to employer-sponsored health plans in any way.
Norms of Employer-Sponsored Health Benefits and Plans
The basic healthcare services that individuals need include basic eye exams, prescription drugs, and visits to a general practitioner (family doctor), and dental and vision care. Even countries with public healthcare in part or in whole typically don’t cover basic services, namely dental and vision care, making their inclusion into employer-sponsored health coverage popular. More extensive coverage that individuals may be interested in are access to medical specialists for preventative and emergency care, paramedical practitioners, hospitalization, and emergency out-of-country/province/state/region care.
In the US, employers often supplement part of the costs of dental and vision care commonly offered. Canadian employer-sponsored plans often cover 100% of basic eye exams and up to a certain amount for vision care (e.g. prescriptive eyeglasses) every 24 months. Where the government’s first-payer has been exhausted, Canadian companies, with limitations, also cover 100% of out-of-country/province emergency benefits. As of 2015, the average cost of providing health insurance to employees was CA $8,330. In China, public healthcare for dental care could include tooth extraction, but oddly, does not include cleaning. In addition, only selected optometry services are covered. Most Chinese employers who offer health benefits do not cover dental or vision, leading to out-of-pocket costs borne by employees themselves.
A related type of benefit that has become increasingly popular for Western employers to offer is wellness benefits, often reimbursing employees or providing them with a stipend to go to the gym.
Employer Advantages of Sponsoring Employee Healthcare
Competitive employers offer health plans with partial or full financial coverage and access to basic and extended services. Here are some of the employer advantages:
- Attracting and retaining talent with compensation and benefits outside of base salary may lower the high cost of hiring
- Lessening the financial burden on employees and workplace stress, translating into shrinking absenteeism, more engaged workers, higher employee morale, and greater overall productivity, contributing to the company’s bottom line
- Offering non-taxable benefits (commonly corporate-sponsored fitness plans) is easier to financially process, but is a cost that nevertheless boosts employees’ mental and emotional well-being, translating into improved overall performance for the company
- Some employer premiums paid to and contributions made to health plans can be made pre-tax and are tax-deductible, reducing total taxable corporate income
With 90% of respondents from a recent survey conducted by the Society for Human Resource Management (SHRM) finding healthcare an extremely or very important employee health benefit, employers should continue embracing the need to stay competitive by offering them. Structuring an attractive remuneration package doesn’t need to be a hassle.
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