Group benefits have evolved significantly since they first emerged post-World War II, when employers began offering basic healthcare coverage to attract and retain talent. The past decade has seen the most consequential changes, fueled by a range of factors including technology, increased demand, rising costs and changing consumer expectations. To learn more about this evolution, read the full article.

In the 80s and 90s, benefits plans offered a one-size-fits-all approach. All employees had the same plan and there was little to no customization. Today, people expect more from their group benefits, which means employers are having to offer more diverse and comprehensive coverage. Most modern plans include traditional benefits like life, health and dental insurance, as well as non-traditional support such as spending accounts, workplace wellness programs, gender-affirming coverage and more.

But even as they modernize, the future of group plans is uncertain. Answering a question from Benefits Canada in a 2023 survey, 52% of plan members said they would prefer a benefits plan to $5,000 of additional salary; it was a significant decrease from 65% giving the same answer in earlier surveys. Today’s group plans face a host of challenges and, just as they have in the past, they will need to adapt and evolve to survive.

The pressures facing group plans today

If Canadian group plans are to continue, employers will need to find new and creative ways to overcome the various challenges they face in a fast-changing society.  

Societal pressures

Group benefits have historically focused on a prototypical employee; one that is generally healthy, has children early in life and retires at 65. But today’s employees face new health challenges, particularly when it comes to mental health, they’re having children much later, and they’re working well beyond the traditional retirement age.

Group plans are adapting to the changing landscape. According to the 2024 edition of the Benefits Canada Healthcare Survey, Healthcare Survey, almost 36% of plan sponsors now provide flexible plans, up from 29% in 2022. In addition, many plans now cover employees up to 70 years old and offer increased maximums for benefits like mental health and fertility support. Despite these efforts, many employees feel their coverage is still lacking. But with rising costs, it’s hard for plan sponsors to provide additional support while ensuring plans are sustainable in the long term.

Rising costs

Inflation has impacted almost every sector in the Canadian economy, especially post-COVID. The cost of group benefit plans has traditionally grown at a higher rate than inflation, but these costs have elevated even more in the wake of the pandemic. In the same Benefits Canada Survey, plan sponsors cited cost increases as their number one concern when it comes to health benefits plans.

Many plan sponsors have tried to overcome the challenges of inflation by implementing increased cost sharing, reducing the coverage levels of benefits and switching to fixed contribution models. But while these changes may have allowed them to continue offering group benefits, they’ve also eroded the perceived value of plans among members. Plan members in the same Benefits Canada Survey cited major dental services, vision care and paramedical services as the top three elements for which they would want increased levels of coverage.

Consumer expectations

With the rise of technology, consumer expectations have changed significantly. People are now used to having a seamless user experience, paying with the tap of a card, and enjoying flexibility in when and where they work, live and even shop. With the recent boom in generative AI, some early-adopter organizations are already exploring ways to integrate the technology into their group benefit programs.

How plan sponsors are adapting

Benefit providers are starting to see the importance of balancing sponsor costs with member value. To keep up with changing consumer lifestyles and expectations, they will need to redesign their plans and come up with innovative solutions to offer added value to plan members, who now expect much more than the traditional health and dental coverage.

Across sectors, we’ve seen growth in direct provider payment for group benefits claims, advancements in fraud detection, and an increase in spending accounts and flexible benefits plans—all designed to bring more value to plan members and help create a more sustainable benefits plan model. We’ve also seen an increase in third-party administrators/payors, which more and more organizations are using to offload administrative responsibilities so they can better support their plan members.

Overcoming challenges

Group benefits are in a precarious position, in a time where the cost of benefits is trending upwards and the value they provide to members is trending downwards. Looking ahead, I believe group benefits will continue—but they will need to offer more to be sustainable well into the future:  

Providing flexible and fixed-cost plans

There’s been a shift in recent years from defined benefit plans to defined contribution plans, which has allowed plan sponsors to continue offering pension plans to their members. I believe there will be a similar shift in the group benefit space, as more and more organizations offer flex plans. Flexible benefit plans not only give members more say in where they spend their benefits; they help plan sponsors control costs thanks to fixed contributions and plan members buying into more expensive types of coverage.

I also predict an increase in wallet-type plans, where plan members have a fixed amount to spend every year on health and dental, supplemented with some catastrophic insurance, like base drug insurance. This type of plan is a win-win for plan members and sponsors, allowing members to make the most of their group benefit plans while keeping costs fixed and predictable for plan sponsors.

Integrating technology

As group benefits evolve, the technology required to maintain them needs to evolve, too. Looking ahead, I believe we will see an evolution in the way plan members access their group benefit plans. The increase in third-party administrator/payor applications has helped create a more seamless group benefits experience for plan members, and as plan sponsors continue to improve their data ecosystems, other processes will become more seamless as well—from enrolling in benefits plans and comparing providers to booking appointments and processing payments.

There is also likely to be an increase in the use of generative AI, which can be used for something as simple as submitting a claim or filling out a form, or for more complex tasks like having a chatbot-type assistant answer specific group benefits questions. In addition, evolving technology opens opportunities for predictive and preventative health suggestions. With better housed, structured and connected data, it’s possible to provide targeted and customized health advice to plan members and plan sponsors alike, further improving the plan experience.

Redefining group benefits

Finally, I think the definition of group benefits will continue to broaden as plans start to incorporate more non-traditional services. From wellness, family planning and financial support to virtual care, on-site counselling, pharmacogenomic testing and even pet insurance, employees expect more from their benefits plans—and plan sponsors are listening. In the future, we can expect to see even more services being added to the group benefits offer to design inclusive and diverse plans that better reflect the Canadian population.