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Employers are increasingly capping the coverage they provide through their healthcare plans. As of 2015, more than nine percent of plans had lifetime caps, while 13 percent of plans had annual caps, according to Benefits Canada. While there are some advantages of healthcare caps, there are also disadvantages.

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Carefully consider the pros and cons of caps before you make any decisions about your healthcare plan.

Pro: Caps Help Control Plan Costs

The cost of providing health benefits is on the rise. Spending on high-cost specialty drugs is increasing. Placing caps on drug coverage is a strategy for controlling costs. For example, companies could decide to cap their drug coverage at $5,000 per year. Those employees who need expensive medications could pay out of pocket or get reimbursed elsewhere, such as through a government drug plan. This protects businesses from the risk of expensive claims.

Pro: Caps Can Help Prevent Abuse

Most of your employees are honest and won’t abuse your benefits plan, but the minority could make excessive or fraudulent claims. They could claim expensive non-prescription sunglasses as prescription eyewear or receive non-medical spa treatments and claim them as massage therapy, for example. Other employees could receive many physiotherapy or massage therapy sessions that aren’t medically necessary.

Some employers place caps on their healthcare plans to help discourage this type of abuse. These caps could be in the form of a dollar value, such as $500 per year for massage therapy. Caps could also limit employees to a certain number of visits to each paramedical practitioner per year.

Con: Caps May Be an Obstacle for Employees

One of the goals of your healthcare plan is to look after your employees and help them stay healthy. Thanks to your plan, employees can access more affordable medications and healthcare services. For some employees, caps could become an obstacle to getting the care they need.

Many of your employees may never come close to hitting the cap on your drug plan, but the few employees who may take specialty drugs could reach it quickly. After they reach the cap, they may need to find an alternative way to pay for their needed medications. To make the cap less of an obstacle for these employees, you could direct them to a government plan, like the Trillium Drug Plan.

Con: Caps Reduce Employees’ Total Compensation

Total compensation includes your employees’ salaries, their healthcare plan, and all the other monetary and non-monetary ways you reward your employees. By placing caps on your healthcare plan, you’ll reduce the value of your employees’ total compensation. Employees could see the new caps as a reduction in their overall compensation. If you need to add caps to your plan, prepare to explain the rationale behind your decision to your employees to reduce the impact on morale.

What’s more, your current employees aren’t the only people who could be concerned about the reduction in total compensation. Job candidates could be, too. After all, your healthcare plan is one of the ways you attract job candidates and stand out from your competitors. By forgoing caps, you could continue attracting good employees to your company, which strengthens your business.

Should You Use Healthcare Caps?

The decision to use or not use healthcare caps should be carefully considered. Weigh the pros and cons, and think about your employees’ preferences and your goals for your business. The decision that’s right for one business won’t be right for another. If you aren’t sure what to do, you don’t need to make a decision on your own. Business owners can turn to compensation consultants for the expert advice they need. With help from a consultant, you can get the information you need to choose the right option for your company.

Healthcare caps have both pros and cons for employers and employees. As a business owner, you should carefully consider your options. Don’t hesitate to seek professional advice when it comes to healthcare caps.


Debbie Russell

Debbie Russell

Debbie is the assistant vice president in the Calgary office of GroupQuest Benefits Resources Inc., partnering with Group Insurance Advisors to support and help grow their employee benefits businesses. Debbie has over 30 years’ experience in the insurance industry. She understands building relationships is what drives this business. She holds the Certified Health Insurance Specialist (CHS) and Group Benefits Associate (GBA) designations and is a member of Advocis. On a more personal note, Debbie enjoys good food, good wine, and having a good time with family and friends. She loves golfing, camping, hiking and travelling.