Which Group Benefits Plan Canada Offers Is Best for Your Shop?

Stop Overpaying for Group Benefits

Your group benefits renewal just landed on your desk and the premium jumped 25%. You look at the report: one person had a major dental claim, another needed a lot of physio, and now everyone's rates are up. It feels like you're being penalized for your team actually using the plan you pay for.

This article explains the three ways benefits plans are funded in Canada—fully insured, Administrative Services Only (ASO), and hybrid. By the end, you'll know how each one works, who it's for, and how to choose the right structure to get control over your costs.

The Cost of The Wrong Plan Structure

Sticking with the wrong plan model is like using the wrong tool for the job. You're either overpaying for insurance you don't need, or you're exposed to huge, unpredictable bills that can wipe out a quarter's profit.

For an electrical contractor with 15 staff in Ontario, a single large, unexpected disability claim on a poorly structured plan could mean a six-figure liability or a massive, unavoidable premium hike next year. You lose control. The right structure gives you back that control.

The default plan you're sold isn't always the plan that's best for you.

Model 1: Fully Insured Plans

This is the most common model for small businesses, and likely the one you have now.

How It Works

You pay a fixed monthly premium to an insurance company for each employee. In exchange, the insurer takes on 100% of the financial risk. If your team's claims are higher than the premiums collected, the insurer covers the loss. If claims are lower, they keep the difference as profit.

• What most owners do: Accept it as the only option. They see the predictable monthly bill as a win and brace for the inevitable renewal increase, feeling powerless.
• What actually works: Viewing it as a starting point. A fully insured plan is excellent for new businesses or those with volatile turnover because it offers budget certainty. But once you have a stable team, you need to ask if you're paying a premium for certainty you may no longer need.

A fully insured plan protects you from risk, but you pay for that protection, good year or bad.

Who It's For

• New businesses or startups.
• Companies with high employee turnover.
• Owners who value absolute budget predictability above all else.

Model 2: Administrative Services Only (ASO)

This model flips the script. Instead of the insurer taking the risk, you do.

How It Works

You don't pay premiums. Instead, you deposit funds into an account and pay the insurance company a fee to administer the plan—process claims, issue cards, and provide reporting. When an employee makes a claim, the funds come directly from your account.

You are only paying for the actual claims your team makes, plus the admin fee. This is often combined with a “stop-loss” insurance policy that kicks in if a single claim or total annual claims exceed a certain high-dollar threshold.

• What most owners think: "That sounds way too risky. I can't afford a massive, unexpected bill."
• What actually works: For the right company, ASO offers incredible transparency and cost savings. If you have a healthy, stable team that doesn't claim much, you're not subsidizing other companies in the insurer's risk pool. The savings can be significant. But it requires a strong cash position to handle claim volatility.

With ASO, you get total transparency and benefit from low-claim years, but you own the risk.

Who It's For

• Larger companies (typically 50+ employees) with predictable claims history.
• Businesses with strong, stable cash flow.
• Owners who want maximum control and transparency.

Model 3: Hybrid (or Level-Funded) Plans

For most established small and medium businesses in the trades or real estate, the hybrid model is the sweet spot. It combines the best of both worlds.

How It Works

You split your benefits into two buckets based on risk:

1. Routine & Predictable Claims (ASO): Health and dental claims are handled on an ASO basis. These are high-frequency, low-cost claims (e.g., dental check-ups, prescriptions, physiotherapy). You pay for what your team actually uses.
2. Catastrophic & Unpredictable Claims (Fully Insured): Life insurance, long-term disability (LTD), and critical illness are fully insured. These are low-frequency, high-cost events that could be financially devastating. You transfer this unmanageable risk to the insurer for a fixed premium.

This structure allows you to save money on the predictable part of your plan while protecting your business from the rare, catastrophic events.

Finding the Right Fit for Your Business

Sorting through your claims data to see if a hybrid model makes sense is time-consuming. You need to know your claims utilization, your loss ratio, and what the market is offering. This is where we step in.

At Thompson & Pollock, we start by analyzing your unique situation. We take your employee census and claims history and model them against all three funding options. We then bring the right options from the market to the table, explaining the trade-offs in plain language. If you want a second opinion on your current plan, a 30-minute Fit Review is the best place to start.

An Objection: "My accountant handles this."

Your accountant is a crucial part of your team, and we often work directly with them. They are experts in tax compliance and financial reporting. We are specialists in the group benefits and insurance market.

An accountant can tell you what you spent. A group benefits advisor can build a structure to control how you spend it, ensuring every dollar works for you and your team. It's a partnership.

Ready to see what a different structure could look like for your company? Many trade-specific firms offer instant quotes. You could request a custom quote for your plumbing company to see an example of the information needed.

Your Plan-Funding Checklist

Use this checklist to assess your current situation this week.

1. Get Your Data: Ask your current advisor or insurer for your most recent annual claims experience report. You have a right to this information.

1. Find Your Loss Ratio: Look at the total premiums paid and the total claims paid out. Divide claims by premiums. If your ratio is consistently low (e.g., under 70%), you are likely a good candidate for a hybrid or ASO model.

1. Identify Your Risk: Where did the big claims come from? Were they a handful of large disability claims, or thousands of small dental and drug claims? This tells you where you need insurance and where you can self-insure.

1. Ask the Question: Call your current provider and ask: "What would my plan look like under a hybrid funding model?" Their answer will tell you a lot about how flexible they are and whether they are proactively working in your best interest.

You cannot manage what you do not measure. Start by measuring your claims.

Do This This Week

1. Find your latest group benefits renewal document.
2. Email your current advisor and ask for your "Annual Claims Experience Report".
3. Block 30 minutes in your calendar for next week to review it.
4. If the numbers don't make sense, or you feel like you're overpaying, it's time for a second opinion.

This is general information, not tax or legal advice for your situation.

A conversation costs you nothing. We offer a no-obligation 30-minute Fit Review to see if we can help you build a more effective, cost-controlled benefits plan. We can't work with everyone, and our client roster is limited to ensure a high level of service. Every application is read personally by a partner. Book a time that works for you, or use one of our quick quote tools to get started.