Hybrid benefits plans offer employers more control, says Andrew Brandsma
The benefits landscape is undergoing a fundamental shift, one that’s driven less by what employers can offer and more by who they’re offering it to and what new employees actually want and need.
At the recent Canadian Pensions and Benefits Institute (CPBI) Saskatchewan conference, Andrew Brandsma underscored that a group benefits plan is no longer considered a perk so much as a basic expectation for new hires. However, the bigger shift, he agues, is that employees now expect benefits to reflect more complex needs, particularly around mental health and different stages of life. With millennials and Gen Z set to represent over 60 per cent of the workforce by 2030, and Generation Alpha not far behind, the expectations around workplace benefits have notably changed.
“Employers are willing to spend money on a particular item in the benefits plan primarily to help their employees, but those options have been kind of nonexistent in the last decade and employers were forced to innovate throughout the pandemic and after,” said Brandsma, director of sales and new business development at National HealthClaim.
“So how are they protecting their staff and not just dumping money into an insured plan where they will often feel that there's a whole bunch of coverage they're paying for that they're employees aren’t using, not being utilized? But if it gets utilized it's going to hit their claims experience and cause a big fat renewal and frustrate them and see that the long-term play here is not going to work,” he said.
The issue, Brandsma argues, is rigidity as employers often end up with standardized coverage that doesn’t reflect how employees actually use benefits, while renewal increases are driven by claims experience in ways they can’t fully control.
As a result, that leaves many employers feeling trapped in a cycle where they want staff to use the plan, but heavy use leads to higher costs and a sense that the model is becoming unsustainable.
That is where health spending accounts (HSAs) come in. Brandsma argues they give employers more predictability and more room to tailor benefits around what employees actually value. Rather than paying premiums for categories that may go largely unused, employers can set a defined budget and only spend when claims are made. That makes the cost more transparent and, in many cases, more efficient.
He also stressed that HSAs shouldn’t be funded by employees themselves as there is little point in asking workers to put in after-tax dollars to receive tax-free reimbursements, especially if unused money ends up stranded.
The real advantage is on the employer side: these accounts are tax-deductible to the business, can work even for very small corporations, and create a practical tax-saving tool for incorporated business owners. That is especially valuable when families are facing large health expenses such as orthodontics or other eligible treatments.
But what about EAPs? While Brandsma acknowledged them as useful mainly for acute or first-time needs, he argues they’re especially valuable in moments of trauma, when employees need immediate access to counselling or support - something HSAs can't do.
“I don't think the HSAs can do that because you still need to have a counselor or find somebody to help you in that traumatic event. So I think that's where EAPs are really valuable,” noted Brandsma. “I don't think three visits is going to really get anybody back on track. There's going to be a need to continue and then an added cost and whatnot. They're very robust.”
Meanwhile, he noted insured plan caps of $500 per practitioner cover roughly two sessions at current rates, with psychologists charging up to $300 an hour and availability scarce. Raising that cap to $1,500 through the insured plan is an option, but it feeds directly into claims experience and drives up renewals. A handful of heavy users can push a stable renewal of nine to 12 per cent up to 25 per cent, making the investment feel unsustainable.
To that end, he suggests that when an HSA is layered on top of a group plan, even a modest amount can meaningfully extend access to care. For example, a $500 baseline can help cover roughly four or five therapy visits over the course of a year, which gives employees a better chance to space out treatment rather than burning through support in a couple of months.
While he would like to see employers go higher where possible, he argues that $500 is a sensible baseline for a tax-free add-on. Below that level, the benefit starts to lose its impact and is less likely to feel useful or valued by employees.
Brandsma also highlighted the broader flexibility of these accounts. They can be used for items that sit outside or above traditional group coverage, like extra vision care, orthodontics, or even certain out-of-country procedures, provided the expenses are reasonable.
He believes that flexibility matters both financially and strategically. Employers know what they are setting aside, and if claims are properly adjudicated by a third party, actual spend often comes in well below the nominal budget. That opens the door to expanding benefits without blowing up overall costs.
Yet, HSA utilization remains lower than it should be for a few reasons, Brandsma acknowledged. For one, some employees simply don’t bother submitting smaller out-of-pocket amounts while others assume the claims process is difficult, even though the technology has improved significantly.
He also suggests there is lingering confusion about how HSAs work alongside a traditional benefits plan. Many employees don’t realize they can use the account to cover the portion left unpaid by their group insurance, which means they’re leaving money on the table and missing a benefit designed to make them whole.
According to Brandsma, HSA limits can be tiered by employee level - managers, full-time staff, and part-time workers can each receive different amounts. That said, he recommended keeping benefits like mental health and fertility consistent across the entire group, reserving tiered limits for the broader HSA component.
That also lines up with his broader point around cost containment as shifting enhanced coverage into a spending account rather than layering it into the insured plan keeps renewals in check over time. For example, at a 20 per cent renewal rate, premiums double in five years, he noted.
"You're actually going to reduce those renewals over the long term. You're going to save a lot more money by budgeting an HSA versus adding to the insured plan and letting that renewal continue to grow every single year," he said.
Flexible spending meets HSAs
According to Brandsma, flexible spending is also becoming a bigger part of the mix, now accounting for about a quarter of his firm’s business, because employers are starting to ask what else they can offer using the same budget.
Instead of simply topping up a group plan with a standard health spending account, companies can carve out lifestyle and wellness benefits that feel more personal and more visible to employees.
Notably, HSAs are tax-free, while lifestyle spending accounts are taxable, but that trade-off can still be worth it, Brandsma noted, because the benefit feels tangible. He used his own example, setting aside $250 each year for a pair of running shoes, emphasizing it’s not about the shoes themselves but the message behind them: when employers pay for something employees value in their actual lives, it builds goodwill in a way traditional coverage often does not.
Brandsma argues that this flexibility also lets employers align benefits with their own workplace needs. Some are funding mental health buckets or fertility support, while others are covering safety boots, education courses, or even travel. He acknowledged employers are often willing to spend the money once they understand they can direct it toward specific needs instead of dumping more into a broad insured plan.
The appeal of this hybrid approach means more relevant benefits for employees, more stability for employers, and more freedom for workers to decide what matters most, noted Brandsma.
"Employees get to choose how that money works best for them every year. That's a really powerful tool," he said.
