The Cost of Doing Business in the U.S.: Workers’ Comp, Healthcare and Geographic Insurance Risk

By Dave Macfarlane

Many times we think doing business in the U.S. is just like in Canada, no different than when we play hockey, tennis, golf or basketball. We play by the same rules, but sometimes things are different. When a Canadian football team walks onto a U.S. college or pro field, everything starts off on the wrong foot. They have too many players on the field to start the game, they’re standing out of bounds when they line up, and the fans in the stands can’t stop laughing when they go to kick the ball on 3rd down.

The same thing can happen when a Canadian business moves into the U.S. The organization tries to purposefully provide equivalent benefits to their American employees, but they may be standing in the wrong place and missing the mark.

Workers’ Compensation Isn’t a Government Matter in the U.S.

In Canada, workers’ compensation is a provincial government matter. Everyone pays into the mandatory system and draws on it when needed. But in most U.S. states, workers’ compensation is offered by a wide variety of private insurance providers – and the program from Company A may not be equivalent to the offer from Company B. The cost is significant, and the system is very different in the United States.

So what’s a Canadian business to do? The typical Canadian broker isn’t licenced in the USA and isn’t familiar with insurance companies that have offerings in the U.S., other than utilizing a U.S. insurer that also has operations in Canada to facilitate these transactions. Since coverage is far more expensive in the U.S., due to fact that claims can be litigated, along with higher administrative and healthcare costs, the fees can be vastly different. Moreover, the Canadian broker probably doesn’t understand mod rates, or the way the return-to-work program operates in the American system – some things that can also have a significant impact on your business operations.

Partnering with an organization that has insurer relationships and brokerage operations in both Canada and the U.S. is the only way to ensure your company gets the proper coverage, at a reasonable price – and that your business continues to thrive.

Healthcare Isn’t Funded by the Government in the U.S.

When Canadian companies move into the U.S., they are often surprised to learn that even in the age of healthcare reforms, most Americans don’t have health insurance funded by the government. In fact, the landscape of healthcare is completely different. Yet if you have at least 50 employees based in the U.S., you’re required to offer them healthcare coverage.

Healthcare is a major investment for Canadian organizations moving into the U.S. The average cost per employee per year is $12,000 – and the coverage is in some ways more basic and restrictive than what we have access to in Canada. Moreover, in many cases this coverage alone accounts for well over 50% of a business’s entire insurance spend, including what they pay in Canada.

Unlike the provincial system in Canada, healthcare in the U.S. is offered by a number of insurance carriers. Each carrier offers its own variety in terms of levels of coverage, and it can be challenging to determine the best one for your employees and your organization. If you have operations in different parts of the U.S., you may be looking for one carrier that can provide excellent coverage in more than one region.

The typical Canadian broker isn’t familiar with American providers or the nuances of their coverage offerings. Working with a team of people that has the resources to help manage and control these significant costs – from program analysts, to employee communication specialists, and prescription management experts – can be a game changer.

Weather Leads to Different Risks in the U.S.

When it comes to geographic insurance risk, it’s imperative to truly understand regional considerations. The focus in Canada is on flooding (the Eastern provinces, Ontario) and wildfires (BC, Alberta, Saskatchewan), whereas the concerns in California may be earthquakes and those in Florida may be hurricanes. And even flood and wildfire coverage works differently in the U.S. than it does in Canada.

A Canadian broker with no experience in the U.S. won’t know how to weather that storm. In some cases, brokers have even left their clients unprotected, without appropriate risk coverage, simply because they didn’t have the right information to guide their clients properly. No one wants to be the brand new business setting up in South Carolina that doesn’t have Tier One Wind Coverage when a hurricane hits the southeast.

These mistakes are common, and similar to not understanding that football in the U.S. has four downs, the field is smaller, and there are few players on the field. Working with an organization that has relationships with experts in Canada and the U.S. is the smart way to make sure you’re covered for all specific local risks – so you won’t be leaving yourself short and kicking on 3rd down.

Hub International’s team of brokers has extensive experience providing appropriate, comprehensive options for specific, local worker's compensation risks and can help you select the right plan to make sure your business is protected.