For many of us, the beginning of the year is a time to take a step back from what lies ahead and plan accordingly–and that's true for AGA Benefit Solutions too. Over the coming weeks, we will be bringing you a series of blogs in which AGA's experts present what they see as the major trends in the employee benefits world. With these perspectives in hand, we hope that plan sponsors will in turn be able to make the best possible decisions for their organizations and their employees. Once again this year, our clients will be able to count on AGA’s team to help them navigate a challenging economic and social environment.

With the new Republican administration that has taken office in the United States and the likeliness of a federal election in Canada over the next few months, we may see a shift in public policy decision-making. This is why our first article looks at political and economic events in North America, and how they intersect with employee benefits – namely updates on National Pharmacare, virtual health care, capital gain taxation changes and the threat of U.S. tariffs.

Will "National Pharmacare" be more than just a Bill?

It was a tumultuous path that led to Bill 64, Canada’s National Pharmacare Bill, receiving royal assent on October 10, 2024. The first phase of the Pharmacare legislation includes universal access to contraception and first-line diabetes medications  , with the cost projected to be $1.5 billion over five years based on the 2024 federal budget. This initial phase represents only a small fraction of the projected cost of a single-payer, universal pharmacare program. Many stakeholders in the Canadian private insurance market have voiced their disagreement with the single-payer model; however, some aspects of the proposed Pharmacare model were well received, notably, the potential financial relief on the unpredictable costs related to high-cost specialty drugs. 

While the Pharmacare bill has received royal assent, the Federal government will have to sign agreements with the various provinces and territories to officially roll-out the program. The faith of National Pharmacare remains unclear with the upcoming election and the varying appetite of the different provinces and territories; AGA experts will monitor closely any developments around this in 2025.  

Virtual Healthcare in Canada: The Future of Employee Benefits?

It is estimated that six million Canadians are not connected to a family doctor¹. Therefore, many Canadians have turned to alternate health care providers and are incurring out-of-pocket expenses for services that would otherwise be covered by their publicly funded provincial or territorial plan if provided by a physician. A growing number of people are also relying on telehealth services, with recent data showing that 10 million Canadians currently have access to employer sponsored virtual care². Telehealth services have proven to be an efficient way for employers to attract and retain a dedicated workforce, since it promotes flexibility and accessibility for their employees.

In the recent past, private virtual care has come under increased scrutiny. Some experts are believing that this service model is in contradiction with the spirit of the Canada Health Act (CHA), Canada's federal legislation for publicly funded health care insurance. The primary objective of the CHA is "to protect, promote and restore the physical and mental well-being of residents of Canada and to facilitate reasonable access to health services without financial or other barriers." Notably, the Federal Minister of Health has made statements in recent years that have raised alarms around the long-term future of private virtual care in Canada. The Letter to provinces and territories on the importance of upholding the Canada Health Act, which was released on January 10, 2025, does not clarify the status of private virtual care. 

The Quebec government implemented changes in recent years to explicitly allow private insurance plans to cover virtual healthcare services; however, the situation remains unclear in other provinces and territories. Notwithstanding any regulatory changes, we anticipate telehealth services to continue to flourish in Canada, since it has proven to be a modern and efficient tool for patients while alleviating the growing pressure on our publicly-funded healthcare. Removing this option from the Canadian ecosystem could have serious and unintended consequences. We will continue to support our clients that want to implement such services for their employees , while being on the lookout for any decision that could create uncertainty in that matter.

A Capital Gain Taxation Change… or Not?  

The 2024 federal budget proposed to adjust the capital gains inclusion rate. Under the current rules, only 50 per cent of a profit on the sale of an asset such as stocks or real estate is taxable, meaning half of the gain is included in income tax calculations. The new proposal would push up that share to 66.67 per cent, though the higher inclusion rate would only apply to individuals for annual capital gains above $250,000. The changes were set to apply on as of June 25, 2024, but the federal government has postponed the implementation to January 1, 2026. The legislation has not officially passed yet, as opposition parties have blocked the actions of the minority government; the situation might evolve again and the measure could even be abandoned, depending on the results of the next federal election.

While the new tax rules would not impact most Canadians, it could affect individuals that experience a major financial event such as the sale of a vacation home, income property or a business. In such as case, you should consult with a tax and estate planning expert to understand your options.

The “Tariff” Risk: Will the Canadian Economy Take a Hit?

U.S. President-elect Donald Trump has threatened to impose a 25 per cent tariff on all goods entering the U.S. from Mexico and Canada in recent months. Economists have conflicting views on the overall impact of tariffs on the U.S. economy, but there is a consensus on the fact that the Canadian economy will suffer if they are implemented. Some studies have suggested that a 25% tariff could shrink Canada’s GDP by 2.6%, costing Canadian households an average of $1,900 annually³. Other expected ripple effects of the tariffs include a high number of job losses and increased inflation. The Canadian government has expressed its intent of retaliating with counter-measures that would impact U.S. exports into Canada and potentially rebalance the financial equation, but it will likely not be a zero-sum game.

In a survey⁴ conducted by the Canadian Federation of Independent Business (CFIB) in December 2024, 69% of small business owners said tariffs would lead to higher costs of doing business. In addition, 65% of small businesses stated the tariffs would lead them to increase prices for consumers to offset tariff impacts. While some industries may be hit harder by these changes, the impact will be felt across the economy and will lead plan sponsors to closely monitor their total rewards spend.   

What’s Next?

The rollout of federal government sponsored programs and policies has been complicated and confusing in recent years. The Canadian Dental Care Plan and National Pharmacare are prime examples of this trend. Given the current political climate, we expect that the ambiguity surrounding government policies will increase, leading plan sponsors to proceed with caution when assessing their benefit programs. Plan sponsors and plan members will require reliable advice and support to navigate the anticipated instability and AGA Benefit Solutions is well positioned to support our clients.

^{1. The Globe and Mail, January 2025}

^{2. Data from the Canadian Life and Health Insurance Association (CLHIA)}

^{3. The Cost of Canada-U.S. Trade Disruption on Full Display with New Trade Tracker - Canadian Chamber of Commerce}

^{4. U.S. tariffs would force price hikes and drive up the cost of doing business across Canada - Canadian Federation of Independent Business}