What is a Health Spending Account (HSA)?
A simple yet powerful employee health benefits plan that works like this:
An employee (or owner) submits a health or dental receipt from a wide list of eligible expenses.
We review it for eligibility and approve 100% of the expense (up to their annual maximum).
We invoice the business this amount plus a 5% fee, and reimburse the employee 100%.
Simply speaking
Health Spending Accounts perform a basic function: they convert the personal health and dental expenses of employees (including owners who are also employees) into a business write-off. This allows the business to transfer money tax-free from the business to the owners and employees to support their health and wellness.
Unlike with traditional employee health insurance plans, employees get 100% coverage of their eligible expenses, and employers pay only for what is claimed, and at a rock-bottom 5% administration fee.
Technically speaking
A Health Spending Account (HSA), also known as a ‘Health Care Spending Account (HCSA)’, is a form of Private Health Services Plan (PHSP) that is “self-insured” by an employer. It is a popular alternative to traditional employee health benefit plans offered by insurance companies such as Sun Life or Blue Cross. Unlike traditional health benefits, HSAs are also suitable for smaller businesses including businesses comprised of a single owner/employee (if incorporated) or with as few as one arm’s length employee (if a sole proprietorship). Learn more about HSA Eligibility.
Here's how an HSA works:
Rather than purchasing a group health insurance policy for your employees through a traditional insurance company, you would instead establish an HSA Benefits Plan with an HSA Provider such as EasyHSA. With our guidance you would define appropriate employee classes (such as “Executives” and “Staff”), assign your employees to each class, and choose a maximum annual benefit level for each class. That’s it! Employees (and owners who are also employees) can then submit their families’ health and dental expense receipts to EasyHSA and get reimbursed 100% of the cost. A very wide range of health and dental services, prescriptions and supplies are eligible. With the receipt we provide, your business would write off the total amount as a regular business expense.
HSA benefits renew at the same level each year (unless you make a change to your plan), so each year your employees have the same amount available to them to spend on eligible health expenses. Unspent amounts do not roll-over and accumulate year after year, however, you can optionally choose to have your plan carry forward unused employee benefits for one year (and if unspent again they will not carry forward again). Unused amounts do not belong to the employee, and instead revert to the employer. In fact, with EasyHSA your business doesn’t even make any upfront deposits, and instead pays only for what is used when it is used.
Eligible health and dental expenses:
Eligible health and dental expenses include everything that would otherwise be eligible for the CRA’s Medical Expense Tax Credit (METC). This includes the services of any Authorized Medical Professional (see the list here), all drug prescriptions and other health supplies prescribed by an Authorized Medical Professional, and more (search the list here).
Unlike with traditional health benefit insurance plans, with an HSA there is no restriction or limitation with respect to how much can be claimed for a particular type of health service, nor are there limits as to how much is “acceptable” when it comes to a health provider’s fee.
HSA fee structure and commitment:
With HSAs there are no annual insurance premiums to pay and no insurance contract fine print, nor are there co-pay amounts or service access fees.
By choosing EasyHSA as your HSA provider there are also no fees aside from our rock-bottom 5% administration fee for approved claims, and no up-front deposits either – you only pay for what is used when it is used. At EasyHSA we do not bundle our HSAs with unnecessary insurance products (such as life insurance), nor do we lock our customers into a contract. You can sign up for free and pause or close your plan whenever you want, without fee or penalty.
What makes HSAs so popular?
Larger businesses appreciate that their employees love how HSAs work: 100% coverage of a wider range of health services and supplies, with compete flexibility about how it is spent. Employees are no longer satisfied with the coverage restrictions and limitations that you get with traditional insurance plans, such as: “80% coverage of Massage Therapy up to a maximum of $80 per session and $500 per year, with a $25 access fee for the first claim”. These constraints make it expensive for employees to use their own benefits, and dissuades them from using a plan that their employer pays for regardless. Nor is it easy for employees to place a value on the partial life insurance or other coverage that is often bundled with their benefits.
Smaller businesses appreciate that with HSAs they can now offer a health benefits plan to owners and employees that is simple, perfectly suited to their needs, and cost-effective. This allows small business owners to retain, reward and compete for employees, or simply pay for their families’ own health expenses.
What do HSAs offer business owners?
- The ability to claim personal health expenses as a business expense. This can create significant personal tax savings compared to the alternative of paying health expenses out of pocket and then claiming them on your personal income tax return using the Medical Expenses Tax Credit (METC) program. An HSA effectively allows you to transfer earnings out of your business tax-free. See how much you could save.
- The ability to cost-effectively attract, retain and reward employees. With their simplicity, flexibility, and 100% coverage of personal health and dental expenses, employees can readily appreciate the true dollar value of their benefit plan. Given that they also don’t pay income tax on reimbursements, their HSA is worth significantly more than an equivalent salary increase or bonus.
- The ability to encourage employees to stay healthy. With 100% coverage it is more likely that your employees will go to the dentist, or get their prescriptions filled.
- The ability to fully control the cost of your company’s health benefits plan. With EasyHSA you decide how much each employee class gets (there is no minimum benefit size), unused amounts do not accumulate and cannot be withdrawn by the employee, you pay only a single 5% fee on approved claims and pay nothing if your plan is not used, and you maintain full cash-control by paying only after claims have been approved (no up-front deposits).