Do Your Employees Need Better Health Coverage?

Though Canadian health care is publicly funded, mostly free, and mainly provided by private entities, many Canadian businesses are still concerned about the levels of coverage provided to their employees. Most choose to offer additional health insurance to their employees, not only as a way to attract new employees and retain experienced ones, but to make sure that their workers have access to the care they need in order to stay healthy and happy.

Health benefits for small businesses often include health spending accounts, also known as HSAs. An HSA provides a different model of health insurance for small business owners who are interested in a more cost effective, tax advantaged way to provide benefits to employees. Members covered under HSAs have greater access to a wide range of health care services that might not be included under standard insured health plans while providing a more cost effective option for business owners. Given that 72 percent of small business owners are concerned about the cost per employee of health plans, HSAs are a popular choice among small business health insurance benefits.

What is an HSA?

Health spending accounts are specified annual amounts of money that can only be used for health care purposes. In some small business health care plans incorporating HSAs, the company makes advance payments on behalf of employees for health and dental expenses while in others, payments are on a “pay as you go” basis. Basically, eligible claims are reimbursed to the employee and are non taxable small business health insurance benefits.

Who Can Be Covered Under an HSA?

Employees must be bona fide. Shareholders and unincorporated owners are not eligible for small business health insurance benefits. The Canada Revenue Agency views payments under an HSA to non employees as taxable transfers of funds, even if a third party is used.

What Expenses Are Covered by HSAs?

Eligible expenses are medical expenses that would otherwise qualify as medical expenses under section 118.2(2) of the Income Tax Act and as interpreted by the CRA in Income Tax Bulletin IT 519R2. They are the same medical expenses as allowed under the Medical Expense Tax Credit. Some of the most popular include,

• Ambulance
• Annual physicals
• Products like bandages, glasses, hearing aids, pregnancy test kits, and prescription medication
• Surgery
• Treatment for alcoholism, drug addiction, and psychological counseling
• Vasectomy

Cosmetic procedures, diaper services, child care, and non prescription medication are not eligible.

Who Provides HSAs?

HSAs can be provided by Trustees, Third Party Administrators, and Insurers. It is up to the owner to determine where to purchase small business health insurance benefits for employers.