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The Alternative Health Plan for Employers Dealing with Rising Premiums

Posted by K. F. on May 17, 2016

 

Skyrocketing health costs, an increasingly diverse work place and greater flexibility of where to spend health dollars are sparking an increase in the number of Health Spending Accounts (HSAs) in Canada.

Now many businesses are recognizing the significant cost-savings and benefits that HSAs provide as a alternative health plan for employers and their employees.

Many employers, large and small, realize the importance of having a benefits plan of some sort as a way to attract and retain employees, while also educating employees on how to become smarter consumers and how to get the most they can out of the contribution.

However, instead of dealing with constantly rising premiums, employers are now generally looking for a plan that can be a cost-effective, flexible alternative to a traditional employee benefits package. Having an HSA provides companies with total and absolute cost control because there’s a specific amount employees can use under the plan and the rest is out of their pockets.

Related Reading: 5 Unforgiveable Sins of Small Business Health Insurance

In addition, consider the following: the medical needs of a 25-year-old single person vary considerably from those of a 46-year-old, married with children. But smaller companies often don’t have the size, scale or resources to offer a comprehensive benefit plan that will cover all of those requirements.

Health Spending Accounts provide a lot of flexibility and a range of options, basically anything that qualifies for the medical tax credit under the Canadian Income Tax Act. This includes coverage for services like physiotherapy, laser eye surgery, and orthotics.

While an HSA can be used to cover expenses not covered under a traditional benefits package, it can also be used to augment costs over and above their benefits package limits.

Costs are tax deductible

Of benefit to employers is the fact that costs associated with offering an HSA are tax deductible as a business expense, with the exception of Quebec. As well, the benefits the employees receive through the HSA are tax free, with the exception of Quebec.

Sometimes, employees don’t use up all of the employer contribution. If, for example, an employer contributes $2,000 in year 1 and the employee only spends $500, that $1,500 moves forward into year 2 and gets used first in year 2 for new claims. If at the end of year 2 there is still $500 remaining from the year 1 contributions, it’s forfeited back to the employer at the start of year 3.

In addition, an HSA can also cover a wider range of dependents than a traditional health and benefits program – including parents, siblings and a disabled relative, as long as they are financially dependent on the employee for support.

Related Reading: Health Spending Account Guidelines

Are you an incorporrated business owner with arm's length employees? Discover how the Olympia Health Spending Account can provide significant value for your employee benefit program by downloading our free guide: The Beginner's Guide to Health Spending Accounts.

The Beginner's Guide to Health Spending Accounts

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