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The Small Business Alternative to Group Insurance

Posted by K. Fry on August 5, 2016
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A potential alternative to group insurance is the Health Spending Account (HSA). The product is being used by thousands of small business owners to control their cost and deliver flexible coverage to their staff.

The HSA is can be used by a business with no staff and by a business with staff.

1. What is a Health Spending Account?

For a business with no staff, an HSA enables a small business owner to deduct 100% of their personal health and dental expenses - without paying standard premiums typically associated with traditional health insurance plans. The ability to write off health and dental expenses can create savings of more than 30% on health and dental related expenses. For entrepreneurs and self employed professionals, this is an effective tool to cut your taxes and reduce your medical costs. 

For a company with a staff, an HSA becomes a means for attracting and retaining talent due to its unique properties.  All benefits within a PHSP are 100% tax free to employees.  An HSA provides significant cost control to the employer and flexibility for employees.

2. What types of health and dental expenses are covered under a Health Spending Account?

One of the great benefits of an HSA is the freedom it provides through the extensive range of eligible expenses.   Forget about restrictions.  You'll love being able to claim 100% of your child's dental braces.  These types of expenses along with a thorough list of qualified medical practitioners, procedures, and medical devices helps make Health Spending Account an attractive choice for the small business owner.

Unlike many traditional insurance plans, a HSA offers 100% coverage on a wide range of expenses...even the expensive ones.  Does your son need physiotherapy?  Does your spouse need a new pair of glasses or maybe laser eye surgery?  Maybe you want to get an MRI? Rest assured, all of these are eligible expenses with a Health Spending Account.

You can even claim your spouse's premiums if they are a member of a traditional insurance plan.  That's right.  Premiums contributed to a non-government insurance plan are an eligible expenses with a Health Spending Account.  How great is that?!  

Do you have unpaid portions that are not covered from your spouse's plan? Not a problem - the remaining amount of an expense is eligible with a Health Spending Account.  Fantastic.

Prescription drugs, massage therapy, and hearing aids are all eligible expenses too.  If you are traveling to the sun on your upcoming vacation...pick up a pair of prescriptions sunglasses so you can read on the beach (the sunglasses are eligible as well).  Sore feet from that long hike or fishing trip? Pay a visit to your friendly Podiatrist as all of their services are eligible expenses. 

3. How does an HSA compare to a traditional group insurance plan?

There are several advantage of a HSA compared to a traditional health insurance plan.  Premiums, expense eligibility, ease of use, deductibles, and claims are some of the areas an HSA is considered more favorable. Understanding the difference between insurance and administration is critical when deciding on how to pay for your medical expenses.

Here's 5 reasons an HSA (also known as a Private Health Services Plan or PHSP) is better than a traditional health insurance plan. 

1. Premium Creep

Traditional Insurance Plan

  • Monthly premium for coverage regardless of access or usage to the plan
  • Monthly premium rate often increased at the annual renewal of the policy (premium creep)
  • Age of the individual will affect the price of your plan

PHSP

  • Avoid a premium creep due to usage or age factors
  • Most Health Spending Accounts have fixed fee as opposed to a premium
  • Pay for the expenses you incur, eliminating a situation where you have paid into a program that you did not use. 

2. Eligible Expenses and Pre-existing Conditions

Traditional Insurance Plan

  • Eligible medical expenses are restricted
  • Items that you wish to claim under this policy may be restricted by an annual or life time maximum or require special authorization in order to obtain eligibility.
  • At time of enrollment, medical history will be requested and pre-existing conditions may be excluded or reduced from coverage.

PHSP

  • Expenses are not restricted by type of expense, only on the dollar amount
  • You will have access to a wider range of eligible expenses
  • Will not restrict or limit benefits due to a pre-existing medical condition

3. Complexity

Traditional Insurance Plan

  • Under a fully insured program, you will receive a plan booklet outlining the items that are covered and also the ones restricted or excluded by definition, co-insurance, deductibles or fee guides. Figuring out what your coverage is and if it will be reimbursed partially or in full can get complicated.

PHSP

  • A PHSP is typically only restricted by dollar amount. You will have 100% coverage for all eligible expenses up to your spending account limit. Your account balance is updated by the administrator every time a claim is processed, eliminating the need to keep track of this information manually.

4. Deductibles

Traditional Insurance Plan

  • Your benefits may be restricted by an annual single/family deductible
  • Benefits can be restricted by a co-insurance of 50%-80%
  • There is a limit for the number of visits and treatments.

PHSP

  • No deductible
  • You are not restricted by co-insurance
  • No limits for the number of visits and treatments

5. Claims

A PHSP with a digital claim platform will process your claim within 24 hours versus many traditional insurance claims that can take several weeks to process.

Interested in learning more about a Health Spending Account? If you own a family business or are an incorporated professional, take a look at Olympia's Beginner's Guide to Health Spending Accounts.

what is a health spending account

Or do you own a small business with staff? Download Olympia's Beginner's Guide to Group Health Spending Accounts.

The Beginner's Guide to Health Spending Accounts

Topics: hsa, health benefits, small business in Canada, healthcare, dental coverage, Canadian entrepreneur, health spending account