The medical needs of a 25-year-old single person vary considerably from those of a 46-year-old, married with children.
But small companies don't often have the size, scale or resources to offer a comprehensive benefit plan that will cover all of those requirements.
Add to the mix the ever-rising costs of traditional health and dental plans, and the result is many Canadian employers now looking for an alternate solution.
Many employers, large and small, realize the importance of having a benefits plan of some sort as a way to attract and retain employees.
But the cost of the traditional employer-insured approach has skyrocketed in recent years, mostly the result of higher drug costs from products like bologics and biosimilars.
Employers today simply can't afford a 15%-20% or 30% compound increase in the cost of their health and dental plans year after year. In fact, in five years, their costs have essentially doubled in most programs. Now, they are looking for cost control and that's what a Health Spending Account (HSA) gives them.
These accounts were first introduced in 1986 by Canada Revenue Agency, aimed at both the self-employed and employees at companies.
Essentially, they operate as a special savings account where a capped amount of money is deposited for each employee to be used exclusively for health issues, including everything from dental expenses to eyeglasses.
That amount varies, but is often a minimum of $1,000 to $5,000 for managers and perhaps some executives. The employees can then use the money from the account to either augment their regular health plan or get some costs covered that aren't in their health plan.
Of significant 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.
The accounts themselves provide a lot of flexibility and arange of options, basically anything that qualifies for a medical tax credit under the Canadian Income Tax Act.
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.
Importantly, an HSA can also cover a wider range of dependents than a traditional health and benefits program - including parents, siblings and a disable relative, as long as they are financially dependent on the employee for support.