Tip: Supplement health insurance by eliminating taxes on premiums

By: Updated: November 21, 2019

Supplement your health insurance plan with this simple tax account for small business owners. Paying for expensive premiums, non-reimbursed medical expenses, and other associated costs is easy when you can pay using before-tax dollars. See how: 

Do you currently have an insurance plan?

Small business owners can deduct their health and dental premiums in an insurance plan (as a business expense) by using a Health Spending Account (HSA). Yes, you heard that correctly. You can pay for your health and dental premiums with before-tax dollars.

How does a Health Spending Account (HSA) work with insurance?

Olympia Benefits serves over 55,000 clients and over the years, we’ve come to realize that some business owners are paying upwards of $10,000/year on health insurance premiums alone… and that’s with after-tax dollars. Imagine if you could be paying that amount without the tax. You could save thousands.

The Health Spending Account is a CRA-approved tax plan that provides tax relief and tax shelter for small business owners specifically.    

A Health Spending Account can supplement your health insurance by eliminating taxes on premiums. Many people pay high or increasing premiums under a traditional health insurance plan. With a Health Spending Account, you can claim these premiums as a business expense. You can even claim deductibles, copays, or any associated cost related to your health and dental plan. Any medical expense NOT reimbursed by your health insurance plan is also eligible under an HSA plan.

A Health Spending Account provides wide coverage and 100% cost control. In fact, the Health Spending Account was originally made to help business owners get cost control for their medical expenses. That’s why any health-related cost is typically eligible.

In fact, many small business owners believe that a Health Spending Account provides more affordability than health insurance since tax has such a big impact on insurance premiums and medical expenses when paid for personally.

Want to see all eligible expenses for a Health Spending Account? View the complete list.

Is an HSA a type of insurance?

No, a Health Spending Account is not insurance. While it is in the "nature of insurance”, it is not insurance. Think of it as a tax plan which turns 100% of after-tax personal out of pocket medical costs into before-tax business expenses. It is an alternative to insurance.  

Are Health Spending Accounts legal?

Yes – an HSA is legal in Canada - as long as the guidelines are properly adhered to. To properly satisfy the conditions set forth by CRA, make sure you choose a reputable provider and understand what you are purchasing.

Note: A Health Spending Account is only for incorporated business owners, such as an incorporated contractor, Professional Corporation, or incorporated small business with arm’s length employees. There are more eligible businesses, these are just a few examples.

Do you feel like you are not getting value from your current health insurance plan?

According to a CBC article, for every $1.00 that Canadians were paying to private health insurance, they were only getting $0.92 cents back (in value) in 1991. Fast forward to 2011, Canadians were paying a dollar and getting $0.74 cents.

If we look at this correlation, the amount paid back will be even lower in 2018. Some estimate that for every dollar you pay, only about $0.60 in value comes back to the employee in the form of a reimbursement. The rest of your dollar paid ($0.40) is used for the administrative and marketing costs.

In most cases, you are better off paying for your medical expenses out of pocket and then using a Health Spending Account to turn these personal medical expenses into before-tax business deductibles. That means the money saved (by bypassing tax) is kept in the corporation, and can be used for other financial needs such as investing or financing. It’s a win/win.  


Download our FREE Beginner’s Guide to a Health Spending Account:

Beginner's Guide to Health Spending Accounts


Own a small business owner with arm’s length employees? Download this guide instead:

Beginners Guide to Health Spending Accounts for small biz

How to write off 100% of your medical expenses

Are you an incorporated business owner with no employees? Learn how to use a Health Spending Account to pay for your medical expenses through your corporation: 

Download the HSA Guide for Incorporated Individuals

Do you own a corporation with employees? Discover a tax deductible health and dental plan that has no premiums:

Download the HSA Guide for a Business with Staff

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