Get More Bang for Your Benefits Buck – Health Spending Accounts
More and more often, employers are now offering Health Spending Accounts (HSA) to their employees to supplement the coverage provided by their benefits plan. And yet, an HSA remains one of the best-kept secrets.
In a nutshell, an HSA works like a benefits bank account. The employer deposits an amount for each employee into the HSA, and the employee in turn makes claims from the HSA.
From an employer’s point of view, an HSA is favorable because;
- It’s a fixed cost, and
- Not subject to inflation
- Not subject to an employee benefits renewal
- Any HSA deposits not used by an employee are refunded to the employer
From an employee’s standpoint, an HSA is favorable because;
- More flexibility than a traditional employee benefits plan.
- Cover the costs of items traditionally covered by a benefits plan (such as over the counter drugs, dental claims, and paramedical claims), but it also
- Is not subject to dental fee guides, or usual and customary limits on some benefits such as massage therapy, chiropractors etc..
- Can be used for other items such as orthodontics, vaccines, or even trained animals to assist the blind, deaf, or otherwise handicapped (there are many other eligible items)
An HSA can be used two different ways;
- To replace an employee benefits plan.
- In conjunction with a benefits plan – For example, an employer might introduce an HSA plan, and at the same time, decrease the co-insurance on their Extended Health Care coverage and Dental coverage. The HSA can then be used to either pay for other items not covered under the benefits plan, or for the 20% co-insurance no longer covered by the benefits plan.
Not everything can be put through an HSA though; the Canada Revenue Agency has specific guidelines as to what qualifies and what doesn’t.