Health Spending Accounts in Canada

Tax free health care expenditures means significant savings for many Canadians

Health Spending Accounts (HSAs) are the government’s way of helping us to pay for needed health care expenditures beyond what is covered by provincial health plans.

A HSA is a special bank account administered by a third party.  Employers deposit funds into the account on behalf of their employees.  Employees then have access to these funds for reimbursement of health care expenditures.  These accounts are available to businesses of all sizes including self-employed individuals.

Similar to RRSPs, Health Spending Accounts are not taxable.  These accounts must be used solely for reimbursement of health care expenses.  Individuals channelling their health care expenditures through an HSA can save thousands of dollars per year.

Comparing RRSPs with HSAs can be helpful.  Both are tax reducing strategies.  HSAs, however, offer more immediate benefits.  HSAs result in tax savings at the time of expenditure without the future tax burden that comes with an RRSP.  In addition, HSAs do not require that funds be set aside for an indefinite period of time.  The purpose of an HSA is to help pay for near term health related expenditures. 

Health Spending Accounts (HSAs) vs. Registered Retirement Savings Plans (RRSPs)   Top Reasons to  Consider a HSA First   Non-taxable expense/benefitImmediate benefitExcess cash not requiredNot taxable when withdrawnNo spending limits  

RRSPS were introduced in 1957 as a way to encourage Canadians to save for retirement.  It wasn’t until 1991, more than thirty years later, when their use became more widespread as a result of legislative changes.  Similarly, HSAs were created in 1986 when Finance Minister Paul Martin introduced a new way for businesses to offer health benefits to their employees.  Until recently the use of HSAs has been limited to those larger companies that have the expertise to understand and properly administer these plans.  Only now, 25 years later, has technology simplified HSA education and administration to the level that it is now a practical consideration for a wider group of businesses and individuals.

Whereas RRSPs are a tax deferral strategy (that is, taxes are paid on funds at a much later date) HSAs are a tax free benefit.  When investing in an RRSP, one must have excess funds to set

aside until retirement at which time these funds are accessible and taxable.  An HSA provides a current benefit with no future taxation.  It requires a little advance planning to channel funds normally spent on health related expenses during a calendar year through a Health Spending Account.  This reduces taxable income, and taxes paid, for the current year.  While an RRSP remains important for retirement planning purposes, a Health Spending Account warrants consideration by any self-employed individual in Canada.  Furthermore, employers should consider HSAs as part of their employee benefits package.  HSAs provide employees with a non-taxable benefit and complete discretion on use of funds while providing the employer with a greater ability to control corporate expenditures on health benefits.

Health Spending Accounts (HSAs) vs. Private Health Care Insurance
Top Reasons to  Consider a HSA First


Non-taxable expense/benefit
Covers more services
Dependents more broadly definedN
o dollar limits for specific products/services  

Consider the hypothetical situation of Jerry.  Jerry is self-employed (incorporated) and his family consists of a wife and two children.  His parents are retired.  Jerry takes medication for high cholesterol and high blood pressure.  He hurt his back a few years ago and requires the services of a chiropractor.  His wife requires thyroid medication.  Their combined out of pocket health expenses of $5,000 per year are for items and services not covered by their provincial health plan.  These items include dental expenses, prescription glasses and contact lenses for three of the four family members, medical lab fees plus other miscellaneous items.  Jerry’s parents are on a fixed income as are those of his wife.  Both sets of parents rely on Jerry and his wife to help out with their medical expenses which include various prescriptions, assistive devices and services that total about $11,000 per year.  

This brings Jerry’s out of pocket health care expenditures to about $16,000 per year.

As Jerry and his family age they anticipate that these expenses could increase by 25% or more in the next five years.

Despite having a relatively successful business, Jerry struggles to pay these health care expenses along with all the other costs of home ownership and family.

Jerry has an Average Tax Rate of about 28%.

Jerry could set up a Health Spending Account to cover the above expenses for him and his family.  He could save approximately $5,000 a year in the current year and more in future years.

A similar scenario plays out with larger companies that want to provide their employees with competitive health benefits.  A Health Spending Account offers additional benefits to these businesses.  It is a tax deductible business expense.  It is also a controllable expense in that only the employer can decide to change the value of this benefit.  There is no requirement that the amount of benefit be increased on an annual basis nor does the value of this benefit impact on the services available to the employee.  By providing these funds monthly, rather than annually, the employer is better able to control costs by discontinuing payments for those who leave the company.

Health Spending Accounts (HSAs) – Who Benefits the Most?  

Self-employed individuals
Employers
Employees receiving employer benefits  

For employees, a Health Spending Account is a non-taxable company benefit.  That is, amounts deposited into the account by their employer are not taxable to the employee.  Furthermore, the employee has complete discretion as to how the funds are used.  There are no limits on how much money can be spent on specific services.   The only limitation is the amount of money available in the account.  This is different than the traditional insurance based approach where limits may be imposed on the amount covered for some services.  The employee makes all decisions as to how these funds are utilized.

Technology plays an important role in the growth of Health Spending Accounts.  Similar to how the Internet has transformed how we manage our banking, HSAs can now be managed through your personal computer.  Funds can be deposited directly to your HSA account via credit card or from your bank account.  Claims can be filed online with receipts submitted electronically.  And there is a variety of reports providing access to claims and payments history, deposits, balances and more. 

Over the past 20+ years Canada has put in place the infrastructure and tax incentives to support its model for health insurance coverage.  With utilization of the Internet to provide education, control and administration tools for Health Spending Accounts, Canada is in a position to deal with the pending cost containment of health care expenditures.  This is partially done by utilizing the Internet to help reduce administrative costs that have become a part of the management of services that Canadians utilize for covering their individual health care needs. 

For more information on Health Spending Accounts, visit www.PreAxia.com.

Go Paperless. Cut Costs and Increase Profits

Health Spending Accounts in Canada

The Internet brings paperless automation and improving margins to HSA Sellers in Canada

Health Spending Accounts (HSAs) are one of many products available to those who advise businesses and individuals how to best manage their financial resources.   Yet they are not well understood by many of the financial and health insurance specialists who could be directing their clients to these services.  Perhaps it is because health benefits are not normally considered when it comes to financial planning.  They should be.  For many, health expenditures can be one of the largest annual expenditures.  It only makes sense to consider them in light of both overall health spending and prudent financial planning.

The Internet has changed the way of doing business for many industries.  Recent innovations in the application of technology has now provided opportunity for those who have, thus far, avoided consideration of HSAs for the clients.  This technology simplifies the process of selling, setting up and administering these services.  Those who understand the value of HSAs and make use of these technology tools can benefit from greater margins, better service to their clients and less effort.  It allows these agents to capture more business at the expense of those who choose not to utilize these same products and technology tools.

Consider how the travel industry has changed, how we now access the media and how we deal with our financial institutions.  It is this same technological upheaval that is coming to the Group Benefits industry.  For those unfamiliar with the term, Group Benefits refers to health care benefits provided by one group, an employer or association, for its employees/members.  It is how many Canadians pay for the many health related expenditures not covered by provincial health plans. 

Group Benefits and health care funding options can be confusing to understand and involve many rules and limitations.  Nevertheless, they are important to anyone who requires access to health care services – namely, every person in Canada.  These services have traditionally been sold by health insurance agents licenced to sell such products.  Increasingly, however, they are also being sold through financial agents who understand the tax benefits of these products.  For these agents, Health Spending Accounts have become a valued product in their portfolio of service offerings.

Imagine a fully automated system where you, as an agent, have your own web site for promoting these HSAs and for managing your clients.  All you require is an office computer with Internet access and a web browser – tools currently at your disposal.  Your clients enrol and set up their accounts through your web site.  No paper required.  Plan acceptance is immediate rather than weeks later.  All employer deposits to employee accounts are electronic with full access to management reports.  Likewise, employees set up and access their on-line accounts without submitting paper documentation.  They can determine fund availability, file claims and access reports using their own personal account accessible from your web site.  Reimbursement claims are filed electronically at the convenience of the employee.  They can check their account to determine the status of a claim in process and determine when a reimbursement will be deposited into their bank account.  As with most automated systems, these reimbursements occur in days rather than weeks.  Elimination of paper and administration costs are a major convenience that result in cost and labour savings for all involved.  The agent (you) need not get involved in the administration at any level.  Furthermore, you are provided with management reports and electronic communication tools.  You can electronically communicate with your clients, share information with them and promote new products for their consideration.

This system is in use today by agents and their clients for the combined purposes of health care management and financial planning.

History of Health Spending Accounts

Health Spending Accounts, or HSAs, date back to 1986 when Finance Minister Paul Martin introduced a new way for incorporated companies to offer health benefits to their employees.  A few years later, a similar option was made available to non-incorporated companies.   While these accounts have been available in various forms, it is only recently that market forces have made HSAs more enticing.  Escalating health care costs and reduced corporate budgets have conspired to encourage businesses to be more efficient in their provision of employee health care benefits.  One only has to look toward the United States for an example of

out-of-control health care expenditures.  As these businesses look closely at their Group Benefit expenditures, they find HSAs to be an increasingly attractive option.

What is a Health Spending Account

A HSA is, quite simply, a special bank account administered by a third party.  Employers deposit funds into the account on behalf of their employees.  Employees then have access to these funds for reimbursement of health care expenditures.  Similar to Health Savings Accounts in the USA and RRSPs here in Canada, Health Spending Accounts offer advantages to both employer and employee.

Advantages of a Health Spending Account

For the employer providing the Health Spending Account, this is a tax-deductible business expense.  It is also a controllable expense in that only the employer can decide to change the value of this benefit.  There is no requirement that the amount of benefit be increased on an annual basis nor does the value of this benefit impact on the services available to the employee.  By providing these funds monthly, rather than annually, the employer is better able to control costs by discontinuing payments for those who leave the company.

For the employee, a Health Spending Account is a non-taxable company benefit.  That is, amounts deposited into the account by their employer are not taxable to the employee.  Furthermore, the employee has complete discretion as to how the funds are used.  Employers or third parties have no ability set limits on how much money can be spent on specific services.   The only limitation is the amount of money available in the account.  This is quite different than the traditional insurance-based approach to employee benefits where limits may be set on the amount that is covered in a particular category.  It is the employee who makes all decisions as to how these funds are utilized.  And since there is no third-party dictating dollar limits for specific services, all expenditure decisions are based on need rather than allowable limits.

The entire health care industry benefits from individuals taking more direct control of their own health care expenditures.  Each employee has a known and fixed amount available for their use.  It is in their best interest to seek out the most economical services they can so that more money is available for use elsewhere.  Health care providers should respond by ensuring their services are being delivered in the most economical way possible.

Health Spending Accounts, much like other options for providing employee health benefits, tends to be labor intensive.  Enrolment applications must be completed and filed by the employer and for each employee.  Claims submitted for reimbursement require additional documentation including receipts.  This adds to the cost burden of all who are involved in the process.  As the agent selling and supporting such a service, responsibility for the proper management, problem resolution and associated costs can become your responsibility.  Fortunately, paper management, record keeping and associated costs no longer need to be part of this equation.

One might assume that such a system would first be developed in the United States by virtue of its larger population and out of control health care costs.  One would be wrong.  Canada has taken a lead in cost containment of health care expenditures.  This is done by utilizing the Internet to help eliminate administrative costs that have become a necessary part of the management of the health plans that Canadians utilize for covering their individual health care needs. 

To learn how PreAxia can help you build your HSA business or to learn more about Health Spending Accounts, visit our web site at www.PreAxia.com for details. 

Health Spending Accounts in Canada

Can the Internet Replace your Health Insurance Company?

The Benefits of Health Spending Accounts AND the Convenience of the Internet

The Internet has changed the way of doing business for many industries.  In the travel industry we no longer rely on agents.  For banking our need for tellers is dramatically reduced.  As for media, print subscriptions have been in decline for many years.  Now the Internet is making inroads in the Group Benefits industry, traditionally a sleepy and unknown area of business to most Canadians.  Group Benefits refers to health care benefits provided by one group, an employer or association, for its employees/members.  It is how many Canadians pay for the many health related expenditures not covered by provincial health plans.  Group Benefits and health care funding options can be confusing to understand and involve many rules and limitations.  Nevertheless, they are important to anyone who requires access to health care services – namely, every person in Canada.

What the Internet does is simplify processes, often by eliminating paperwork and bureaucracy.  One no longer needs to understand complex medical terms or legalese.  It simplifies the process to an extent that fewer advisors or consultants are needed to provide expertise that is often acquired only after years of experience in an industry.  This makes it easier for individuals, and organizations, to manage such services with less outside expertise.

Imagine a fully automated system for management of Group Benefits through the Internet using a web browser on your computer.  Employers set up an account on-line without any of the traditional paperwork.  Acceptance of their plan is immediate rather than weeks later.  All deposits to their employee accounts are electronic with full access to management reports.  Likewise, employees access their on-line accounts to determine fund availability, file claims and access reports.  Reimbursement claims are filed electronically at the convenience of the employee.  They can check their account to determine the status of a claim in process and determine when a reimbursement will be deposited into their bank account.  As with most automated systems, these reimbursements occur in days rather than weeks.  Elimination of paper and administration are significant conveniences that result in cost and labour savings for all involved.

This system is in use today by Canadian organizations concerned about the value they and their employees receive for their health care dollars.  It is available to organizations who establish Health Spending Accounts for their employees.

Health Spending Accounts, or HSAs, date back to 1986 when Finance Minister Paul Martin introduced a new way for incorporated companies to offer health benefits to their employees.  A few years later, a similar option was made available to non-incorporated companies.   While these accounts have been available in various forms, it is only recently that market forces have made HSAs more enticing.  Escalating health care costs and reduced corporate budgets have conspired to encourage businesses to be more efficient in their provision of employee health care benefits.  One only has to look toward the United States for an example of out of control health care expenditures.  As these businesses look closely at their employee benefit expenditures, they find HSAs to be an increasingly attractive option.

What is a Health Spending Account

A HSA is, quite simply, a special bank account administered by a third party.  Employers deposit funds into the account on behalf of their employees.  Employees then have access to these funds for reimbursement of health care expenditures.  Similar to Health Savings Accounts in the USA and RRSPs here in Canada, Health Spending Accounts offer advantages to both employer and employee. 

Advantages of a Health Spending Account

For the employer providing the Health Spending Account, this is a tax deductible business expense.  It is also a controllable expense in that only the employer can decide to change the value of this benefit.  There is no requirement that the amount of benefit be increased on an annual basis nor does the value of this benefit impact on the services available to the employee.  By providing these funds monthly, rather than annually, the employer is better able to control costs by discontinuing payments for those who leave the company.

For the employee, a Health Spending Account is a non-taxable company benefit.  That is, amounts deposited into the account by their employer are not taxable to the employee.  Furthermore, the employee has complete discretion as to how the funds are used. 

Employers or third parties have no ability set limits on how much money can be spent on specific services.   The only limitation is the amount of money available in the account.  This is quite different than the traditional insurance based approach to employee benefits where limits may be set on the amount that is covered in a particular category.  It is the employee who makes all decisions as to how these funds are utilized.  And since there is no third party dictating dollar limits for specific services, all expenditure decisions are based on need rather than allowable limits.

The entire health care industry benefits from individuals taking more direct control of their own health care expenditures.  Each employee has a known and fixed amount available for their use.  It is in their best interest to seek out the most economical services they can so that more money is available for use elsewhere.  Health care providers should respond by ensuring their services are being delivered in the most economical way possible.

Health Spending Accounts, much like other options for providing employee health benefits, tend to be labor intensive.  Enrolment applications must be filed by employer and employee, and all claims require document submission.  This adds to the cost burden of all who are involved in the process.  Fortunately, paper management, record keeping and associated costs no longer need to be part of this equation.

One might assume that such a system would first be developed in the United States by virtue of its larger population and out of control health care costs.  One would be wrong.  Canada has taken a lead in cost containment of health care expenditures.  This is done by utilizing the Internet to help eliminate administrative costs that have become a necessary part of the management of the health plans that Canadians utilize for covering their individual health care needs. 

For more information on Health Spending Accounts, visit www.PreAxia.com.

Paul Verbene Joins PreAxia Board of Directors

CALGARY, June 1, 2018PreAxia Health Care Payment Systems Inc, (OTC Pink: PAXH), a publicly traded and fully reporting company  is pleased to announce that Mr. Paul Verbene has joined the company’s Board of Directors.

Mr. Verberne has been involved in the Healthcare Spending Account (HSA) industry since 2004, when he became counsel for HSA Bank (a division of Webster Bank). He provided legal and business expertise focused on tax favoured benefit accounts, helping HSA Bank grow from $8 million in HSA deposits to over $800 million in six years. HSA Bank is now a leading HSA provider in the USA with over $5 billion in assets. Mr. Verberne was also general counsel to the American Banker’s Association HSA Council and Tango Health, a leading benefits optimization solutions provider. He is currently a principal in HSA Consulting Services, LLC, which provides training and expertise to the HSA industry, and a partner in Verberne x Maldonado LLP in Houston, a law firm concentrating in business law. He received his B.A. in Liberal Arts (Economics/Psychology) from the University of Texas (Austin) and a Juris Doctorate from University of Houston Law Center.

Mr. Verberne will be providing strategic advice and guidance to PreAxia as it develops, rolls out and expands its HSA Management Solution throughout Canada and the USA.

About PreAxia

PreAxia Health Care Payment Systems Inc. (www.PreAxia.com) administers Healthcare Spending Accounts for businesses and their employees through its automated & paperless HSA Management Solution. The company is currently quoted on OTC Pink under the symbol “PAXH”.

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Media Contact:

Tom Zapatinas, President, PreAxia Health Care Payment Systems Inc. (888) 773-2952

Health Spending Accounts 2.0 Now Available

Health Spending Accounts 2.0 Now Available

CALGARY, July 3, 2017 – PreAxia Health Care Payment Systems Inc. introduces its new Health Spending Account (HSA) platform for businesses of all sizes.

It should come as no surprise that Health Spending Accounts are growing in popularity.  They help pay for individual health care expenditures which are a growing concern for businesses and their employees.  Businesses of all sizes save money while providing employee and owner health care benefits.

In 2011, PreAxia introduced the first paperless Health Spending Account using Internet technology.  Allowing businesses to establish HSA accounts on their own, to submit claims and receive payment using existing Internet and banking technology was a breakthrough at the time.  Today, the company’s updated platform provides more HSA choices plus support for today’s mobile devices, tablets and browser technology.  Unchanged is the paperless platform that simplifies administration and reduces costs.

Small businesses unable to justify health insurance can financially benefit from establishing a Health Spending Account.  Larger businesses that currently offer health benefits find that a Health Spending Account helps to control escalating expenditures without compromising on coverage.

PreAxia’s paperless platform has been simplified.  Employers and employees appreciate electronic submission of claims, quick payment of claims through electronic means, and the elimination of paper record keeping.   The new platform reduces the amount of information required of employers and employees in the administration and utilization of their HSA.

PreAxia’s HSA Education Centre has been enhanced to make it easier for businesses and individuals to learn about the benefits of Health Spending Accounts.  Access to the HSA Education Centre is available at www.PreAxia.com.

About PreAxia

PreAxia Health Care Payment Systems Inc. (www.PreAxia.com) administers Health Spending Accounts for businesses and their employees through its automated & paperless HSA Management Solution.  The company is currently quoted on the over the counter bulletin board (OTC/BB) under the symbol “PAXH”.

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Media Contact:  Perry Shoom, Vice President of Marketing, PreAxia Health Care Payment Systems Inc.  (416) 721-8247

PreAxia Introduces First Paperless HSA Service in Canada

Today’s launch follows three years of development to create the first fully integrated HSA solution for Canada’s brokerage and broker community.

 

PRESS RELEASE

– FOR IMMEDIATE RELEASE

PreAxia Introduces First Paperless HSA Service in Canada

CALGARY, November, 2011 – PreAxia Health Care Payment Systems Inc introduces their automated platform for managing Health Spending Accounts (HSAs) in Canada.  Today’s launch follows three years of development to create the first fully integrated HSA solution for Canada’s brokerage and broker community.  Through the use of Internet technology, PreAxia allows HSA brokers to more easily offer and manage HSA accounts.  PreAxia technology simplifies fund-management, claims adjudication, transaction processing and on-line health benefit administration, through a broker’s own web site.   This automation results in cost savings for both HSA brokers and the companies that purchase these services.

An HSA is a special bank account to set aside funds for personal health care.  Similar in ways to an RRSP, this account offers tax advantages to both employers and employees.  Unlike the more traditional insurance plans, HSAs provide employers and employees with greater control in both the amount of funds invested and how the funds are used.  These accounts are available through health insurance brokers and financial advisors.  More information on HSA accounts can be found at PreAxia’s broker web sites which are accessible through www.PreAxia.com.

With PreAxia, Brokerage Firms and Brokers can create their own health spending account program.  The system provides the tools to establish a privately branded health spending account product as well as design a web site and marketing materials to complement the brand.  The platform also provides tools to manage new customer relationships and an automated enrolment process.  “This is an extremely sophisticated technology that we believe will be embraced by every HSA agent in the industry.  We have eliminated all the broker, employer and employee paperwork from HSA management.  PreAxia provides the administrative expertise, technology and tools to help our broker community to succeed.  We allow brokers to spend less time on administration and focus on the personal relationship part of their business”, commented Perry Shoom, PreAxia’s Vice President of Marketing.

For Small to Medium-Sized Businesses, HSAs are an attractive way to provide health care options for employees while controlling costs.  Using the PreAxia platform, employers determine the amount of money they wish to deposit into an HSA.  Employees use these funds to pay for a broad range of health care services.  PreAxia’s platform provides the on-line tools to manage the plan, generate reports, communicate with employees, submit claims and be reimbursed for health related expenditures.

“A great deal of planning and thought went into this product” commented Tom Zapatinas, PreAxia’s President and CEO.  “Our goal to build a technical solution that would bring value to everyone in the HSA community, I am proud to say, has succeeded beyond our most optimistic expectations” added Mr. Zapatinas.

PreAxia offers a Free Webinar for professionals interested in learning about the company’s automated & paperless HSA Management Solution.  Interested individuals should send an e-mail to webinar@PreAxia.com with “Request Webinar Details” in the subject line.

PreAxia Health Care Payment Systems Inc. (www.PreAxia.com) provides HSA brokers, employers and employees with a comprehensive set of software applications for managing their client relationships and HSA accounts through a web browser.

 

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Media Contact:  Nelson Hudes, Hudes Communications International  (905)660-9155