HSA Education Centre
What is a Health Spending Account (HSA)?
A Health Spending Account is a uniquely designed bank account designed exclusively to cover healthcare‐related costs.
In a traditional HSA, an employer deposits funds into the account for each eligible employee. Another form of HSA allows employees to accumulate expenses prior to an employer depositing funds. The employer has the power to choose the amount they wish to spend each year and can adjust the amount based on their unique financial situation.
The funds are held in the name of the employee and are reimbursed to the account holder for eligible medical expenses. The funds can be saved year over year to fund major healthcare expenses.
Eligible expenses include items performed by, prescribed by, or dispensed by a licensed medical practitioner!
They are the fastest growing health benefit solution for small to medium sized companies!
Health Spending Accounts
Frequently Asked Questions
Health Spending Accounts are an exciting and innovative solution for managing the health benefit programs of small to mediums-sized businesses across Canada. They put control back in the hands of the employer, allowing them to contain costs while having access to health plan that covers far more then any other product on the market today. The following guide provides answers to some of the most frequently asked questions regarding health spending accounts to help you make a smart investment into these great new benefit plans!
A Health Spending Account is a uniquely designed bank account established exclusively for the purpose of health care spending. An employer deposits funds into a special account for the employee. These funds can be used to pay for eligible medical and related health care expenses for the employee and their dependents.
Health Spending Accounts work like a bank account where an employer provides funds for employees to cover eligible medical expenses. The employer makes a contribution on behalf of an employee into a Health Spending Account and these contributions are considered a business expense. It is a non-taxable benefit for the employee and can be used for a wide-range of health care needs.
Contributions are determined at the start of the program for each enrolled employee. The contribution amount, once established at set-up, cannot be changed within the first 12 months. Changes can only be made at the renewal date for a company. If the account is for a sole-proprietor, changes to the contribution amount can also be made if a Life Event has accured. A Life Event is defined as a marriage, birth or death in the family changing the need for required health care coverage.
Unlike a normal insurance plan, an HSA can provide greater coverage and has no maximums. There are two main qualifiers for an expense…
1. A service must be performed by a licensed medical practitioner,
2. All items must be prescribed by a licensed medical practitioner & dispensed by licensed medical practitioner or a pharmacist.
An eligible medical expense is any payment made to a licensed medical practitioner qualified to practice under the the laws of the province where you reside. Some examples of commonly accepted medical expenses include the following:
Prescription Medicines, Drugs, & Vitamins:
Payment for prescription medicines and drugs (i.e. over the counter drugs) qualify as medical expenses if purchased by the account holder, their spouse, or dependant, as prescribed by a medical practicioner and dispensed by a licensed pharmacist.
Vision:
Eyeglasses, if prescribed, are eligible medical expenses. The cost includes both the frames and the lenses. The funds in an individual’s account may also be used for other devices for the treatment or correction of vision including contact lenses and laser aye surgery. In order for any of the items listed to be considered eligible, they must have been prescribed by and dispensed by medical practitioner such an optician, ophthalmologist or an optometrist.
Dental:
Payment made to a dentist, dental hygienist, dental surgeon or dental mechanic for services provided are eligible medical expenses. This includes procedures not commonly covered by many dental plans including dentures, crowns, bridges, oral surgery, dental X-rays, gum treatment, filling teeth, and extracting teeth.
Professional Medical Services:
An amount paid to a licensed medical practitioner for services of a preventative or elective nature are also covered and is an eligible medical expense. They can include, depending on the individual’s province of residence, services rendered by any of the following:
- Chiropractors
- Audiologists
- Chiropodists
- Christian Science Practitioners
- Dentists
- Dental Hygienists
- Dental Technicians
- Denturists
- Dieticians
- Osteopaths
- Physiotherapists
- Podiatrists
- Psychuatrists
- Psychianalysts
- Phisician and Surgeons
- Psychologists
- Radiologists
- Massage Therapists
- Midwives
- Neurologists
- Occupational Therapists
- Opticians
- Speech Therapists
- Registered Nurses
- Respiratory Therapists
- Naturopaths
It is important to note that all medical doctors, practitioners, dentists, pharmacists, nurses, optometrists, or related medical professionals must be authorized to practice under the laws of the province or state where the service is rendered.
Transportation Costs:
Transportation costs can include ambulance charges to and from hospitals as well as commercial transport service transporting a patient and an attendant (if medically necessary to accompany the patient) to a clinic/hospital/doctor’s office. For the later, the distance traveled must be in excess of 40 kms to obtain equivalent services as readily available in their home region. If the distance traveled is greater than 80 kms, the eligible costs would also include meals and accommodation.
Insurance Premiums:
Premiums paid to a private healthcare insurance plan are eligible, provided it is not issued by a government-sponsored program.
An eligible dependent can be a spouse or any member of the household related to the employee by blood relationship, marriage or adoption, and who is financially dependent upon them within a given year. They must also be a Canadian citizen residing within the country for a minimum of 6 months out of the year.
Those with a Health Spending Account may submit any eligible claim incurred after the enrollment date if they are the primary claimant. Claims incurred before the enrollment date are not eligible. For dependents, eligible claims may be submitted if the service occurred on our after the date they where added to the plan.
If an account holder currently pays premiums for a Health & Drug Insurance plan from another carrier, they may submit this for reimbursement as an expense from their HSA. The plan MUST be a private plan and they are required to submit the explanation of benefits page or statement from the insurance carrier. This can be submitted like any other medical claim.
Many insurance plans only cover a portion of the total costs of a claim. Amounts not covered such as maximums or dispensing fees charged from another insurance plan owned by the owner or one of their dependants may be submited as an expense from an HSA. An Explanation of Benefits statement from the insurance carrier is needed. This can be submited like any other medical claim.
The Canada Revenue Agency’s Web site provides a wealth of information on taxation issues and Health Spending Accounts. For specific information related to HSAs, one can reference the following interpretation bulletins published by Canada Revenue Agency:
S2-F1-C1 – Health and Welfare Trusts
IT339R2 – Meaning of Private Health Services Plan
IT529 Flexible Employee Benefit Programs
These interpretation bulletins can be viewed by visiting the Canada Revenue Agency Web site at www.cra-arc.gc.ca.