Is there a video that explains the PreTax Health Spend Account?
What is a Health Spending Account?
What is a Health Spending Account?
In Canada, A Health Spending Account is a tax free benefit that a corporation (as an employer) provides to employees and their dependents. Company owners are included if they are also employees of the company.
A Health Spending Account can be used on its own, or in conjunction with an existing health insurance plan (to cover ‘out of pocket’ health expenses and to provide access to a broader set of health care services that are not covered by traditional plans).
Some providers use the term PHSP (Private Health Services Plan) when referring to a Health Spending Account; PHSP is in fact an umbrella term, and a Health Spending Account is only one type of PHSP.
What is an HCSA (Health Care Spending Account)?
What is an HCSA (Health Care Spending Account)?
Some providers use the name HCSA instead of HSA (Health Spending Account), but it’s the same thing.
What is a PHSP (Private Health Services Plan)?
What is a Private Health Services Plan (often referred to as a PHSP)?
PHSP available in Calgary, Vancouver & Toronto (and all area between)
Many providers of Health Spending Accounts don’t use the name Health Spending Account at all, but simply call these plans PHSPs or Private Health Services Plans.
This confuses the issue.
The term PHSP or Private Health Services Plan, is in fact an umbrella term that was coined by Canada Revenue Agency (CRA). It’s discussed in subsection 248(1) of the Income Tax Act, and further in interpretation bulletins such as IT-339R2.
This simply defines the general term of Private Health Services Plan (PHSP) as a contract or plan of insurance in respect of hospital care or medical expenses. It goes on to say that a health services plan may take any number of forms and still qualify as a PHSP.
A PHSP must meet the following three criteria:
- It must be a contract or plan of insurance for hospital or medical expenses;
- The plan must only cover medical expenses covered under subsection 118.2(2) of the Act for medical expense credit;
- It must only cover eligible expenses of an employee, spouse, or partner, or dependent of an employee.
In other words, the term PHSP encompasses otherwise widely diverse types of plans. Essentially, CRA says “if you have a plan that meets all these various criteria for being a PHSP, then we’ll consider what the employer pays into that plan to be an expense, and we’ll consider the benefit to the employee to be non-taxable”.
Consequently, one can get widely different types of plans that are PHSPs. For example, some traditional monthly insured plans also qualify as PHSPs.
What we provide is one specific type of plan, known as a Health Spending Account (HSA). Our HSA is also a PHSP since it meets all the criteria for a PHSP. (In other words; while our HSA is a PHSP, not every PHSP is going to be an HSA).
A Health Spending Account is unlike any other type of PHSP or traditional insured plan: there is no regular (eg monthly) fixed contribution or “traditional premium” at all. Instead, when an employee claims for a medical expense that was paid out-of-pocket, the employer (company) pays the amount of the claim. One can almost think of the employer being the “insurer” or “underwriter”.
In other words, a Health Spending Account allows any incorporated company effectively to take its before-tax dollars and put those into the pockets of employees/employee-owners tax free, provided that this is to reimburse eligible medical claims according to the rules of a PHSP. Therefore a third party (like PreTax Health and its adjudication partners) must process those claims to ensure all claimed items are eligible under the CRA’s PHSP rules; and also as there are privacy issues for a company to see private medical details about its employees.
Note again the requirement that a PHSP must be a “plan or contract of insurance”. Under IT-339R2, this has a very specific definition: for a contract of insurance to exist, five elements must be present: a) it is an undertaking by one person b) to indemnify another person, c) for an agreed consideration, d) from a loss or liability for an event e) where the happening is considered uncertain.
In the case of PHSPs that are traditional insured types of plans, then it is clear that such an indemnity agreement exists, as there is a traditional insurer that is indemnifying the employee against a loss.
However, in the case of a Health Spending Account, it is the employer (company) that is footing the bill for the claim; there is no other “insurer” in the usual sense of the word. As mentioned above, one can almost think of the company as being similar to an “insurer” or “underwriter” here.
In order for an HSA to qualify as a PHSP, it must still meet the criteria of being a “contract of insurance” per IT-339R2. This in turn means it is necessary to arrange for how indemnity is transferred from the employee to the employer.
Therefore, three additional criteria must be met by a Health Spending Account: Since a contract of insurance must be established (ie indemnitytransferred), 1. there must be a contractual obligation for the employer to cover the employee’s eligible expenses (employer indemnifies employee) by (2) there being an undertaking between the employer and administrator that the employer will cover the claims as adjudicated by the administrator; and (3) there being an undertaking between the employee and the administrator that the administrator in turn will reimburse the eligible claim to the employee upon receiving funding from the employer.
As noted elsewhere, it is our impression that many providers of HSAs are not working according to either the letter or the spirit of the law. It is extremely important to us to get it absolutely right. Therefore, a number of years ago our adjudication partner had one of the largest international consulting firms look at this in very great depth, so we could be supremely confident in their level of compliance. The result further reinforces our impression that many of the other providers get things like this “contract of insurance” aspect quite wrong. This is also why, for example, our HSA is only available to incorporated companies, and not to sole proprietors.
What is an HWT (Health and Welfare Trust)?
What is a Health and Welfare Trust or an HWT?
Once again, some providers confuse the term Health Spending Account with a Health & Welfare Trust.
A Health & Welfare Trust is a different instrument entirely – it is a form of a ‘trust’ account. Actual money is paid into the trust account, often on a regular basis, and that money is then subject to a strict set of trust account rules established by the government.
A Health Services Plan does not need to operate as a Health & Welfare Trust to be considered a PHSP.
How does a Health Spending Account Reimburse your claim?
Getting Paid by a Health Spending Account: How does this all work and how do I get reimbursed for my health claims?
After you have set up your plan online, the process is as easy as 1, 2, 3: You can see it in action here.
You as an employer / company have two broad funding options:
- “Pay-as-you-go:” where your company submits funding as expense claims are submitted
- “Pre-funding:” where your company sends in a block of money that will be held in an account, and drawn from as HSA claims come in. This can be done anytime. By “Pre-funding” an account, claims can be processed immediately (without any funding concerns).
PreTax Health is unique in the industry – it operates in either mode (Pay-as-you-go, or Pre-funding), automatically. In fact, you don’t really even have to think about it or choose an option.
If you do nothing, our system will call on your company automatically when it needs to submit funds. Any funds we don’t use, we’ll simply keep on account for you and use toward your subsequent claims automatically. There is nothing special you have to do.
If you do choose to Pre-fund (so that funds are readily available when a claim is processed) and opt for direct deposit of claims, then reimbursements are normally completed in a few business days.
If you want to Pre-fund, you can even specify a threshold, and our system will notify your company once your funding amount will be dropping below that threshold.
Although there is no restrictions on whether a company decides to Pay-as-you-go or Pre-pay a block of money, the steps are broken down for each.
Steps if you decide to Pay As You Go for each claim submitted:
- The health/dental expense is paid first by the employee who then completes the on-line claim form, prints and signs it, and mails it (with the original receipts) to PreTax Health.
- The employer receives automatic (email) notification and is directed to ‘submit funding’ using the on-line, real-time service. The employer then submits a cheque for the total cost of the expense, plus the 10% administration fee (+GST on the admin fee only).
- The claim is adjudicated and the amount of the reimbursement is directly deposited (or mailed as a cheque, if preferred) to the employee. The web site keeps itemized details of all claims activities.
Steps if you already have funds available via Prepayment:
- The employer goes to the site and “submits funds” to fund their organization’s Health Spending Account.
- The health/dental expense is paid first by the employee who then completes the on-line claim form, prints and signs it, and mails it (with the original receipts) to PreTax Health.
- The claim is adjudicated and the amount of the reimbursement is directly deposited (or mailed as a cheque, if preferred) to the employee. The PreTax Health site keeps itemized details of all claims activities.
100% Business Tax Deduction:
The system itemizes all health care claim details which are 100% deductible from the company’s income. The administrator of the company simply pulls a monthly statement from the online system for their records.
What are the costs for the PreTax Health Spending Account?
Health Spending Account / HSA Costs: What are the costs for the PreTax Health Spending Account Plan?
Let’s first consider the costs of NOT having a PreTax Health Spending Account. Irrespective your tax rate, you’re then effectively paying the CRA a 40%+ “handling charge” on your out-of-pocket medical expenses! (See example below if you wonder why).
By contrast, this is what PreTax Health costs the employer:
- A One-Time Setup Charge for new HSAs:
- $99 + GST/HST
- If you are moving from another HSA/PHSP, this setup charge is waived.
- If you are moving from another HSA/PHSP, this setup charge is waived.
- $99 + GST/HST
- Ongoing Admin Fee: 10% for all adjudication, payment and administration of claims, plus GST/HST (taxes only on the 10% admin fee).
- Compare this with the 40%+ “handling charge” you’re paying to the CRA otherwise: it really is a no-brainer!
Example with PreTax Health:
For a $500 claim, the employer would submit a payment of $500 + $50 admin fee + $2.50 GST/HST on admin fee.
Note: You’ll be charged your province’s HST rate (only on the admin fee) if your company is based in one of the HST participating provinces. Otherwise you’ll be charged the GST rate (only on the admin fee).
Example WITHOUT PreTax Health:
To pay for a $500 medical expense, the employer would have to remunerate $714 to the employee if the employee’s tax rate is 30% (70% of $714 is $500). This is equivalent to the employer paying a 43% “handling charge” on the $500!
Should I be incorporated for a Health Spending Account?
Should I be incorporated to take advantage of a Health Spending Account?
Some providers will tell you “no” — but the REAL answer is: Yes: to take advantage of a Health Spending Account you MUST be an incorporated company – from a single owner company on up to a large corporation. This includes any incorporated company in Canada with the exception of the province of Quebec, which has separate legislation governing the taxation of health benefits.
What about Sole Proprietors?
Although some health providers say it is possible for an unincorporated company to subscribe to a Health Spending Account, this is not consistent with the CRA criteria for an HSA. Most of the more reputable health care providers no longer support the practice of offering HSAs to unincorporated companies.
The CRA is clear. A sole proprietorship cannot legitimately subscribe to a Health Spending Account. The CRA lays out various criteria for a plan to qualify as a PHSP. One such rule is that the plan must be a “plan or contract of insurance”. This has a very specific definition: there must be one party that indemnifies another party against loss in respect of an event, the happening of which is uncertain.
In an incorporated company, it is the corporation which indemnifies the employee(s). Even if its only a single-person company, the employee and the company are two different entities or legal persons.
It is not possible for a Sole Proprietor to qualify under this rule, since a Sole Proprietor (wearing the hat of “business owner”) cannot indemnify him/herself wearing the hat of employee; since they are legally the same person!
For example, if Fred H is a sole proprietor then Fred H cannot indemnify himself against loss in respect of medical events, the happening of which is uncertain.
On the other hand, if Fred H is the sole employee and owner of “Fred H Consulting Inc”, then it is quite possible for “Fred H Consulting Inc” to indemnify Fred H, since the company and the employee are two separate persons.
The confusion probably arises because the PHSP rules explicitly refers to Sole Proprietors, and states that PHSPs are available to sole proprietors provided that all the other rules apply. Clearly this cannot apply in the case of a Health Spending Account; however, Health Spending Accounts are only one type of PHSP. Notice, for example, that a sole proprietor (unincorporated company) can subscribe to a traditional monthly health benefits program (e.g., Blue Cross), as there can then be a contract of indemnity or insurance between the sole proprietor and the insurer (e.g. Blue Cross).
These same limitations do not exist with incorporated businesses. A corporation is a separate entity which can indemnify an employee-owner.
Besides, in addition to the obvious Health Spending Account benefits you obtain by incorporating, there are numerous other benefits you can realize from incorporation. If you are not already incorporated we encourage you to download and read one of our Free Reports entitled “8 Ways to Reduce Your Taxes 30% or More,” where we identify 7 compelling reasons to incorporate.
At PreTax Health, we were determined that our plan should be as compliant to CRA rules as possible; so a lot of money was spent on having a Top 5 international consulting company go through our operational procedures and the CRA rules with a fine tooth comb.
This clearly showed that Health Spending Accounts cannot be provided to Sole Proprietors. We’re saddened that there remain providers who offer Health Spending Accounts to Sole Proprietors, ignoring the potential tax consequences to which they are exposing them.
What is the definition of family members covered by a Health Spending Account?
What is the definition of family members that can be covered by a Health Spending Account?
Dependants of employees are also covered. Dependents normally include children, spouses or common-law partners.
For example, if you are a single-person company and your spouse does not do significant work for your company, then you are able to set up your HSA plan as a single employee, with your spouse as your dependent.
A dependent may also include a grandchild, parent, grandparent, sister, brother, aunt, uncle, niece or nephew of the individual if it can be demonstrated that that person is dependent on the employee for support.
Do I need to be in good health to be eligible for the PreTax Health Spending Account?
Do I need to be in good health to participate or enroll in the PreTax Health Spending Account?
No. Current or past health conditions do not affect your ability to enroll in the PreTax Health plan.
Are there age limits to participate in the PreTax Health Spending Account plan?
Are there age limits to participate in a Health Spending Account / PHSP like the PreTax Health Medical Plan?
There is no age limit for employees, as long as the employee is still actively working for the company. Also, as long as they are still working, the Health Spending Account coverage also extends to their spouse and immediate family members.
A company will typically specify “cut-off” ages for children. For example, non-students are covered before they turn 21 years old, while full-time students are covered before they turn 25. These cut-off dates are determined by the employer.
How can an incorporated company benefits from the PreTax Health Spending Account?
How can an incorporated company benefit from the PreTax Health Spending Account (HSA)?
- Costs for medical benefits provided to employees (or employee-owner and immediate family) come out of pre-tax earnings thus reducing overall taxable income.Example: If a company earns $200,000 in a given year and spends $20,000 on health benefits for its employees then taxable income is reduced to $180,000.In addition, the benefit is tax-free for the employee. If you wish to calculate your savings with the PreTax Health Spending Account you can use our handy HSA Tax Savings Calculator which is included in our FREE REPORTS
- Employees always have out-of-pocket medical expenses, even if they have a traditional monthly insured plan.If you are not providing them with a Health Spending Account, they are using their after tax money (eg salary) to pay these out-of-pocket expenses. Since they have to pay tax, this means you have to pay them *more* in salary, than you would have had to pay to the Health Spending Account to reimburse those expenses tax free.In fact, we estimate that without a Health Spending Account, companies effectively overpay $3 to $4 per employee per day to Canada Revenue Agency — money which cannot be recovered in any other way, except by a Health Spending Account. (Some people believe you’ll get it all back when claiming it on your personal tax return — this is incorrect).
- If a small corporation subscribes to a traditional monthly health benefits plan, typically for every $100 incurred toward a plan on average only $70 will be paid back to the employee, especially for routine expenses. On the lower end, health care insurance providers actively work to maintain a 30% margin, and the more your employees claim, the higher the group premium will become. In addition, the insurer places many restrictions on what is covered and the percentage coverage (for example, they may only pay the employee for 70% of dental claims up to a certain amount per year).While a traditional monthly health plan can offer good protection against catastrophic events (i.e., with Accidental Dental coverage, coverage of premium prescription drugs, and private nursing care), on the smaller end these plans are not cost efficient for scheduled health care services.With Pretax Health – Health Spending Account there is no monthly fee; a company only pays for the actual health care expense incurred. The full benefit of the health care expenditure goes to the employee vs. 30% or more going toward an insurance company’s profit. For smaller corporations the net saving can be 20% (30% less the traditional 10% admin fee charged by Health Spending Accounts). In addition, with PreTax Health, the smaller incorporated company has complete control on setting the expenditure limit it is willing to support – the system even reminds the user when the health balance is below a certain threshold and needs to be topped up.Under a Health Spending Account essentially any legitimate health care expense is 100% covered (as long as it is listed by Revenue Canada as an eligible expense). Visit our ‘Resource Center’ and click on the link to view a comprehensive list of all the health care services covered by a Health Spending Account.
- A Health Spending Account is viewed by employees as a valuable employment benefit – it can contribute to employee satisfaction and encourage employee retention.
- For organizations, especially larger ones, who have a monthly health benefits plan in place, a Health Spending Account is very complementary.There are at least three reasons for this:
- many expenses only partially covered by a traditional monthly health plan can be reimbursed by an HSA
- non-traditional coverage that is not accessible through a traditional monthly health plan is often 100% reimbursable with an HSA
- if an employee has unused HSA expenses, and their spouse has a traditional monthly plan with another company, both the monthly premiums and the uncovered expenses from the spouse’s plan can be run through the employee’s HSA.
For more detail on BENEFITS you can derive from a Health Spending Account click on the ‘Benefits’ section of our site, or review our Free Report entitled “How to provide Unrestricted Health Care and Save your Company 20%”
How can employees, owners, and dependents benefit from an HSA?
How can employees, owners or immediate family members benefit from the Health Spending Account / HSA provided by PreTax Health?
Employees and their dependents receive tax-free reimbursement of their health care expenses at no cost to them. With many employer-provided group health plans, employees are often asked to contribute a percentage of the plan’s monthly costs.
Health and Dental benefits are not restricted as they are in monthly individual or group health plans. Employees, employee-owners and immediate family receive 100% coverage on a full range of health care benefits as defined by the CRA – as long as health care is provided by a license practitioner there are few restrictions. It even includes things such as braces, laser surgery, prescription sunglasses, chiropractic, registered massage therapy, Dr Bernstein, etc.
Can a company adjudicate its own HSA Claims?
As a company, can’t I adjudicate my own Health Spending Account claims?
No. Under CRA guidelines it is essential that an independent 3rd party service is used to adjudicate Health Spending Account claims. The 3rd party must be thoroughly trained and follow CRA guidelines.
Further, the 3rd party adjudication service must maintain strict privacy in the processing and viewing of the claim information for employees of a company. It would violate health privacy legislation if an employer were allowed to view the medical information of one of its employees.
Advantages of the PreTax Health HSA over other HSAs
Comparison of Health Spending Accounts: What are the advantages of the PreTax Health Medical Plan over other Health Spending Accounts / PHSPs?
PreTax Health offers multiple unique benefits for your company:
- Complete payment flexibility and control — prepay or pay-as-you go– with seamless change as your needs change.
- Only with PreTax Health does a company have the ability to choose either Credit Carry Forward, to carry forward unused health care expenses, or Expense Carry Forward (see next FAQ for further information).
- Minimize Plan Administrator’s Time — provides a full set of tools to manage and control health spending costs, allows employees to manage their own claim details online, and eliminates the extra admin and time associated with managing ‘Black Out Periods’ — there are no more periods where claims need to be held for 3+ months.
- Provides the capability to optimize the allocation of health care costs — the flexibility of easily managing benefit categories by employee type, and the ability to allocate costs by department, division, etc.
- 100% Guarantee of compliance on claims adjudication and operating guidelines, as verified by one of the leading International Accounting firms. Few if any providers can make this claim. It is a known fact that many providers who provide 3rd party adjudication services do not properly adjudicate claims based on CRA guidelines, nor strictly adhere to privacy legislation. If this lack of compliance is exposed through CRA audits, a company can end up with a substantial and unexpected tax obligation from Canada Revenue Agency.
- Mobile Claims – now you can submit your claims by simply taking a picture of the health care receipt from your mobile phone (Android or Apple app.). Submit your health care claims in 10 seconds or less, from anywhere. Imagine visiting your health care practitioner and submitting your claim for processing on your way out the door. This is a groundbreaking application; there is no equivalent in the industry. Click Here to see it in action.
PreTax Health also offers multiple unique benefits for employees (including owner-employees and immediate family members):
- Eliminate any concerns about being ‘out of pocket’ on claims. This is accomplished in a couple of ways:
- by the elimination of claim ‘Black Out Periods’ where other providers typically hold claims for a few months at period end.
- by an automated system which facilitates quick submission and payment of claims.
- Cost management and control – the employees are given the tools to manage their health care claims directly, according to the budget the company allocated to them. They obtain ongoing status reports of claim progress and an update on dollars and percentage of claims to budget.
How does Credit or Expense Carry Forward work?
How does Credit or Expense Carry Forward work with a Health Spending Account / HSA? How is PreTax Health Unique?
Benefits typically run in periods, so that a new benefit limit is allocated to employees for each new period. A period is typically 12 months, so many companies like to align their benefit period with their financial year.
As each benefit period or year ends, Canada Revenue Agency allows one of three things to happen with the unused credits from that period. Your company can select which one of these options should apply company-wide:
- No Carry Forward: After the end of the benefit period, an employee can no longer claim receipts from that period. Any unused portion of their allocated Health Spending Account benefit limit from that period is forfeited, and the employee starts the new benefit period with a brand new benefit limit allocation.
- Credit Carry Forward: After the end of the benefit period, an employee can no longer claim receipts from that period. The employee is given a brand new benefit limit allocation for the new period; and in addition, the unused portion from the prior period is carried forward for one year. For example, if an employee has a $5,000 annual limit and submits only $3,000 for the current benefit year, $2,000 is carried forward into the next benefit year (and is thus added on to the new $5,000 allocation for the new year). The employee will enjoy an effective benefit limit of $7,000 for that new year. Should the employee only submit claims of $4,000 for that new year, the unused $1,000 (based on the $5,000 granted benefit for the year) will be carried forward one year into the following year, and added onto the new $5,000 allocation for that subsequent year, resulting in an effective benefit of $6,000 for that third year; and so forth.
- Expense Carry Forward: With this option, although there is no carry forward of credits, an employee can continue to claim old receipts from the previous year, in the following period. For example, if an employee looses a health claim receipt and doesn’t discover this receipt until the following year (a full year after it was incurred), he/she still has the flexibility to submit that claim. This is a great option, especially for smaller business, since the benefit limit allocation for the current year can be changed at any time.
What makes PreTax Health Unique?
Most other industry plans offer only the credit carry forward option. Few, if any, offer expense carry forward. Only PreTax Health offers both options.
To our knowledge, we are also the only system where the company can change its mind regarding its carry forward option, and elect to switch from one option to another without penalty, while retaining complete compliance with CRA rules.
How is the PreTax Health HSA Funded by an Employer?
Funding a Health Spending Account / HSA: How is the PreTax Health Spending Account funded by the employer?
There are two broad ways in which the PreTax Health Spending Account can be funded:
- Pay-as-you-go: as claims are made, our automated system will automatically contact your company to request submission of funds.
- Pre-funding: your company can send a block of money that is held in an account, that will be drawn from as claims are processed.
PreTax Health is unique in that it supports either mode of operation — automatically. There is nothing special required, and you don’t even have to think about this explicitly if you don’t wish.
For example, even if you pay-as-you-go, if we end up not utilizing all of the funds (for example because a claim is gets adjudicated for less than the initial claimed amount), we will simply keep the remainder on account, and automatically apply it toward your further claims.
Companies wishing to retain a balance on hand can even specify a threshold: as soon as the claims volume suggests that the funding level will drop below that threshold, our automated system will notify your company.
Note: If your company keeps funds on hand with us, claims are often paid more quickly, since funds are readily available to support the payment process. For example, we do not have to await receipt or clearing of your company cheque.
Does the employee pay the health care practitioner first?
How does a Health Spending Account work? Is the employee required to pay the health practitioner before submitting a claim?
Yes. A Health Spending Account is essentially a medical expense reimbursement plan.
The employee pays for their health, dental, vision, prescription drug, etc, expenses personally. To get reimbursed, the employee submits a claim on-line using our secure HSA website.
A cheque or direct deposit amount is then issued to the employee, as soon as we have adjudicated the claim and sufficient funds are available from the employer.
Are there submission deadlines and blackout periods?
Doesn’t PreTax Health also have submission deadlines and black-out periods?
The short answer is No. Although there is a year-end that is established for submission of claims, there is no restriction on when claims can be submitted.
To our knowledge, we are also the only provider that supports all carry forward options without any black-out periods. Employees can submit claims at any time, without payment delays.
Our system automatically figures out what period to assign the claim to. Its completely transparent for the employee or owner-employee submitting the claim.
Here are some more details:
Your company can specify its desired “run-off” length: typically this is 60 days. This is the length of time employees have, after the end of period, to submit claims and still have them be processed against the benefit allocation for that closed period.
During run-off, employees can also submit claims for the new period, and we’ll process them against the new period’s benefit allocation. During run-off employees can even mix and match claims from the two periods; our system will automatically allocate each receipt to the correct period and benefit limit.
Carry forwards can even be utilized during run-off, as necessary.
Once run-off is complete, the remaining carry forward is applied to the new period.
Do you loose features if you are a small single-person company?
Do I lose any features if I’m a small single-person company?
No, that is the advantage of PreTax Health. The features and functions are the same regardless of the size of your company.
We’ve designed it so that the features stay simple and manageable for smaller companies too! And as you grow larger, you can simply keep adding more employees. There is no need to change system or re-learn anything as you grow larger.
In fact, we have many single-person companies on our system; and also companies of over 1,000 employees (and almost every size in between).
What health expenses does an HSA cover?
What are eligible health expenses that can be claimed on my Health Spending Account / HSA?
In general, health expenses are eligible for reimbursement if they would qualify as a medical expense tax credit under the Income Tax Act of Canada.
Examples of eligible health care expenses include:
- Medical treatment by a licensed professional
- therefore this also includes massage therapy performed by a registered massage therapist, and even Dr Bernstein’s Weight Loss program (since the services are administered by registered physicians and nurses).
- Dental and orthodontic treatments by a licensed dentist
- Laser eye surgery
- Out-of-country medical
- Unpaid spousal benefit coordination
- Prescription medication (a DIN and RX number is required)
- this includes prescription sunglasses
Here’s the full list
Any service performed by a qualified medical/dental practitioner, including but not limited to the following:
Acupuncturist, Chiropractor, Cosmetic Surgeon (some conditions apply *), Dermatologist, Naturopath, Obstetrician, Ophthalmologist, Optician, Orthodontist, Osteopath, Physician, Plastic Surgeon (some conditions apply *), Practical Nurse (for medical services), Psychoanalyst, Registered Nurse, Surgeon, Chiropodist, Christian Science Practitioner, Dentist, Gynecologist, Neurologist, Oculist, Optical (all services), Optometrist, Orthopedist, Pediatrician, Physiotherapist, Podiatrist, Psychiatrist, Psychologist, Speech Therapist, Therapist
Note: Qualified medical practitioner is a person authorized to practice based on the laws of the province. It is also a person who is certified by the practitioner’s governing body.
* As of March 4, 2010, expenses for purely cosmetic procedures and/or surgery are no longer eligible. If the procedure / surgery is medically necessary due to injury, deformity, accident or trauma (including psychological) a letter from a medical practitioner stating the medical reason for the procedure is required.
All Dental Services
Dental X-Rays, Examinations, Filling teeth, Oral surgery, Replacement filling, Denture repairs and replacement, Extracting teeth, Gum treatment, Orthodontist, Straightening teeth
Anesthetist, Oxygen Masks/Tents, Vaccines, Hospital bills, Use of operating room, X-Ray Technician
Prescribed Medical Treatments
Audiology, Bone Marrow Transplant, Electric shock treatments, Hydrotherapy, Insulin treatments, Physiotherapy, Radium Therapy, Speech Pathology, Whirlpool baths, Blood transfusion, Diathermy Nursing, Healing services, Injections, Organ Transplant, Pre-natal/post-natal treatments, Registered Nurse, Ultra-violet ray treatments, X-Ray treatments
Materials and Apparatus which are Prescribed by a Recognized Medical Practitioner
Contact Lenses, Eyeglasses, Hospital beds if required in home, Infusion pumps for diabetics, including peripherals,
External Breast prosthesis, Heart monitors or pace makers, Inductive coupling, Monitors attached to babies identified as being prone to Sudden Infant Death Syndrome, Optical scanners or similar devices to enable a blind individual to read print, Osteogenesis stimulator, Prescription medications, Television closed captioning decoders, Orthopedic shoes or boots, Oxygen tent Syringes, Wigs, if required as a result of disease, accident or medical treatment
Devices Designed and/or Used for the following:
- Assist walking where the individual has mobility impairment
- Enable individuals with a mobility impairment to operate a vehicle
- Assist a person to use bathtubs/showers/toilets
- Extremity pumps or elastic support hose to reduce lymph edema swelling
- Enable deaf or mute persons to make and receive telephone calls including visual ringing indicators, acoustic coupler or teletypes
- Used by individuals suffering from a chronic respiratory ailment or chronic immune system deregulation
- Synthetic speech systems
- Braille printers and large print-onscreen devices that enable the blind to utilize computers
- Electronic or computerized environmental control systems for individuals with severe and prolonged mobility restrictions
- Electronic speech synthesizers for mute individuals
- Power operated guided chair installation for stairways
- Power operated guided lifts and transportation equipment allowing access to buildings, vehicles or to allow wheelchair access to a vehicle
Other Materials and Apparatus which don’t require a Prescription
- Artificial eyes
- Artificial limbs
- Blood sugar level measuring devices for diabetics
- Catheters, catheter trays, tubing , diapers, disposable briefs required by incontinent persons
- Hernia truss
- Iron lung
- Spinal brace
- Artificial kidney machine, including installation, operating costs
- Brace for a limb
- Colostomy pads
- Ileostomy pads
- Laryngeal speaking aid
- Any apparatus or material, paid to a doctor, nurse or hospital
- Any device to aid the hearing of a deaf person including bone conduction, telephone receivers, extra loud audible signals and devices to permit volume adjustment of telephone equipment above normal levels
- Specially trained animals to assist blind, deaf or severely impaired persons, including the cost of its care and maintenance
- Transportation costs to hospital, clinic or doctor’s office to obtain services not otherwise available
- Homemaker service
- Home care (attendant must be a non-relative)
- Reasonable costs for adapting a residence to accommodate a disabled person (ex. Wheelchair ramp, lifts, bath facilities)
- Prescription Birth Control pills
- Ambulance charges
- Rehabilitative therapy
- Lip reading
- Sign language training
- Transportation, meals and accommodations (reasonable expenses for meals, accommodation and travel costs for a patient and an accompanying attendant may be deductible if: equivalent medical services are not available locally, the route traveled is reasonably direct and medical treatment is reasonable and distance traveled is at least 80 kilometers)
How much are owners and employees entitled to under an HSA?
How much am I or my employees entitled to in benefits under the PreTax HSA?
We ourselves impose no hard limits for coverage, although Canada Revenue Agency will always reserve the right to audit expenses that are not viewed as reasonable.
The actual benefit limits experienced by your employees are flexible, and set by the person(s) in your company who administer(s) your plan (this may be the owner themselves).
You can allocate a different benefit limit based on different types of employees, ie for different benefit categories.
For example, executives may be granted a benefit limit of$10,000 per year, and managers $5,000 per year. Its completely up to you.
For each benefit category, you can also specify different limits depending on whether the employee is single, has a spousal dependent (couple limit), or has child dependents (family limit).
In addition, for each benefit category you can also apply a waiting period for new hires before the benefit becomes available, and/or have the benefit limit pro-rated for new hires.
Our system will show you up-to-date information on the benefit utilization for all employees, further allowing you to determine and control precisely the full extent of your company’s contingent liability.
If employees do not fully utilize the benefit limits that you have allocated to them, you can decide to carry forward that credit to the following year.
Don’t all HSAs adjudicate claims to the same standards?
Don’t all Health Spending Account providers adjudicate claims according to the same set of standards?
They should — but they don’t.
Although there are many companies (including established health insurance providers) that offer Health Spending Accounts, it is important to understand if they adhere to CRA guidelines.
The industry is full of examples of companies who claim to provide a 3rd party adjudication service for Health Spending Accounts, yet there are many cases where a CRA audit has found that these companies are not properly adjudicating claims, are allowing employers to view confidential employee medical information, or are merely rubberstamping claims that do not qualify under CRA guidelines.
The reality is that if your organization happens to use a service of this nature, a CRA audit may result in a large tax reassessment — non-eligible expenses can be reassessed as a shareholder benefit, and be subject to tax, arrears and penalties.
It is important to ask your chosen provider for proof that they strictly adhere to CRA guidelines for the adjudication of Health Spending account claims.
What makes PreTax Health adjudication better?
Health Spending Account Adjudication: What makes PreTax Health’s adjudication services different or better?
Many HSAs simply ‘rubber stamp’ claim approvals. This is a dangerous practice. If there is a CRA audit then your business is fully responsible for the financial and legal implications from a CRA tax re-assessments. This happens more often than one would think and the financial impacts on a small business can be very significant. At PreTax Health our adjudication team strictly follow CRA guidelines to ensure that your business is fully protected. In addition, we also keep detailed records to support you if a CRA audit does take place.
How do I sign up for the PreTax Health HSA?
Fill in your name and email and you will then be immediately redirected to the sign-up screen (another link will also be sent to your email, just in case)
The sign-up process is very straightforward and should only take a couple of minutes. There is a one-time setup fee of only $99 per company (regardless of the number of employees) and the only ongoing fee you will pay is the 10% admin fee on processed claims (plus HST on the admin fee). With PreTax Health there are NO hidden fees.
The most difficult part of the enrollment is setting your benefit period. The vast majority of companies set their benefit period to correspond with their fiscal year end. If this is your first HSA you can setup your first benefit period for a maximum of 24 months, i.e., you can claim health expensesup to 24 months back from the end date that you set for your benefit period. This is provided you have not previously claimed these expenses before on another benefit plan, or as a medical expense on your personal taxes.
After you sign-up you will receive confirmation that your account is setup and you will be able to file claims right away. You will receive a starter package with instructions but we are sure you will find the system intuitive and easy to use. In addition, you will be assigned a personal representative to help get you setup and answer any questions you may have.
How long will it take to get reimbursed on claims?
Health Spending Account / HSA Payment: How long will it take to get reimbursed on a claim?
Claims are normally settled/paid electronically within a few business days provided your Health Spending Account is funded.
The best way to ensure fast reimbursement of claims is for your company to pre-fund.
Most customers opt for our direct deposit service, which further increases the speed of claim reimbursements.
How long has PreTax Health been in business?
How long has PreTax Health been in business?
Our PreTax Health Spending Account product is being provided by a collaboration between related companies, many of which have been in business since the early 2000s, some even longer. In early 2007 we rolled out a new technology and it is consider to be the most sophisticated HSA system in Canada. At present there are thousands of employees on this plan, and over the last three years alone we’ve reimbursed them over $6m.
PreTaxHealth.com’s focus is on making it simpler and easier for companies of all sizes, including smaller entrepreneurial companies, to get themselves set up on-line with the most powerful Health Spending Account in Canada; one that is properly run according to the highest levels of compliance in the industry.