PreTax Health is often used stand-alone: but if you already have some insured health benefits, such as Blue Cross, PreTax Health will continue to save you money.
Insurance Premiums
If you have a health insurance plan (such as Blue Cross Personal) that requires you to pay your premiums out-of-pocket, you can even claim those insurance premiums back on your PreTax Health Spending Account. The more you can claim back through your PreTax Health Spending Account, the more money you'll save.
LEFT-Over Expenses
Your insurer likely isn't paying 100% of every medical expense, still leaving you with out-of-pocket expenses. They usually exclude certain types of drugs, physio, and so forth; and will only cover a percentage of dental, up to a point. Anything they don't pay for, you can claim via PreTax Health, as long as it's an eligible expense under the tax laws.
“Last year, besides my annual Blue Cross premium of $1,300, I still had to pay another $1,700 out of pocket for ordinary routine stuff Blue Cross just didn't want to pay for. I could claim both the $1,300 and the $1,700 back via PreTax Health, to use my company's before-tax money to pay for those. This saved my company around $1,000, as it only had to spend $3,300 on those expenses, instead of $4,300 on my salary!”
- Peter C, owner of a small Alberta-based consulting company
The PreTax Health Spending Account Employer Benefit
It's sometimes tricky to understand how a company can save money by spending money on health benefits.
Let's consider the case of our client Peter:
Peter runs a small Alberta-based consulting company, and as he demonstrates, he is paying around $3,000 per year out of his pocket (toward Blue Cross premiums and other medical expenses).
Somehow, that $3,000 has to find its way into his pocket in the first place. One way is for his company to pay this to him as part of his salary or income; in which case it'll have to be around $4,300 (assuming 30% is going to CRA, the 70% left over will be $3,000).
The other way is to claim it via PreTax Health, in which case the company will have an expense of $3,300: $3,000 to reimburse the claimed amount, plus a 10% admin fee that ensures the legality of the transaction.
With PreTax Health, Peter's created an extra $1,000 in his company almost "out of thin air", which he can now apply back toward his business.
Do you Have Coverage under your Spouse'S existing Insured Medical Benefit?
It's even possible to pick up the left-over expenses from a spouse's existing benefit. If your spouse's plan is only paying parts of your family's expenses, then you can claim the left-over expenses back from your company using our own PreTax Health Spending Account, even if some of those expenses were for your spouse or dependent children.
Coordination of Benefits
If you or your spouse has an existing insured benefit plan, you should always try claiming your expenses from them first. The insurer will then send you back an "Explanation of Benefits" (EOB) that details the various medical events you claimed for, what they paid, and what they didn't. This EOB becomes a new receipt that you can submit to PreTax Health, allowing you to claim all the unpaid expenses for you, your spouse and your dependents, using your company's before tax money.
How a Health Spending Account Works
See the Tax Savings in Action
Save $1,000 per Employee Per Year
PreTax Health can create significant tax savings for your business, on money you'd be spending anyway, virtually creating money out of "thin air". See how.
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