In Canada, most health services are covered by public funds. However, some types of care are restricted, and others — like elective surgery or mental health spending — have to be paid for out-of-pocket. Many employers choose group benefits for small businesses, and these can take care of some of the gaps in coverage. However, besides these types of small business health insurance plans, there is another way to take care of out-of-pocket medical expenses: with health spending accounts for employees.
What is a health spending account? These plans allow employees to cover 100% of their out-of-pocket costs with 100% pre-taxed dollars. This lets employees choose how and when they spend their money on medical care, either for themselves or for dependents.
What are the advantages of these accounts for employers and employees? Take a look below:
1. Pay less to the Canada Revenue Agency. Under the CRA health spending accounts can actually lower a person’s tax bill. CRA health spending accounts take money from your gross pay, so you’re claiming less net pay at the end of the fiscal year. This is a huge advantage for small business employees who work to support their families.
2. Employers benefit, too. Employers who use CRA health spending accounts could see lower taxes if they are contributing to their employees’ accounts. In general, these types of accounts can also be more cost effective for employers who need an alternative to pricey group benefits plans.
3. HSAs give employees more choice. This type of coverage can give you access to health care services that you may not have had before. For instance, government benefits might not cover certain prescriptions. With a health spending account, you’ll have more funds to devote to services that a standard plan may exclude or limit.
Have more questions about health spending accounts? Leave a comment below.