An HCSA is a great way to introduce flexibility and choice to a group benefits plan. They allow you to expand the type of expenses your plan can cover while only charging you if the account gets used.
HCSAs provide non-taxable supplemental coverage to traditional health and dental plans. Employees can choose to use their HCSA to for things such as:
- paying for deductibles and any amounts over and above a deductible such as co-pays or co-insurance;
- covering additional expenses for a benefit if they've reached the benefit maximum; and
- covering insurance premiums if they purchase their own health plan for extra coverage
The Canada Revenue Agency website has a full list of medical expenses that are non-taxable and would be covered under our HCSA. Some examples include prescription eyeglasses, prescription drugs and dental services.
How does it work?
As an employer, you choose the HCSA amount employees receive each year. The minimum amount you can offer is $250 per employee. That amount can be increased by $50 increments to a maximum of $15,000 per employee. You can even have different amounts for different employee classes such as owners, managers (Class A), and all other staff (Class B).
Once the HCSA is set up, employees can submit claims for reimbursement just like they would for any other benefit. We’ll adjudicate the claim to make sure it’s eligible, reimburse the employee, and then invoice you monthly for the cost of all claims plus a 10% administration fee. Taxes may apply and there’s a minimum annual administration fee of $100 per policy year.
Each year the HCSA amount will reset for your employees. And, if you want to adjust the amount you’re offering, you can change it when your plan renews.