By Howard Cheung, Account Executive, Immix Group: An Employee Benefits Company
The year 2020 has certainly been a year of change. All aspects of life have adapted to a new normal, and this includes businesses and what it means to provide valuable benefits to employees. As business owners and managers of employee benefits, what can you do to continue providing high-value benefits to your employees, while maintaining your budget?
Traditional insured plans are simple, and the chosen structure for most SMEs
The majority of SMEs (5-99 employees) in Canada historically have traditional insured employee benefits programs. It’s quite simple; you pay premiums to an insurance company, and in turn, they cover employees for a set schedule of benefits. Premiums are adjusted annually, partly based on the spending patterns of the employees, relative to the premiums you have paid.
Studies show employers and employees both want flexibility
However, based on the latest 2020 Sanofi survey results, what many employees are missing in having only this type of benefit is flexibility and choice, something that caters to them as individuals. The overwhelming response from both employers/ plan sponsors and employees is the desire for some level of “Flex Plan.”
The perfect addition to your insured program
Health care spending accounts or health spending accounts (aka HSAs) are the perfect solution to the desire for flexibility in a benefits offering.
A Health Spending Account works as follows:
- The employer determines the annual spending allocation amount per employee.
- Employees submit eligible medical and dental expenses throughout the year, thereby reducing their remaining balance.
- The plan carrier reimburses the employees for the eligible expenses.
- The employer is billed, typically monthly, for the employee’s expenses, plus an admin charge.
- The employer can choose whether to go with a ‘use it or lose it’ model, or whether to allow unused balances to carry forward to the next year.
Health Spending Accounts can cover both non-taxable and taxable items
HSAs are used to reimburse plan members for a very broad set of health and dental related purchases (eligible expenses are matched to the CRA list of eligible expenses, in a tax-free HSA). This list is far more expansive than what is typically covered under a regular insured benefits plan. Given a set dollar amount for the year, members choose when and how to use their allocation, depending on their own personal needs.
For programs that also allow for non-CRA eligible expenses (typically considered ‘Wellness’ expenses), items such as vitamins, gym memberships, fitness equipment, alternative practitioners and even childcare can be claimed. These items create a taxable benefit for the employee.
From the employer’s perspective, the key difference from traditional insured benefits is full control as to how much you want to spend. HSAs offers stability and flexibility, with no surprises. Probably the most under-utilized CRA- approved benefits offering, HSAs are cost effective and simple.
However, health spending accounts are not intended to replace insured benefits
Are HSAs the ultimate solution for benefits? No. HSAs provides flexibility and choice for a certain segment of expenses. Ultimately, there is very little or no insurance component which means members are not protected from long-term, significant health costs.
When it comes to long term protection such as for expenses associated with severe illnesses or catastrophic events, your health and dental benefits need an insurance component, where high expenses can be covered, without a dollar limit. This is where the traditional benefits serve as your foundational base. For example, a costly dental accident, a travel mishap or the diagnosis of a serious illness requiring lifelong medication; these all require traditional ‘insurance.’
As well, other coverages such as long term disability, life insurance or programs such as group savings plans, employee assistance plans or wellness and workplace culture programs are all valuable parts of a comprehensive benefits package, typically under an insured structure.
The role of a Health Spending Account
Health Spending Accounts are the perfect complement to your insured program and can often be carefully designed to replace certain items within an insured plan. HSAs are certainly a solution that is often overlooked, but that can provide a highly valued benefit that sets your company one level above the competition. Best of all? You control the cost.
ImmixGroup provides innovative customized benefits solutions. Feel free to reach out to me howard@immixgroup.ca if you would like to see how we can set your benefits apart from the competition!
References:
https://www.cbc.ca/news/business/hsas-the-best-health-plans-you-ve-never-heard-of-1.990547
https://www.hmabenefits.ca/blog/health-spending-account-versus-group-benefits-plan
