Are you considering a healthcare spending account (HCSA) for your business? Or maybe you already have one but you’re not sure about some of the finer details?
Several key details of HCSAs are often overlooked – but knowing the ins and outs of an HCSA will help you (and your employees) use it to its fullest potential.
Here are four healthcare spending account details that you should know:
1. What’s Covered by HCSAs
Conventional benefits plans can offer great coverage, but they have certain gaps that can be frustrating if you require those particular health services.
Healthcare spending accounts provide you with a pool of money that allows you to decide exactly which expenses to fund. It can be used to fill those gaps in existing standard benefits packages or to simply stand alone and give you ultimate flexibility with your health expenses.
An HCSA covers anything from the Canada Revenue Agency’s list of approved health and dental expenses. Anything that qualifies for the Medical Expense Tax Credit is eligible. A healthcare spending account will reimburse you up to 100% for these expenses, until it runs out.
Here are some examples of expenses that are covered by HCSAs that many people aren’t aware of:
- Laser eye surgery
- Dental implants
- Tuition for special needs schooling/education
2. An HCSA Is the Last Payor
Coordination of benefits guidelines state that HCSAs will always pay last. This applies across all Canadian benefits providers, following the Canadian Life and Health Insurance Association (CLHIA) guidelines. So if you are covered by a conventional benefits plan and also have a healthcare spending account, you should claim expenses from the HCSA last.
If you are covered by a single benefits plan, claim first from your core benefits coverage, and then use the HCSA to cover any outstanding expenses. For example, if your plan covers 80% of drug costs, you can use the HCSA to cover the remaining 20%. Benefits providers will automatically process claims from the core plan first, and then the HCSA.
If you are covered by more than one benefits plan (i.e. your spouse’s plan and your own), you should submit your benefits claims in the following order:
- Your benefits plan
- Your spouse’s benefits plan
- Your HCSA
Doing this will help you maximize your coverage. It also allows you to save your HCSA funds for those expenses not covered by your standard plan.
3. HCSAs Don’t Have to Be Standalone
There is sometimes a misconception that a healthcare spending account is a standalone option. That you can either have a benefits plan package or an HCSA.
This is simply not the case.
In fact, a hybrid benefits plan – including both conventional benefits and an HCSA – is the ideal benefits design for many businesses, both small and large. With a hybrid plan, you can take advantage of the process outlined above to maximize your benefits.
Combining an HCSA with a conventional benefits plan gives you the best of both worlds. It’s a very flexible and cost-effective solution.
Of course, you can also get an HCSA by itself if that’s what you’re looking for.
4. Use an HCSA to Incentivize Executives or Key Employees
A healthcare spending account can be used to incentivize and compensate executives or key employees without “rocking the boat”.
What we mean is that you can add an HCSA to specific employees’ or specific groups of employees’ benefits without making changes to the benefits plan across the entire company. An executive HCSA can be layered on top of an existing core plan, even with a separate provider than the core plan if necessary.
An HCSA is a great way to incentivize or reward certain employees or groups of employees because it can be completely customized. You have control over the amount and the employee has control over the expenses they use it for. It’s a win-win. Plus, an HCSA is a tax-free way to increase compensation for your key people.
Know Your Benefits!
We encourage you to get to know the advantages of, and best ways to use, a healthcare spending account.
>> The Benefits Trust can help you integrate an HCSA into your current plan, or build a new customized benefits solution unique to your business. Contact us today!
More on HCSAs from The Benefits Trust: