Are Health Spending Accounts a Good Tool for Your Business?
Because the COVID-19 pandemic has created a lot of uncertainty, with significant potential impact to revenue and operations, businesses across Canada are looking for ways to adapt to new realities. This may include taking a hard look at costs, with a new openness to exploring new options and alternatives, including to their employee benefits. A popular option, and one that might be even more relevant today, is the Health Spending Account.
Recap: What Employees Want
Before we get into the details of Health Spending Accounts, let’s recap what employees want when it comes to benefits. Then we’ll look at how a health spending account can address those needs.
When asked what benefits employees would like to see in their employee benefits plan, employees often cite:
- Coverage for medications
- Coverage for emergency medical services, including medical supplies and upgraded hospital services
- Coverage for vision care, including prescription eye glasses and exams
- The flexibility to choose how to spend their benefit dollars, for themselves and their families
Tools to make accessing benefits easier and more convenient are also important. Employees value things like mobile apps and direct pay. These make it easy to access benefits information on the go and submit claims. Direct pay means they’re not out of pocket, which is always a good thing from an employee perspective!
Health Spending Account (HSA)
Health Spending Accounts address many of these needs, which is why they’ve become increasingly popular with employees. So what are Health Spending Accounts, how can they be a good tool for both employees and employers?
HSA – The Basics
A health spending account acts like a bank account for eligible benefits expenses.
- Your business decides on a fixed amount of money for each employee’s health spending account.
- Your employees submit eligible expenses to be paid from their health spending account.
- The balance in their health spending account decreases as they are reimbursed for eligible expenses.
- They have a fixed amount to spend throughout the year, and when their balance reaches zero, they will not be reimbursed any further.
As the employer (or “plan sponsor), it’s your choice what happens with any unused health spending account balances. You can have them roll over (so employees can use any remaining balance the following year) or you can allow the unused funds to be forfeited at the end of the year (“use it or lose it”).
It’s your choice whether you offer a health spending account in conjunction with other benefits, or as a standalone employee benefit. Many companies choose to offer extended health and dental, and then an HSA with it. What you choose depends on your budget and your benefits goals.
HSA – The “Benefits”
There are a number of reasons a health spending account can be a good tool for your business.
- Cost certainty – Because there is a fixed amount that each employee can spend on eligible expenses, you don’t have to deal with variations in claim costs or premiums. Your business can budget for a set amount that you will spend on benefits. This is especially valuable during uncertain times like the current COVID-19 pandemic.
- Flexibility – You employees and their families share the balance of the health spending account. They use the HSA balance on benefits that are most valuable to them. The HSA can be used on benefits not covered under any other plan, to pay any unpaid portion of benefits already claimed (for example, to cover deductibles), or for any other eligible medical expenses (as listed in the income tax act). It’s the ultimate in flexibility.
- Tax write off – Health Spending Accounts are tax-deductible business expenses. Especially during tough economic times, this is a welcome relief!
- Support the health of employees – Because employees can spend their health spending account balance on any eligible healthcare expenses, you’re supporting their health. You’ll benefit from healthier, more productive employees and they’ll know that you care about them. Even if traditional employee benefits aren’t in the budget for you, a standalone health spending account is a great way to show your support.
Health Spending Accounts and COVID-19
Now more than ever, many businesses are facing uncertainty and challenges as the COVID-19 pandemic continues. As our communities reopen, organizations are finding new ways to control costs while continuing to provide their employees with robust health benefits.
If this situation describes your business, you may want to consider adjusting your employee benefits plan by adding a health spending account. Because you set the amount of the health spending account, you can ensure it fits within your budget. It’s also valuable when you begin rehiring new employees as you will know exactly how much their benefits will cost you.
Good Advice is Key
A health spending account can be a great complementary or stand-alone employee benefit. Talk to an expert to help see if it’s a good fit for your company. Review your options with one of our licensed advisors on the phone, or contact us for a comparison quote.