Health Care Spending Account (HCSA)

What is an HCSA?

HCSAs, also referred to as flexible benefits, or Health Spending Accounts (HSA), is a type of health spending plan that is more flexible than the traditional Group Benefits life and health plans. The HCSA pays for health/dental and other extended health care expenses to the Employee by the Employer. When there is a claim, the reimbursed money is received tax free by the Employee, but it is also tax deductible for the Employer.

A HCSA can be part of a traditional life and health benefits plan as a top up feature, or it can be a stand-alone plan.

Why are HCSAs so popular?

HCSAs are great if an Employer wants to give their personnel better and more choices in their benefits, but at the same time keep the company’s financial costs for medical benefits in check. It is a “pay for what you use” model.

Traditional life and health benefit plans have been available a long time, but they have limitations on what services are covered. A HCSA can offer a wider range of coverage. For example, a plan can even include the following traditionally non-covered services:

  • Cosmetic surgery
  • Over-the-counter medications that are prescribed
  • Home renovations for medically requirements (ie, ramps, chair lifts)
  • Home care support aides

A HCSA can also be used to pay for deductibles, co-insurances, and amounts that are over an existing benefit maximum (from a traditional plan), such as chiropractor, physiotherapist, massage therapists fees or expensive dental procedures.

This is especially good if you are an incorporated professional; for example, medical practices, accountants, consultants, or legal firms. The Employer is your corporation and you, the professional, are the Employee (as well as your staff).

And let’s not forget Mental Health programs.  More and more employees request that access to mental health care be available to them. This includes counsellors, therapists, psychologists, psychiatrists, and even substance abuse programs.  Coverage for these valuable programs go a long way in helping keep Employees sharp and productive at work.

How do HCSAs work?

HCSAs can be provided on a stand-alone basis.  If so, they are funded entirely by the Employer.  Each Employee receives an equal allocation of funds from the Employer, for example: $500 in the fund.

HCSAs can also be part of a flexible benefits plan and can be funded by both the Employer, plus Employee contributions.  Employee contributions are funded by “flex credits” rather than direct deposits. However, in this case, Employee contributions are deducted from their payroll on an after-tax basis.

Either way, Employees and their covered dependents can use the HCSA to reimburse eligible medical expenses that are not covered by their (or their spouse’s) regular Group Benefits plan.

Claims

Whenever there is a claim, the HCSA balance is reduced by the amount of each reimbursement. Claims can continue until the account balance drops to zero.

At the end of the year, if there is an unused balance in the health spending account, the balance can be carried over for one year. Or, any expenses that were unclaimed for a given year can be carried forward for one year. (Note, a plan cannot include both a carry-over of the account balance and unclaimed expenses. It is one or the other).

Call us to discuss further if this plan is right for your business: 1-833-946-1773, or request a quote.

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