Many of the Small Business Owners that I have sat down with in my initial Discovery Meetings were pleasantly surprised to hear that there were other options out there other than Traditional Group Insurance (Traditional).
Not that there’s anything wrong with Traditional…but for the Small Business Owner that wants to start up a Benefits Program that only helps his/her employees out with paying for Medical and Dental expenses, then the Health Care Spending Account (HCSA) could be just the solution they are looking for.
Here are the more common questions as they relate to HCSAs…
How Does it Work?
An HCSA essentially works like a bank account…As the Small Business Owner, you contribute monthly to your employees’ HCSA accounts from which your employees withdraw to help offset their Medical & Dental expenses. Any unused balance gets carried over to the next year. Funding the HCSAs is an eligible business expense.
What does it cover?
Along with covering the common products and services found in Traditional programs, an HCSA also covers dozens of other eligible services as determined by the Canada Revenue Agency.
How much does it cost?
Since there is no risk to underwrite an HCSA arrangement, the associated costs are,
- the funding of the accounts
- an administration fee (10% – 15%)
- applicable taxes
The minimum account amount is $500 per employee. You determine the amount by Class of Employee. For example, you may want to give “Management” employees more than “Salaried” and you may not want “Hourly” to be eligible for benefits at all. You can even create Classes of Employees like “Employees with Dependents” and “Employees without Dependents”…or by Years of Service.
Or, you may want the same amount for everyone…It’s up to you!
Will the cost ever increase?
Short answer is “No.”
Longer answer…You decide if your costs will change. Once a year at your HCSA Anniversary, you will have the opportunity to decide whether or not you want to increase or decrease the monthly deposit(s) into the HCSA(s).
Can I add Optional Coverage?
Yes, depending on the HCSA Carrier, you can typically add some “what if?” insurance such as Travel Coverage and/or Catastrophic Coverage.
What if I am covered through my Spouse’s Plan?
The HCSA can cover the gaps in your Spouse’s Plan. Those gaps are typically the deductibles; the 10% or 20% coinsurance you have to pay; or Plan Maximums for coverage such as Vision Care; Physiotherapist; Chiropractor, etc… Even gaps created by not covering certain benefits like Orthodontics can be handled by the HCSA.
What is involved with administering the HCSA Program?
The first step in administering the HCSA Program is to have determined the following:
- What is the definition of an eligible employee?
- Are you going to allow employees to opt out, if they are covered through their Spouse?
- Will you have different HCSA amounts for the different Classes of Employee in your organization?
Most of the administration of the Program occurs at implementation…the employees fill out their Enrolment Forms on-line and you sign the Application.
Moving forward, you will only need to just let the Carrier know of any employee additions/status changes…and, of course, submit the funding monthly. As a general rule, you shouldn’t be involved with making claims. All of the administration is done on-line and even the employees will submit their claims on-line.
What’s the downside?
If there is a downside to the HCSA Program, then it is the fact that the employee can only be reimbursed for the amount that is in his/her account. The other thing that could be viewed as a downside, is that some HCSA Carriers do not provide a drug card and they do not allow Dental Offices to receive on-line payment. So, all expenses will have to be paid out-of-pocket first. The exception to this would be the Travel Coverage.
Located in Cambridge, ON Sharkey Group Insurance provides independent Employee Benefits advice & counsel for Small Businesses across Ontario.