A Health Spending Account works like a special savings account. Every year, an amount is placed in each employee’s Health Spending Account. The employee uses this money – called credits – to settle those medical and dental care fees that are not covered by their group plan.
This program can be effectively combined with a basic group insurance plan or it can simply be offered on its own, as a flexible benefits plan.
Advantages for the employer
Effective tool for managing costs – With a Health Spending Account employers know ahead of time how much the benefits program will cost because they decide how many credits will be given to employees each year. This helps in reducing the financial risks of claim fluctuations.
Tax deductible – All reimbursements and administrative fees related to a Health Spending Account are tax deductible.
Advantages for the employee
Options – Employees can use their credits to cover the expenses for any eligible medical and dental care they need. They get to choose the benefits that best suit their needs.
Less out-of-pocket expenses – When combined with a basic group insurance plan, credits may be used to pay for:
- The deductible on services covered by the basic group insurance plan
- The portion of the benefit payment not fully covered by the basic group insurance plan
- Care not covered by the basic group insurance plan, but that qualifies as a medical expense in the Income Tax Act
- Income tax free – The credits in this account are considered as non-taxable income (except in the case of Revenue Québec).