Health Flexible Spending Accounts Are They Right for Your Small Business?

Small business health care plans

When many Canadian employers sign up for their small business health insurance plans, they often choose traditional group benefits, thinking this is their only option. Group benefits for small business typically offer a certain set of health benefits, which employees pay for with a premium. These plans only cover certain services, so small business employees with these plans may have to pay out of pocket for some visits, treatments, and procedures.

While it is true that much of Canada’s health care is covered by the provisions of the CHA and federal funds, there are still items that may not be covered under these plans. As a result, around three-quarters of Canadians have some kind of supplemental insurance to provide care that falls outside of a physician’s office or hospital. Fortunately, small business group health insurance isn’t the only option that exists.

Today, many small business employers — who make up around 98% of all Canadian business owners — are looking to other sources to meet their employees’ needs. Health flexible spending accounts are one such solution that can help employers provide a cost-effective, tax-advantaged way to provide health care for their employees.

Also called health spending accounts or HSAs, health flexible spending accounts allow employees to place 100% pre-taxed dollars into a personal savings account. Employees who have had to pay some or all out of pocket costs for a specialist or other health care service can then use these funds to either pay for services or get reimbursed for them. Because the funds are taken out before payroll taxes are assessed, employees receive the advantage of using tax-free savings for their health care; it also lowers their tax bill for each paycheque.

Health flexible spending accounts allow employees to choose what they need, so they can receive anything from elective surgeries to money for mental health counseling if their current plan does cover these treatments. These plans can also be used for more traditional services that would otherwise be paid for all or partially out of pocket, such as dental treatments and vision-related costs (e.g. new glasses or contacts).

Are these plans right for all businesses? Business owners should speak with their health care plan administrators to determine which solutions are right for them and their employees. Have more questions? Leave a comment below. Continue reading here:

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