Healthcare Spending Account
As with a conventional employee benefits plan, the cost of any HCSA is a tax deductible business expense, and the benefits are received tax-free. To be considered a tax deductible expense to the plan sponsor, a HCSA must be a pre-set limit, which is 100% employer funded. The funds cannot be used to purchase additional insurance. Unused HCSA amount cannot be paid out at year-end as cash to the employees.
Healthcare Spending Accounts provide employers with complete control over claims costs each year, because the employees can only claim up to their individual maximums. Funds that are not used for claims within the specified time period remain the property of the plan sponsor and will be returned to them. Many employers are looking for creative ways to control their health and dental expenditures; a Healthcare Spending Account can be an ideal solution.
Under the Income Tax Act, any item that qualifies for the Medical Tax Credit is eligible for coverage through an HCSA. When used as a supplement to a traditional benefit plan, HCSA can pay for expenses not fully covered under group benefit plans, such as hearing aids, prescription glasses, crutch rentals or dental braces. It can also be used to pay any deductibles or co insurance for covered services Often this definition of eligible expenses is broader than that of a conventional employee benefits plan, allowing for additional flexibility for employees and executives in particular.
A Healthcare Spending Account is a pre-determined amount of money provided to employees at the beginning of each benefit year for coverage of their medical and dental expenses.
Claims are submitted by employees and reimbursed in a similar fashion to a traditional benefits plan. Eligible expenses are paid at 100% up to their total dollar amount available in the HCSA. A Healthcare Spending Accounts stands on its own as a benefit offering or can complement traditional medical and dental coverage
An Administrative Services Only or an ASO Plan is an alternative way for employers to fund their employee group benefits.
Using this funding model, an employer will assume the cost of predictable claims while being protected by pooled stop loss insurance. Catastrophic risk elements of the benefits plan (Life Insurance, A.D. & D, and Long Term Disability) remain insured in a traditional fully insured pool.
Frustrated by the lack of transparency and flexibility from their traditional group benefits providers, successful employers are turning to ASO plans in ever-growing numbers.
ClaimsPlus Solutions offers Budgeted ASO plans. With Budgeted ASO, you pay a predictable fixed amount every month based on your previous claims history. The budgeting process each year is straightforward. Should actual claims exceed the budgeted amount, you are responsible for the deficit. If your claims are less than anticipated, the surplus is yours to keep. However with full and transparent monthly reporting, you are always aware of your surplus or deficit position.
When comparing traditional plan funding with Budgeted ASO plans, it is important to remember that with Budgeted ASO you pay only for your actual paid claims experience. This works just as effectively for small groups of 5 to 50, as it does for large groups of hundreds of employees. And with the Budgeted ASO model, smaller employers gain full transparency and flexibility for their group benefits plans.
The key pricing factors to consider when comparing benefits plan providers are: the competitiveness of the administration fees for the services provided; and who has ownership of any surpluses or deficits (the employer or the insurer). In effect, in the benefits plan game, the employer becomes the “house”, and keeps any surplus in lower claims years, while being protected from the risk of catastrophic claims costs through pooled stop loss insurance.
Budgeted ASO plans set funding levels based on the same factors as traditional group benefits plans:
• Premiums for insurance to protect against catastrophic risk, such as life insurance, long term disability,
out of country emergency medical, etc.,
• Claim costs for routine medical and dental claims, and
• Administration fees to manage the program.
Unlike a Budgeted ASO arrangement, the monthly premiums for traditional insured plans also include insurer reserves, and significantly higher inflation factors, which add to the renewal cost of an employer’s plan. Insurers also tend to apply high administration fees to smaller businesses, generally ranging from 25% to 35%.
Our budgeted ASO offers benefits plans specifically designed to serve the needs of successful smaller employers. The result is more competitive administration fees for the same size businesses (compared to traditional group benefits providers).
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Cost Plus is a proven, tax-effective means of covering Health, Dental or Vision Care expenses not eligible under your regular group plan. Used correctly it can be considered a Private Health Services Plan (PHSP), recognized by Canada Revenue Agency (CRA) as a vehicle which allows businesses to deduct health-related expenses eligible under the Income Tax Act. Eligible Cost Plus charges are treated the same as group insurance premiums and can be a deductible business expense. Cost Plus benefits paid to individuals are generally not taxable in the hands of the employee who receives them.
Cost Plus covers all supplies and services considered eligible medical expenses under the Canadian Income Tax Act. This would include amounts over any limits in your benefit plan, the co-insurance amounts you are responsible for, or expenses such as orthodontic treatments that may not be part of your current benefit program.
Cost Plus can be used by most businesses, but there may be limits as to the total amounts deductible to the business under this arrangement, contact us at for more details.