You’re at the dentist’s office for a routine checkup. You’ve had a bit of tooth pain lately, but you brush your teeth regularly – you even floss – so you’re not too worried. But then your dentist tells you that you need a root canal, the cost of which comes up as a whopping $1200!
Luckily, you’ve got dental insurance through your employer, but it doesn’t cover the entire root canal procedure. You’re left with a bill a little bigger than you’d imagined when you first walked into the dentist’s office. It’s great that your employer covers a portion of the procedure, but what about the rest?
Introducing the Health Care Spending Account
A Health Care Spending Account (HCSA) is a defined-contribution plan where an employer decides on a yearly amount to provide employees for eligible medical expenses. HCSA’s cover any eligible expenses, as determined by the Canada Revenue Agency (CRA), and employees claim expenses approved by the CRA up to an amount allocated by the employer.
And the best part? HCSA’s can be auto-coordinated with traditional, existing benefits plans.
To outline this further, let’s expand on our previous dentist’s office example. Let’s say your employer’s benefit plan covers 75% of the cost of a root canal. So of the $1200 total, you’ll be paying $300 out of pocket. Not bad, but why pay at all when you could just have it all paid for?
Now, let’s say your employer allots you $500 per year in your Health Care Spending Account (HCSA) in addition to your 75% dental insurance. With an HCSA, the $300 you’d normally pay out of pocket is covered. And, if you want, you can set this up to take effect automatically until you’ve reached your $500 allotment, eliminating the need for any extra steps.
Spend what, when, and how you want
A Health Care Spending Account (HCSA) is not limited to root canals. There’s a long list of eligible medical expenses covered by the Canada Revenue Agency (CRA), including dentures and implants, in vitro fertilization treatments, and orthopedic shoes, boots or inserts as just a few examples. There’s a lot of things you can use an HCSA for – that’s what makes it a flexible option for so many different types of people, and because you’re not obligated to use it all every time, you get to choose how and when to use it. If you decide to, you could pay the $300 for the root canal out of pocket and save your HCSA, knowing that your child is going to the dentist next month and likely has a few cavities that will need to be dealt with.
Good for employees, good for employers too
Employers reap the benefits of Health Care Spending Accounts (HCSA) as well! HCSA’s are a great way to protect traditional benefits plans from big increases in rates. As an example, let’s imagine you’re an employer of a small company with 100 employees ranging from a variety of ages and backgrounds. You want to be able to provide the best benefits plan for everyone, and you notice that the majority of claims in one area are coming from one or two people. While you know it’s great people are able to use the plan for this, you also know that they represent only 2% of your employee base, and this may not be the best plan for everyone.
However, by introducing an HCSA, employees would be able to choose what to use their dollars for. The two people making the most claims in one specific area can use their dollars for that, leaving others the flexibility and choice to use their own dollars for what they need. And since you know that everyone only has a specific set amount, this gives you some coveted cost predictability when it comes to your benefits plan.
Health Care Spending Accounts (HCSA)’s allow everyone to benefit – the 2% of people who were driving up the cost of the benefits plan for everyone else can still use their HCSA towards those expenses, while the rest of the employees can use their HCSA for whatever they choose to use it on. You as the employer protect yourself from big increases, give more options to your team, and gain a bit of cost predictability. It’s a win-win-win.
Want to learn more about Health Care Spending Accounts?
Are you an employee or an employer looking for more information about Health Care Spending Accounts (HCSA)? Contact Schueler Group Benefits Corp today and we begin a conversation that could make everyone on your team a little bit healthier!
BBD (November 21, 2017). Providing Flexibility, Choice & Cost Predictability with a Health Care Spending Account. Retrieved from www.bbd.ca/blog/health-care-spending-account-flexibility/.