In June 2017, Doctors Without Borders added lifestyle and health-care spending accounts to its traditional benefits plan.

The organization still provides insurance, drug coverage of up to $100,000 and extended health benefits, including hospital and dental expenses. But now it also provides permanent, full-time employees with $2,500 for other health-care services and $250 for wellness services. As well, couples and families have more health-care funds, with an allocation of $3,500 and $5,000, respectively.

Read: More employers offering innovative health-care spending accounts: report

The changes reflect the organization’s new outlook on employee benefits and health, says Tiffany Moore, director of human resources at Doctors Without Borders. Rather than looking at benefits as an expense, the organization now sees it as an investment vehicle to help create healthier and more productive employees, she says.

Health-care spending accounts provide employees with flexibility on where they choose to spend their benefits dollars, says Moore. And unlike traditional health plans, which she says tend to focus on solutions to existing health-care conditions, spending accounts focus on preventative services.

Unique medical expenses covered under the Income Tax Act

While CRA covers typical medical expenses, such as hospital fees, prescriptions, vision and dental care, it also covers the following expenses under certain conditions:

  • Premium cost of gluten-free products for people with celiac disease;
  • Fertility related procedures paid to a medical practitioner or licensed hospital;
  • Renovation or construction expenses for people with mobility impairment;
  • Talking textbooks for people with a learning disability; and
  • Medical marijuana.

Source: Canada Revenue Agency

“Let’s say I injured my knee, or I needed some psychological support. If I wanted to use the majority of my benefits on all of that, I wouldn’t be limited by a ceiling. So whatever is going on in my life or in my dependant’s life, they can allocate as much of those funds as they want to towards that [expense], within their limits, of course.”

Health-care spending accounts are gradually gaining popularity, according to the 2018 Sanofi Canada health-care survey. It found one-third (33 per cent) of employers offered these accounts in 2018 compared to 31 per cent in 2017.

Read: Hybrid of core coverage, personalized benefits touted as future of health plans

The trend started about 15 to 20 years ago when these options were part of a flexible benefits program, says Joseph Chan, senior benefits consultant at Stem Capital Inc. But nowadays, more companies are using health-care spending accounts to replace traditional benefits plans, he says.

They’re popular because they make it easy for employers to budget expenses for any given year, says Chan, noting they’re also popular among employees because they’re easy to use and offer control over what to spend benefits dollars on.

Unlike traditional plans, health-care spending accounts also cover an expansive list of services that reflect the Canada Revenue Agency’s eligible medical expenses, says Chan. However, employees often get confused about what expenses are eligible, he adds, so employers should ensure they communicate this to their staff.

As well, many employers still forego spending accounts because some employees feel limited by the spending dollars allocated, says Chan. “Even if you’ve got, let’s say $3,000 . . . for some of the healthier employees who don’t have much health or dental expenses, it might be fine. But for some of the employees and families that have a larger health-care spend or expense . . . that $3,000 could be exhausted easily.”

Read: 28% of U.S. employers made changes to health benefits in 2018: survey

Some employers also prefer the traditional plan because it’s backed by insurance coverage rather than a health-care spending account, which is self-insured, says Chan. “So the employer would be paying for the claims and the expenses the provider would charge to administer the HCSA.”

Chan notes employers should also consider that these accounts have a broader definition of eligibility for coverage. Whereas a traditional plan only covers employees, their common-law partner and dependants, a health-care spending account can cover parents, grandparents, grandchildren or anyone who’s financially dependent on the employee in order to align with CRA’s policy.

Employers, however, can specify eligibility and limit their accounts to cover only employees, partners and children, says Chan.

Jann Lee is a former associate editor at Benefits Canada.

Copyright © 2021 Transcontinental Media G.P. This article first appeared in Benefits Canada.

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Both employers and advisors should be careful in discussing Health-care Spending Accounts and benefit plan coverage as an either/or situation. Most health plans will eventually pay the cost of their claims plus expenses over a short period of time – both insured and self-insured plans, although in slightly different ways. The spending account has to be a very significant amount to cover claimants over the average claim costs. An example would be an orthodontic or cancer claim could wipe out a spending account leaving nothing for other family members and other expenses whereas this would not happen under a benefit plan structure. Consideration of a truly flexible program would incorporate both concepts in a balanced fashion allowing for top up of excess expenses or coverage of coinsurance or deductible amounts. Design of programs to meet needs is important and it usually isn’t all one or another format to make it work effectively.

Thursday, June 27 at 12:16 pm | Reply

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