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Understanding Health Care Spending Accounts

Small business health care plans

As a Canadian citizen, you have a lot to be thankful for — especially your health care. Canadian health care is delivered through a publicly funded health care system, which is mostly free and most services are provided by private entities.

But what happens if you are a small business that is looking to provide health care for your employees? An estimated 60% of employers worry about the quality of the health plan for their employees, while 72% of small business owners are concerned about the cost per employee to have a health care plan.

There are options out there to make sure your employees are happy and healthy and on the right plan for your budget. A great small business health insurance plan would be to set up a health care spending account for your employees.

What is a health care spending account? This type of health insurance is a self-insured private health plan that you can arrange for your employees. What makes a health care spending account so attractive is that it covers all out-of-pocket health care costs for each employee with 100% pre-taxed dollars. This means your business saves money while your employees get great health benefits.

These accounts allow for a maximum annual allocation of funds that are used solely for health care spending. For example: You are given $100 for food a week — just food. This money is your max allocation fund. Your company will need to pay in advance for these accounts to be filled and can be made on a pay-as-you-go basis.

How a health spending account works: These accounts can be used to supplement an insured private health services plan or used as a stand-alone plan in place of the private health services plan.

Health spending account rules: Those who do not qualify for a health care spending account are unincorporated businesses. Employers who wish to provide health and/or dental benefits for their employees can qualify as they have arms-length employees. The plans can be used alongside other insured private plans or as a standalone option.

Who provides these accounts? Trustees and other third party administrators as well as insurance companies can provide some type of flexible health spending account to Canadian employers.

About Canadian health care: An estimated 30% of the nation’s health expenditures are from private sources, either insurance pays for expenses or individuals pay out of pocket. Since health care is generally covered by the government, preventative care and early detection are highly emphasized and annual checkups are strongly encouraged for all citizens. Early detection can, after all, extend the life of an employee and they will not end up draining their health spending account. There are also no deductibles on basic health care, while co-pays are also extremely low or do no exist at all.

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August 2014
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