Your Guide to Health Care Spending Accounts (HCSA)
Published: Jun 25 | 2019
Modified: Jul 29 | 2019
Health Care Spending Accounts (HCSA)s, sometimes known as Health Spending Accounts (HSA)s, are an increasingly popular alternative or top up to traditional health and dental solutions typically found in an employee benefits plan.
We generally don’t like to brag (we’re making an exception in this case), but we were talking about HCSAs before it was cool. Over the years, we’ve compiled a lot of research and valuable information and used it in blog posts, Advisor newsletters, event content, e-books, and more.
Now, we’re taking all of that and putting it into a simple guide for your use.
Frequently Asked Questions
Below, you’ll find the answers to some of the most commonly asked questions we’ve gotten regarding HCSAs over the years, as well as a fully downloadable guide to HCSAs.
#1. What is the difference between a HCSA and a Personal Spending Account?
A Health Care Spending Account (HCSA) provides coverage for eligible health-related and dental expenses. HCSAs are a non-taxable benefit and regulated by the Canada Revenue Agency (CRA), who determine what expenses are covered and not covered.
A Personal Spending Account (PSA), sometimes known as a Wellness Spending Account (WSA), is a taxable benefit and is not regulated by the CRA, so employers can pick and choose what’s covered. PSAs are used to provide additional health and wellbeing options and “perks” aimed at keeping employees happy and healthy, such as gym memberships, childcare, hobbies, and more!
#2. Is a HCSA an “add on” to a health insurance plan or a plan itself?
It’s both! HCSAs can be used as a top-up to an existing plan or as a benefits solution on its own.
For example, a HCSA is often paired with our more traditional Benepac® as a top up to provide more choice to employees, who can use those HCSA dollars for what they want, while still being insured through Benepac. On the flipside, our fully digital Standalone® HCSA product is often used as a benefits solution in its own right (hence the name) and gives employees the power to choose how to spend their benefits dollars.
#3. What is covered under a HCSA?
Eligible expenses under a HCSA are regulated by the Canada Revenue Agency (CRA), but here are some common uses:
- Ambulance services
- Specific cancer treatments
- Dental services
- Registered Massage Therapy (RMT)
For a complete list, you can check out the CRA website.
#4. Why should employers include a HCSA in their benefits plan?
Today’s workforce is extremely diverse, and it’s becoming more and more challenging to provide a benefits solution that works for everyone. HCSAs provide choice to your employees in how and when they spend their dollars, allowing employers to provide coverage for what’s most valuable to each person. We like to use our own benefit plan as an example:
We used to offer a $200 vision care benefit to our 90+ employees across Canada, but since only approximately 50% of employees wear glasses or contacts, half of our staff were paying premiums for a benefit they would never use. That didn’t sit right with us.
So we removed our vision care benefit entirely and instead offered a $200 HCSA to all employees in its place. This gave employees the choice of what to use their $200 on; those who needed a new pair of glasses could buy them, but other employees could choose to cover extra dental costs or paramedical expenses as needed.
Health Care Spending Accounts (HCSA)s are growing in popularity as the workforce becomes more diverse and the importance of flexibility and choice in benefits grows. Advisors and employers need to be well informed about the merits of a HCSA (and, admittedly, its limitations) when discussing implementing a benefits plan.