Health Spending Accounts

Doctor explaining to patients

A Health Spending Account (HSA) from Alberta Blue Cross is an innovative way to complement your group benefit plan. HSAs provide the ultimate blend of flexibility and cost containment, while enabling your employees to pay for medical and dental expenses not otherwise covered by your plan—with non‐taxable dollars.

Whether you need to manage costs because of a slowdown or a tight labour market, offering an HSA as part of your Alberta Blue Cross benefit plan gives your business a valuable edge in attracting and retaining quality employees.

How does it work?

Credits (dollars) are allocated into a Health Spending Account that employees can use to pay for eligible medical and dental expenses not covered under your group or provincial medical plan. Alberta Blue Cross offers a variety of options for employers to fund HSA accounts. Alberta Blue Cross Health Spending Accounts have become an important component of many groups' overall benefit programs.

Here's why…

Added flexibility
Alberta Blue Cross Health Spending Accounts add flexibility to group benefit plans by addressing the varying needs of your workforce. HSAs reimburse your employees for a wide range of health related expenses not covered by provincial medicare plans and for services no longer covered by government programs. HSAs also help your employees pay co‐insurance payments, deductibles and amounts in excess of their health and dental plan limits.

Employee attraction and retention
Offering an HSA to your employees not only helps maintain a healthy, productive workforce, but gives you an edge for attracting and retaining high‐calibre employees.

Active role in health
An Alberta Blue Cross Health Spending Account allows employees to take a more active role in their health—using their HSA "credits" wisely and becoming more accountable for their own benefit plan.

Tax advantages
A Health Spending Account from Alberta Blue Cross provides an avenue for you to deliver tax‐effective compensation to your employees, using pre‐tax dollars just as if expenses were covered through the health/dental plan. And because the employee portion of health/dental plan rates are eligible expenses with Health Spending Accounts, the tax advantages of a Health Spending Account are better than ever.

Enhanced claiming processes
With Alberta Blue Cross’s enhanced claiming processes, it’s easier than ever for employees to submit claims. Balances remaining from health and dental plan claims automatically flow into the HSA plan—meaning no additional claim forms.

Allowable expenses

The following information is provided as a guideline only and does not supersede information or decisions rendered by Canada Revenue Agency.

Determining reimbursement eligibility
Under a Health Spending Account, plan members can be reimbursed for medically‐related expenses not covered by provincial health care plans. In general, any medically‐related expense that could be used to meet requirements for deductibility on a plan member's personal income tax return (in accordance with the Income Tax Act) is eligible for reimbursement. In other words, eligible medical expenses for HSAs are those, which normally would otherwise have qualified as a medical expense under Medical Expense Tax Credit.

Examples of health and dental benefits eligible for reimbursement:

  • Deductible and co‐payment amounts for health and dental expenses
  • The cost of procedures not covered by provincial health plans, including,
    • vision care expenses
    • orthodontic procedures

Additional items listed below
In addition to deductibles and coinsurance amounts, expenses covered by a Health Spending Account may include the following items, as long as they qualify as medical expenses under the Canadian Income Tax Act and are not covered by any other provincial health insurance plans.

This list of medical expenses and claiming guidelines has been developed by Canada Revenue Agency.

Medical practitioners

acupuncturist audiologist
chiropodist Christian science practitioners
dental hygienist dental mechanic
dentist denturologist
dietician medical doctor
naturopath nurse (or full-time practical nurse)
occupational therapist oculist
ophthalmologist optometrist
osteopath pharmacist (dispensing fee & cognitive services)
physician physiotherapist
podiatrist psychoanalyst
psychologist speech-language

Prescription drug expenses
Two categories of drugs, medicaments or other preparations or substances that must be prescribed by a medical practitioner:

for an oxygen tent or other equipment necessary to administer oxygen or for insulin, oxygen, liver extract injectible for pernicious anaemia or vitamin B12 for pernicious anaemia, for use by the patient as prescribed by a medical practitioner;

prescription drugs with a written prescription from a pharmacy.

Vision care expense

  • eye examinations
  • eyeglasses (lenses and frames) and contact lenses
  • surgery performed by a Medical Practitioner such as laser eye surgery

Dental expense
Preventive, diagnostic, orthodontic and therapeutic care.

Ambulance expense
Ambulance charges to or from a public or licensed private hospital.

Diagnostic service expense
laboratory, radiological and other diagnostic procedures or services used for maintaining health, preventing disease or assisting in diagnosis or treatment as prescribed by a Medical Practitioner or dentist;

Examples include in-vitro fertilization procedures, ultrasounds, anaesthetist fees, etc.

Please note: Due to changes announced in the 2010 Federal Budget, cosmetic services and procedures purely esthetic in nature are no longer eligible expenses through Alberta Blue Cross Health Spending Accounts unless they meet specific requirements. This exclusion applies to all cosmetic procedures incurred after March 4, 2010.

For a list of additional expenses, please visit Canada Revenue Agency

Health spending account example

The following example illustrates the tax advantage of an Alberta Blue Cross Health Spending Account funded through the Employer Option.

Kevin can save $450 this year with his Health Spending Account

Kevin is an employee with typical expenses.

His annual salary is $45,000, which places him at a 30 per cent tax rate. His annual portion of the Alberta Blue Cross health and dental benefit plan is $700.

His benefit plan includes Extended Health, Dental and Prescription Drug coverage—excluding Vision coverage.

Kevin’s employer provided him with an offer of compensation that included $1,500 in his HSA account.

Kevin’s family incurs $1,500 in medical expenses not covered by the health/dental benefit plan.

Kevin
Employee share of Alberta Blue Cross rates * $700
Physiotherapy $100
Glasses $300
Dianne
Prescriptions (co-pay) $50
Chiropractor (co-pay) $50
Megan
Dental checkup / exam (co-pay) $50
Orthodontic exam (co-pay) $150
Emily
Prescriptions (co-pay) $50
Dental checkup / exam (co-pay) $50

Total medical expenses: $1,500

*Yes! Employee contributions to Health and/or Dental rates are eligible for claiming through an HSA.

Here’s how Kevin’s compensation can be structured to provide him with savings of $450—based on a $1,500 HSA allocation.

Without an HSA
Gross salary $45,000
No allocation to HSA $0
Gross salary $45,000
30% tax rate x .7
Net salary $31,500
Less expenses not covered -$1,500
Total $30,000
With an HSA
Total compensation $45,000
Allocation to HSA -$1,500
Gross salary $43,500
30% tax rate x .7
Net salary $30,450
Less expenses not covered $0
Total $30,450

Simply by using an HSA approach, Kevin can increase his take home pay by $450 per year!

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Where to next?

Get introduced to HSA's cousin, the Wellness Spending Account

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