What is a Health Care Spending Account

Jan 24, 2012

A Health Care Spending Account (HCSA) is generally used to enhance a traditionally designed group insurance plan. As the name implies, it is a flexible spending account established by the plan sponsor where credits or a specified dollar amount is deposited at the beginning of each year. The amounts can vary, however, they are typically funded  with deposits of $300 to $500.  The amount deposited can be used to pay for medical and dental expenses incurred by the member or the member’s dependents that are not reimbursed by the provincial health insurance or the private group insurance plan. Every time the account is used to claim eligible expenses, your HCSA balance is reduced accordingly.

If established properly, a Health Care Spending Account is a non-taxable benefit for employees.

What expenses are eligible under an HCSA?

To be eligible for reimbursement, expenses must meet the eligibility requirements of the Canada Customs and Revenue Agency and must not be fully covered by a private or government plan. Also, most of the services and care must have been prescribed by a healthcare professional.

HCSA credits can be used to claim:

  • Deductibles and co-insurance amounts not paid by your plan
  • Any amount greater than the maximums set by your plan
  • The portion of the expenses incurred that are not reimbursed by your plan
  • Care not covered by the basic group insurance plan, but that qualifies as a medical expense in the Income Tax Act.

Some of the more common types of expenses that are eligible include:

  • Prescription Drugs
  • Diabetic Supplies
  • Vision care services such as glasses, contact lenses and laser surgery
  • Medical supplies, tests, treatments, devices and equipment
  • Paramedical practitioners, i.e.(chiropractors, massage
  • therapists, physiotherapists, acupuncturists etc.)
  • Dental expenses i.e.(bridge work, orthodontics, root canals, crowns)
  • Cosmetic procedures: only those required for medical or restorative purposes are eligible.

 

For a complete list of eligible services please click here to visit the Canada Customs and Revenue Agency website at www.cra-arc.gc.ca for further guidelines and specific details.

Health Care Spending Account is a very good way to allow employees some flexibility in how they spend their health care dollars while giving employers a level of cost control.

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