enVia Health Spending Account Program (eHSA)

What is a Health Spending Account?

A “Health Spending Account”, is a vehicle permitted under the Income Tax Act as a “private health services plan” (IT-339R2) that enables employers to cover the participants’ eligible medical and dental expenses as defined under Section 118.2 (2) of the Act. The employer contributions may be used to pay for any eligible medical or dental expense under the new Income Tax Folios – S1.F1.C1. Medical Expense Tax Credit introduced in June 2013.

A Health Spending Account is in effect a personal “health and dental bank account” that can be used to pay for the broadest range of eligible expense, far beyond those covered by any group or individual health insurance program.

The eHSA operates on a “Calendar Year” basis. Prior to the start of each plan year the employer determines how much to contribute for the following plan year. It is not an “insurance plan”, rather a unique tax sheltered vehicle that employers may utilize to control the cost of medical and dental benefits. Employees technically cannot contribute directly to the eHSA per Canada Revenue Agency rules and that is why an “employer” must make the contributions. This includes self-employed incorporated business owners.

The eHSA is an individual “private health services plan” (phsp) per Interpretation Bulletin IT-339R2. A significant advantage of the eHSA Program is that employees who are facing higher than normal medical or dental costs may enter into a formal “compensation adjustment” agreement with the employer on the plan’s implementation and annual anniversary date of January 1st to have the employer contribute pre-tax earnings on their behalf to their Health Spending Account (per IT-529 Para 9).

How is it different from a traditional individual or group health and dental program?

Traditional individual or group health and dental programs offer “defined benefit” amounts for a range of eligible medical and dental expenses. e.g. $300 per practitioner per year for Professional Services (Chiropractor, Physiotherapy, etc.). The HSA instead uses a “defined contribution” approach under which the employees can decide how to spend the available funds to meet their actual needs.

A Health Spending Account (HSA) is not “insurance”, rather it is a “defined contribution approach” under which the “employer” decides how much can be afforded initially and on an ongoing basis. Under the eHSA the amount that can be claimed at 100% reimbursement is limited only by the amount contributed. There is no deductible, no co-insurance, and no limit other than the annual amount contributed to the eHSA. All claims must be submitted by January 30th of the year following the year in which they were incurred.

Forfeiture of Unused Contributions

In accordance with the Advance Ruling secured from CRA to ensure the eHSA is “onside” there is a one year carry forward of unused funds from the first year to the second plan year. If there is any portion of this amount remaining at the end of the second year it is forfeited back to the contributing employer. This is the “element of risk” required by CRA to make the program compliant.

Excess Medical Insurance Protection

Additional protection is provided through the automatically included Excess Medical Insurance that provides the following benefits to eHSA participants:

  • Drugs, generic (other than biologics) - $50,000 per year
  • Drugs, biologics - $25,000 per year
  • Semi-Private Hospital differential – 90-day max per accident or sickness
  • Ambulance - $20,000 per accident or sickness
  • Dental Injury - $20,000 per accident within 12 months.
  • Durable Med Equipment, rental not exceeding purchase price - $20,000 per year
  • Assistive Medical devices, includes hearing aids - $10,000 per year
  • Private duty nursing - $25,000 per accident or sickness
  • Other miscellaneous medical expenses ordered or prescribed by Physicians or Dentists to treat injuries or sicknesses - $2,500 per year

The Excess Medical coverage is subject to an annual deductible of $2,500, and a lifetime maximum of $1M . There is a 24-month waiting period before medications for pre-existing chronic conditions can be used to satisfy the deductible.

No health statement is required, only a statement as to medications being taken for chronic pre-existing conditions at time of enrolment.

Excess Medical Insurance coverage will not cover any dental expenses or elective medical expenses, even though they are an eligible claim against a Health Spending Account.

Excess Medical Insurance coverage ceases at age 70.

The Excess Medical Insurance Program has been included in recognition of the fact a sudden unexpected serious illness or an accident and related medical expenses could quickly exhaust one’s eHSA, and additional insurance protection is therefore required. For example drug bills for cancer or other conditions can easily exceed $20,000 per year! The addition of this coverage does not make the eHSA compliant with CRA requirements, rather it is the eHSA plan design and forfeiture provision that ensures it is compliant.

Additional enVia Benefits for eHSA Participants

All eHSA participants working a minimum of 20 hours per week are automatically covered for the following benefits:

  1. Employee & Family Assistance Program: provides up to 3 hours confidential telephonic professional counselling per cause per person per year and referral to ongoing services, if required.
     
  2. AIG Special Risk Insurance & Attaché Services: provides $20,000 of AD&D insurance on a 24/7/365 basis; plus a wide range of assistance services for travelers; and Identity Theft assistance.

For additional information please Contact Us.

E&O Excepted Maclagan Inc. July 2014