Shopping for HSAs? What you need to know!
A Health Spending Account (HSA), is an inexpensive way for employers and sole proprietors to offer tax-free health benefits to employees, their dependents and themselves. An HSA provides health benefits that are 100% deductible to employers and 100% tax-free to employees. HSAs are flexible and easy to use compared to traditional health insurance.
The following 7 characteristics should be used to compare Health Spending Account in Canada:
1. Pay Structure:
- Registration fees
- Monthly/Annual fees
- Fees to add/remove employee
- Claim processing fees
2. How claims are submitted:
Each company varies in how claims are submitted, and receipts are collected. Some companies’ claims are:
- Paper based. These companies claims and receipts are done on paper forms and need to be mailed in or emailed.
- Online submission form. These companies have a fill-in the blank form on their website that requires the user to fill-in all their details and each of their claims. Also receipt submission is done by uploading files (there are file size limits and restrictions on how many files the user can submit at one time)
- Electronic filing on an app/website. All claims are online through a website/app login. These companies have users login to accounts and file claims. This usually requires the least amount of “filling in” since each users information is attached to the account. Receipt submissions are uploaded with the claim.
3. How the account is funded:
Funding can be done in two ways:
- Prefunded (fully or partially), Company funds the account at the beginning of the term. If this is the case, an employer should investigate what happens to un-used funds at the end of the term.
- Pay-as-you-go, funds stay with the employer and the HSA company trusts the funds will be there when a claim is made.
4. How fast are claims processed:
Once a claim is approved companies process claims in different ways. Approved claims are processed by:
- Long process time: The HSA company sending an invoice to the employer the employer then sends funds to HSA company and then the company sends funds to the individual employee.
- Short Process time: Employer signs PAD agreement with the HSA company and employees gives banking information to HSA. Once a claim is approved HSA company deducts funds from Employer and transfers funds to employee directly. This is a much faster approach as there are no invoices and waiting for fund transfers from employer.
5. Claim adjudication process:
HSA companies adjudicate claims differently:
- Random claims are adjudicated
- Every claim is adjudicated
Note that there is a rule with the CRA that requires 90% of your claims to be valid. In the case of random adjudication it is important to understand that if CRA audits your account and it is not 90% compliant your account can be deemed invalid and your company can be penalized.
6. Report accessibility for employers/accountants
Employers need to be able to balance their accounts monthly/quarterly/yearly. HSA reporting should be available to them in real time. It is crucial for employers to have access to this information when they need it. Reports are not something people will think of asking about when comparing HSA providers, but it is important to find out before you sign with a company because good reporting access will help make the employer’s life easier once enrolled in a program.
7. Proper Taxes are charged
It is important to make sure the HSA provider is charging the correct taxes for your province. Every province will charge different taxes and if these taxes are not paid on your behalf to the CRA and you are audited you become liable for those taxes.
Overall, it is important to shop around for the HSA provider that best fits your companies needs. The above characteristics are a great way for you to make sure the HSA is right for you, your business, and employees. Want to find out more about LIfeaccount HSA, contact us today for a free demo!