What is a PHSP?
A Private Health Services Plan (PHSP), is an inexpensive way for employers and sole proprietors to offer tax-free health benefits to employees, their dependents and themselves.
A PHSP provides health benefits that are 100% deductible to employers and 100% tax-free to employees. The plan is simple to setup, has no monthly premiums and provides significant savings compared to traditional health insurance plans.
Your employees will be able to claim a variety of health and dental expenses without co-pay or category specific limits.
If you already have a traditional health insurance plan that does not offer full coverage you are able to setup a PHSP for supplement coverage.
PHSPs are also referred to as Health Spending Accounts (HSA), Cost plus, Health Care Expense Accounts, or Health Care Spending Accounts (HCSA). PHSPs are regulated under the CRA Income Tax Act. More information can be found in the Income Tax Folio S2-F1-C1.
Who qualifies for a Private Health Services Plan?
The health plan is available to both incorporated businesses and unincorporated (partnership and sole proprietors) businesses but with different restrictions. The plan covers health expenses of the employees and their families including their dependents.
Incorporated businesses may offer the plan to all or some employees. You have the flexibility to specify spending limits for classes of employees. Employees must be actively involved in the business and must receive the plan in their capacity as employees (not as shareholders).
Unincorporated businesses may also qualify for PHSP but with more restrictions on the annual spending limits and the qualification criteria. Individuals must be actively engaged in the business and must meet certain income test criteria. Depending on the number of employees, the maximum allowable annual deduction may be limited to:
$1,500 for each proprietor, spouse, and dependents over the age of 18 and
$750 for each dependent under the age of 18.
More details on the limits and criteria can be found here.
What are the benefits of PHSPs?
Increased employee satisfaction and retention.
Traditional insurance plans come with a plan booklet listing all category-limits, co-pays and restrictions on the type of expenses covered. With Lifeaccount, employees can allocate any portion of their balance towards the health category they truly need. Any unused balance can be carried forward to the next plan year.
All employees can be covered without limitations due to pre-existing health conditions.
Submitting claims and managing your account is simple and straight forward with our online platform and mobile apps.
Our fees are only 8% (plus taxes) of the approved claim amount. No setup fee, no maintenance fees. At the end of the plan year, unused balances may be carried forward for only 1 calendar year. No funds are spent unless claims are made.
Traditional insurance plans typically charge a 25% fee to process the same claims. At the end of the plan year, all premiums are lost.
The bottom line is that for the same health benefits budget, employers are now able to allocate more towards the employee benefits and less toward fees.
To understand better how premiums are calculated in traditional group benefits plans read this article.
Simple cash management
Our service is based on a pay-as-you-go arrangement. We do not charge monthly premiums or annual fees. We only initiate electronic fund transfers once claims have been approved. Until then, you get to keep and manage your cash.
Avoid renewal shock
With defined benefit plans you often find yourself dealing with excessive premium increases (“premium creep”). Sometimes you may be forced to reduce benefit coverage to maintain the same monthly premiums. With our service you select the limit for each employee class. You can increase it or decrease it to match your business abilities. Simple is better!
What type of expenses are covered?
A great range of benefits are covered. Typically any service provided by a qualified medical practitioner (according to your province) is eligible.
You can claim 100% of your expenses including dental braces, physiotherapy, laser eye surgery, massage therapy, prescription glasses and prescription drugs.
You can allocate your account balance to the expense that you need without worrying about co-pay or category limits.
If you or your spouse have a traditional health insurance plan you can combine them to maximize your health benefits coverage. First, submit the claim to your traditional insurance and then submit the remaining amount to your PHSP.
How does it work?
Setup is easy and is done online. You follow our online setup wizard to register your company, provide banking information, upload your list of employees and define the coverage limits you offer to them by class.
Your employees will be notified via email to complete registration and setup of their individual details and banking information.
Employees pay for their claims at the point of service and retain the receipt and prescription (as needed). They can use our website, or a mobile device to submit the claim along with the required documents.
Lifeaccount reviews the claim and once approved the funds including fees will be withdrawn from the employers’ bank account and the reimbursement will be deposited in the employees’ bank account. The process takes 2-3 business days and is completely electronic.
Employers can manage their company plan online. They are able to add and remove employees and get online reports in real time.