Create a unique plan to protect your employees and their families that will match your company philosophy and keep within your budget.
Traditional Benefit Plan
Traditional benefit plans are the most common and can cover drugs, extended health benefits, life insurance, accidental death and dismemberment, short and long term disability, out of country and dental. Typically these plans outline specific benefit coverage with set benefit amounts that may include deductibles and coinsurance. A traditional insurance plan will cover extended health and drugs and may have an 80% coinsurance. The employee is required to pay the remaining 20% difference and could also be responsible for the dispensing fee depending on the plan. The vision benefit under this plan may be limited to $250 for eyeglasses and contacts every 24 months.
A renewal analysis takes place every year by the insurance company and could positively or negatively affect your premium. Factors that are considered include demographics, average age, health care inflation for the year, and whether claims incurred exceeded what was expected.
All benefits are usually mandatory except extended health and dental which can only be waived if benefits are available through a spouse or significant other.
Health Spending Account
A Health Spending Account (HSA) is similar to a bank account set up through an insurance trust. Each year the employer deposits a set amount of money per employee into this account. The employee is able to submit receipts for eligible medical expenses under the Income Tax Act for themselves or their dependents for reimbursement. The list of eligible medical expenses is expansive and includes items such as drugs, dental procedures and medical supplies, as well as non-traditional expenses such as laser vision, and seeing eye dogs. Employees receive reimbursement for eligible expenses up to the maximum stipulated by the employer each year on a tax- free basis. The amount of money allocated to the account and the associated fees are a tax-deductible expense to the business. In most types of HCSA plans, at the end of the policy year any unused HCSA balance in an individual’s account is rolled over to be used in the subsequent year. If this balance from the previous year is not used in the second year the money is returned to the employer.
Advantages for the Employer. Using a HCSA to fund a benefits plan for employees allows an employer to cap their costs now and in the future. The amount of money that is deposited into the HCSA is determined by the employer each year and is usually based on a fixed budget. In contrast, a fully insured benefits plan can see premium rates increase significantly every year due to high utilization, changing demographics and inflation.
Advantages for the Employees. A HCSA provides for greater flexibility as employees can pick and choose the expenses they want to have reimbursed. They are put in control and can allocate the appropriate amounts to their individual health care priorities. Any reimbursement of expenses is received by the employee tax-free. In a sense, it is like getting a tax-free raise.
It is not uncommon to integrate a traditional plan with a HCSA. Many employers can reduce benefits or increase coinsurances on the traditional account and implement a HCSA to cover the difference. This helps reduce the premium of the traditional plan due to the decrease in benefits and helps control renewals due to the decrease in utilization. It also provides more options for your employees since they are able to allocate certain amounts to their individual health care priorities. An example of this is removing dental and vision from a plan and implementing a $500 HCSA.