How Do Health Spending Accounts Work?
Plan members can be reimbursed from their Health Spending Accounts for deductibles, coinsurance amounts, or amounts in excess of plan maximums that would otherwise be paid out-of-pocket. Funds in a Health Spending Account can also be used to pay for items not covered under an employee’s health or dental plan such as:
- medications if prescribed by a physician or dentist
- glasses or contact lenses
- seeing eye dogs
- It is important to note that cosmetic procedures have not been allowed since the budget implementation on March 4, 2010 and similarly over-the-counter medications, vitamins and supplements are not allowed, even if they are prescribed by a medical practitioner.
The list of eligible items is the same as those items considered eligible under the Medical Expense Tax Credit. A complete listing can be found at http://www.cra-arc.gc.ca/tx/tchncl/ncmtx/fls/s1/f1/s1-f1-c1-eng.html
Members are encouraged to fully utilize their insured plans before submitting claims to their Health Spending Accounts. The logical order of processing for a claim that is eligible under both an insured plan and a spending account is:
- Insured plan
- Balance submitted by employee to other spouse’s plan
- Health Spending Account
This allows members to get the most from their insured plans before accessing their Health Spending Account. Claims or portions of claims that are not payable under a member’s core plan can automatically be applied to the spending account. The appropriate claim form for use with Health Spending Accounts can be found on the Insurer’s website or from your plan administrator. Using the appropriate form will eliminate the need for double submission of claims.
Co-ordination with Spousal Benefits
If a spouse has coverage in a group insurance plan and the plan has deductibles and/or provides for only partial reimbursement of expenses, the portion of the expense not reimbursed under your spouse’s plan may be submitted to your plan for reimbursement.
Carry Forward of Account Credits/Claims
- Credits – If you do not use the full amount of your credits in any one year, they will automatically be carried forward to increase your account in the next year. If after two years you have not used your year one allowance, the remainder of the year one allowance will revert back to the Employer.
- Claims – If your claims in any one year exceed your account limit, you will be reimbursed up to the applicable calendar year maximum.
It should be noted that account balances can never be returned to the member in the form of cash.
Who is Eligible for Coverage?
Eligible dependents are governed by the Income Tax Act and can be different than as defined under your group plan. If a member wishes to cover a non-standard dependent, (i.e. mother or father) this is permissible, as long as that dependent is financially dependent upon the member for support under Canadian Revenue Agency (CRA) guidelines.
Expenses can be paid for dependants even if the member does not have family coverage under the insured plan.
For over 20 years, Chris Pryce of Human Capital Benefits has been advising employers on all aspects of managing employee benefits programs and related products. If you have any questions, you can contact Chris at 416.924.8280 or by email at email@example.com