HEALTH SPENDING ACCOUNT (HSA)
WHAT IS A HSA?
A Health Spending Account (HSA) is a pre-determined amount of money allocated to Employees by Employers. It provides a top-up to pay for health expenses not covered by Health and Dental plans while controlling costs for Employers.
How does an HSA work?
Employers determine the amount of money deposited into plan members’ accounts each year.
The target amount is determined by the Employee class. Employees can access their HSA funds for the year the funds were deposited plus the following year. At the end of the second year, unused funds revert to the plan sponsor. The HSA runs on a calendar-year basis, allowing easy coordination with your insured plan’s calendar year maximums.
Common Expenses
Any expenses in excess of insured health and dental plan maximums and co-insurance and deductibles not reimbursed by insurance plans. Items such as vision care expenses (glasses, contact lenses, and laser eye surgery), prescription drug expenses commonly excluded on Extended Health Care plans (fertility drugs, erectile dysfunction drugs), paramedical practitioners (massage, physiotherapy etc that aren’t covered at 100%, adult orthodontics (dental braces).
Funding the HSA
Plan sponsors have two options:
1. Budgeted: Employers are billed monthly in advance for HSA costs (1/12 of the annual HSA amount). This approach is beneficial if plan sponsors prefer a predictable expense each month.
2. Non-budgeted: plan sponsors are billed the following month for claims paid the previous month. A claim float to pay for the first month is required in advance; it’s calculated as 1.5 times the monthly claims amount.
Claim Expense
To process prior year expenses, claims must be received by our office no later than the grace period of 30, 60 or 90 days of the current year, which is at the discretion of the Employer If an Employer chooses 30 days, plan members would have to submit claims by Jan 31st of the current year. After the grace period of the current year (i.e. Jan. 31st), expenses from the prior year will be ineligible.
Payment Order
Claims are always paid from the core benefits plan first, then submitted to any secondary payors (co-ordination of benefits), and then paid from the HCSA. This maximizes all available benefit coverages and reserves the HCSA for expenses not paid by core coverages.
Tax advantages for you and your plan members
Plan sponsor contributions and administrative expenses related to the HCSA are tax-deductible business expenses. Expenses reimbursed through the HSA are non-taxable to plan members.
Manage claims automatically
Employees have access to the full annual contribution amount on the first day of the fund year. As claims are paid from the account, HSA balances are updated. This ensures claims are not paid in excess of the available balance of the annual contribution amount in the plan member’s HSA. Plan members receive claim payments by direct deposit and have access to view their information on their Online claims platform.