Over the course of the coronavirus pandemic, health-care spending and wellness accounts have been vital tools in employers’ support toolboxes.
Whether it’s increasing the dollar amount allotted to these accounts or broadening the eligible services covered under wellness accounts, employers are maximizing these offerings to help employees endure the prolonged public health crisis.
Since HCSAs are governed by the Income Tax Act, they’re limited to items that fall under the Canada Revenue Agency’s list of eligible medical expenses. Eligible expenses can be reimbursed on a non-taxable basis — with the exception of Quebec, where they’re subject to the provincial sales tax. As all expenses must fall under the eligible medical expenses categories, there isn’t a lot of leeway in use.
Maximizing the HCSA
However, some employers are leveraging their HCSAs by topping up the maximum so some or all of employees’ medical or dental-care costs can run through the account.
Read: Expert panel: Think of health-care spending accounts as the duct tape of benefits plans
In cases where these services or procedures aren’t covered by a health or dental plan or there’s an excess balance not covered under the plan, the costs could fall under the HCSA, says Kim Siddall, vice-president of enterprise consulting in the west at People Corporation Inc.
For example, e-commerce company Endy doesn’t have a traditional health benefits plan, but it introduced an HCSA in 2017 with a larger maximum amount to cover the cost of employees’ medical and dental-care needs, says Hemalee Sisodraker, the company’s director of people and culture. All employees receive the same amount in their HCSAs and can decide how to allocate the funds.
What’s the difference between an HCSA and a wellness account?
A HCSA turns personal medical expenses into a deductible business expense for the employer and is a tax-exempt benefit for the employee. As a stand-alone or add-on offering to an employer’s group benefits plan, it can reduce administrative and other fees for the employer. Some common expenses covered are: paramedical health practitioners, prescription drugs, dental and vision care.
A wellness account is a spending account, similar to a cash bonus, that employees can use to purchase health and wellness services or products. The offering is taxable, so it isn’t limited by the CRA, allowing employers to set restrictions on what can be covered under the plan. Some common items are: gym memberships, smoking cessation programs, elder care or childcare, nutritionists and medical marijuana.
According to Siddall, one reason employers should consider expanding the HCSA maximum is that the CRA reviews — in tandem with the Canada Health Agency — new therapies coming to market or therapies that people have been accessing more to ensure, where appropriate, they’re covered under the accounts.
Though the list of eligible expenses isn’t necessarily expanding, she says, more services and products qualify under existing categories. For example, pharmacogenetics testing is eligible under HCSAs because it falls under the diagnostics category.
In addition, Siddall says the ongoing pandemic has led the federal government to clarify that coronavirus-related tests that individuals must take to travel could be covered by an HCSA under the diagnostics category if they’re accompanied by a prescription from a physician.
Getting creative
On the other hand, wellness accounts offer employers the opportunity to get creative with employee support tools and can be used to illustrate their values, company culture or as an incentive tool, says Siddall.
Sagamok Anishnawbek is one employer thinking outside the box to make the most of its wellness account, a pilot offering that provides traditional Indigenous medicines and services to 240 staff.
The First Nations community’s current health benefits plan offers coverage for dental, vision and Western-allied health services and medications, says Jeff Moulton, the community’s director of human resources and shared services. Although 218 of Sagamok’s employees have First Nations member status, the benefits plan doesn’t offer traditional Indigenous medicines or therapies. Indigenous peoples view Western medications through a different lens, he adds, so bringing these medicines and ceremonies, such as sharing circles or sweat lodges, under a wellness account is a game-changer.
As well, a number of individuals are well-versed in traditional medicines, says Moulton, noting the community intends to grow its own herbs so members can purchase them at a lower cost. Sagamok’s Indigenous staff can use the wellness account to purchase items that originate from the community, with the cost falling under the tax-exempt status of products or services procured on reservation land, says Chris Sanderson, vice-president of operations at Maximus Rose Living Benefits Inc., the account’s provider alongside Indigenous Workplace Wellness.
Read: How small and mid-sized employers can offer benefits like large employers
Due to their tax exemption under section 87 of the Indian Act, Indigenous staff can choose to use the wellness account to top-up their benefits coverage for services not covered under the non-insured health benefits for First Nations and Inuit.
Benefits costs are rising significantly and employers are looking for ways to cut costs, says Sanderson, noting the ‘Great Resignation’ is forcing people to think creatively about benefits and suggesting all employers be aware of changes and new ideas reshaping this space.
Lauren Bailey is an associate editor at Benefits Canada.