Healthcare and Wellness Spending Accounts have been gaining popularity in recent years because of the flexibility that these plans provide.
A Healthcare Spending Account (HSA) is a tax-free benefit that can be used to pay for CRA-approved medical and dental expenses. The extent of coverage is typically wider than that of a traditional benefits plan. For example, HSA can cover dental implants, orthodontics, eyeglasses, laser eye surgery, fertility treatments and many other products and services that a traditional benefits plan may not pay for.
Wellness Spending Account (WSA) also referred to as Personal Spending Account (PSA) provides funds for wellness expenses that your benefits plan or your HSA does not cover. Examples include: vitamins and supplements, fitness clothing & gear including home gym equipment, ergonomic home office furnishings, gym memberships, childcare and more. Unlike Healthcare Spending Accounts, WSA’s are a taxable benefit.
Health and Wellness Spending Accounts are a great solution for companies with diverse workforce demographics. Different age groups and generations will have varying needs when it comes to employee benefits and wellness. HSA/WSA is also a great fit for employers that are looking to offer something unique to their staff. It is a good way to stand out from competition and/or reward key employees. Here are top 3 ways to integrate Healthcare and Wellness Spending Accounts into your benefits plan.
1. As a top up to existing coverage
One of the most popular ways to integrate an HSA or WSA into your benefits plan is a top-up option. In other words, HSA/WSA is there to supplement the existing benefits’ co-insurance, maximums, and/or deductibles. For example, a benefits plan with 80% co-insurance could use an HSA to pay for the remaining 20%. Alternatively, employer can “carve out” certain types of claims from the benefits plan (which would also reduce your premiums) and cover these expenses under an HSA instead. Common examples of carve-outs include visioncare, major dental, orthodontics, and fertility treatments.
2. On a stand-alone basis
Alternatively, an HSA or a WSA can function on a stand-alone basis, without the insured healthcare and dentalcare coverage. Because the amount of the HSA/ WSA is pre-determined, the employer knows what to expect in terms of claims. Moreover, there is no need to worry about healthcare/dentalcare premiums. However, a stand-alone plan would not protect employees in case of catastrophic healthcare or dentalcare needs. This situation may arise if there is a serious illness or an accident. When a catastrophic claim occurs, HSA balance would be depleted very quickly. This leaves your employees with a significant financial risk.
3. Combined with an insured component
To mitigate the financial risk of catastrophic claims, your HSA can be supplemented by pooled insurance benefits. These include Life Insurance, AD&D, Disability and Critical Illness.
Another key aspect to consider is a Stop-Loss insurance when it comes to healthcare and dentalcare expenses. It is possible to implement an insured element that only covers catastrophic claims such as ambulance, hospital, large medical equipment, and travel insurance.
The good news is that the cost of stop loss insurance is minimal. Another option is to include coverage for prescription drugs in the insured component of your plan. This does increase the cost of the insured element, but is a nice option to have given the risky nature of prescription drug coverage. For example, with biologic drug prescriptions, the cost can run in the thousands of dollars per year. More info on biologics and prescription drug trends is available in our recent blog here.
A stand-alone HSA with an insured prescription drug component is not a plan that is widely available with carriers. Should this interest you, please contact us for further information.
Managing Health and Wellness Spending Accounts
Most carriers offer both HSA’s and WSA’s. Typically, the employer sets a predetermined annual HSA/ WSA amount for each class of employees. The employer can also decide whether or not staff can carry forward any unused amounts to the following year.
Either the employer, or the employee would have the chance to direct their funds into either an HSA or WSA account before the start of each year. Thus, when a family knows they have a few pairs of glasses to purchase, they could direct all funds to an HSA for that year. Conversely, when they want to purchase a treadmill or other fitness equipment, they may direct funds into the WSA instead.
Health and Wellness Spending Accounts are an excellent way to supplement your existing benefits plan while gaining better control over your benefits costs. Your team will love the added flexibility these accounts can offer. It’s really a win-win for everyone. Thinking about integrating an HSA and/or a WSA into your benefits plan? Get in touch with us to learn more.