Save 20% to 50% compared to an Insurance-based Group Medical Benefit Plan.
Suitable for single person companies to companies of thousands of employees.
There are three ways to pay health care expenses in Canada.
Employee pays out of pocket.
You and your employees can pay for their health expenses directly out of pocket. Unfortunately this provides little tax relief. If you have $3,000 of medical expenses, you might have a few hundred dollars of tax relief.
Insurance (Group Benefits)
A common and often expensive way is through a group benefits insurance plan. You pay premiums every month whether you make a claim. Likely there are co-pays and deductibles so your entire expenses are not covered.
Has it ever occurred to you that each dollar that is paid to an insurance company for employee benefits, your cost is typically marked up by 30% or more? Maybe a group benefits plan is not the most cost effective tool to help you achieve your HR Goals.
Sometimes a group plan can achieve the opposite of your HR goals. If your staff have spouses with a group plan, they may not appreciate the plan you are offering, and in fact may feel their co-workers are realizing a benefit not available to them.
Private Health Services Plan
A Private Health Services Plan (PHSP) is often the best choice for a small business or incorporated professional. A PHSP provides employees with a tax free benefit for qualifying medical expenses they incur, paid for by their employer. The employer typically will be permitted to deduct the full amount as an operating expense.
Employees like PHSPs because:
- the list of allowable expenses is large as determined by tax legislation, not by an insurance company.
- they receive reimbursement for 100% of their expenses up to their limit
- they can usually complement their spouses group plan. They may even be able to pay part of the premiums for their spouses group plan
As every case is different, you should seek tax advice for your business before setting up a PHSP.
A PHSP is also referred to as a Health and Welfare Trust (HWT) or HSA (Health Savings Account).