Health Spending Account

Overview

Exposure

The publicly funded Canadian healthcare system provides most medical services at no charge to patients See: Provincial Health Care.

Over 90% of medical and dental expenses covered by employee health plans are predictable and can be budgeted for rather than insured. Insurance works best when the probability of something occurring is low but the financial consequence is high. For example, you need travel medical insurance when you leave Canada because you don’t expect to get sick or injured, but if you do, the cost will be enormous. However, buying insurance for a regular dental check-up seems silly because you expect to go and know the cost is relatively low.

A health spending account removes the illusion that health benefits are insured and lets each employee take responsibility for their own expenditures.

Who Decides What’s Covered?

Good health care is a relative concept that cannot be universally agreed to.

Traditionally employers have decided which products or services would be covered and to what extent. Decisions were based on economics and their concept of appropriate treatment. Costs were controlled through deductibles, specific definitions of covered services, limits and numerous exclusions.

A health spending account lets employees control what their health budget is spent on. They can express their unique wants and needs within the perimeters of the Income Tax Act.

New Paradigm

Changing the focus from limiting access to products and services to empowering staff to make their own health care decisions within a budget has become common during the last decade.

A health spending account promotes a positive change in attitude whereby:

employees scrutinize expenditures and make individual cost-benefit decisions.
claim adjudicators pay all claims permissible by law.
the employer defines the funding level rather than products or services covered.