Rethinking Employee Benefits: How Health Spending Accounts Help Your Business
November 21, 2023
In today’s ever-evolving post-pandemic work landscape, the desire for flexibility and personal choice in the workplace has never been higher. And we’re not just talking about flexible hours, shorter work weeks, and remote working options—the demand for choice also extends to the benefits your employees receive.
As a Business Owner, you probably know that the success of an organization hinges on the mental and physical well-being of its people. Investing in the health of your workers is critical to bolster retention, productivity, and morale and ultimately strengthen your business in the face of unpredictable circumstances. But it’s a big ask for a single benefits plan to cater to the unique needs of every single employee. The truth is: a traditional, one-size-fits-all approach to group benefits is often too rigid to effectively address the varying needs of a diverse workforce. Plus, benefits plans are costly—and the more you try to cover, the more expensive it’ll be for your business.
So how do you find a plan that can adapt to the needs of your staff without breaking the bank? By allowing employees to customize to their needs within a cost-contained framework—that’s where a Health Spending Account comes in.
What is a Health Spending Account?
A Health Spending Account (HSA) allows employers to provide each of their employees with a set amount of money per year to spend on a wide scope of eligible health and dental expenses. With an HSA, employees have the flexibility to choose where to allocate their funds based on their personal or medical needs, while traditional benefit plans typically offer a fixed amount for a predetermined set of services. Often, your staff will only use a few of these services (e.g. massage, chiropractic) but may not need to use many of the other services available to them. When using a Health Spending Account, employees will be able to put the full amount of funds towards the services they’ll actually use—thus getting maximum value from their own plan.
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How can an HSA benefit your business?
HSAs won’t just help you improve your employees’ individual health—they can also help you improve your business health by resolving some of the key challenges of a traditional group benefits plan. An HSA will:
1. Control your costs—and keep them consistent.
With traditional benefits plans, your employees get specific amounts of coverage every year, while you, the employer, pay a premium annually. However, even if your plan seems like the most affordable option right now—there’s always the chance that your premium could spike come renewal time due to medical inflation and your employees’ usage habits.
Rates are reviewed every year to evaluate if the premiums collected support the claim expenses incurred. That means a higher volume of claims can lead to higher prices! If the majority of your staff maxes out their paramedical and dental coverage in a given year, your insurance company will look at this usage level and decide to increase your premium for the next year.
The traditional benefits model is even harder on smaller businesses—SMBs are at risk of having one individual with high claims drive up the premium rates for everyone in the plan! On the other hand, larger organizations with more staff members may see less drastic changes in pricing, as they can spread the claims expense across the employee base.
Health Spending Accounts allow employers to have more stability and consistency in terms of their annual spending. You’ll be able to exercise more control and better forecast what your plan will cost year-over-year, since you get to decide the maximum amount that your staff can spend. Even if every single employee claims up to their predetermined limit, you won’t need to worry about steep premium hikes down the line.
Plus, with an HSA, you only need to pay as the funds are used up—that means if the plan ends up being underused, your business can invest the surplus elsewhere. HSAs are also 100% tax-deductible as a legitimate business expense for all incorporated businesses under Canada’s Income Tax Act.
2. Offer more choice and value.
While traditional benefits plans are a step in the right direction for protecting your employees’ health, they often fall short when it comes to offering enough choice, especially if you’re not taking the time to survey your staff and learn more about their unique needs.
Let’s say you adopted a traditional plan because it was the cheapest option at the time. It might seem like you’re being cost-effective on paper; however, many of your employees likely aren’t able to take full advantage of their coverage because some of the covered items are services that they don’t need or won’t use. That means you, as the employer, are paying for coverage that isn’t getting used—which is essentially throwing money down the drain!
Health Spending Accounts let your employees have more choice over what works best for their lifestyle and needs, meaning they’re not stuck with coverages they won’t use—and you’re not stuck paying for any unused coverage! HSAs allow reimbursement for a variety of healthcare expenses that aren’t typically covered under provincial or standard employer plans, such as vision care, dental services including orthodontics, mental health services, and various other health professionals, such as Chiropractors, Chiropodists, Registered Massage Therapists, Physiotherapists, Speech Therapists, and more!
With an HSA, you can offer tailored benefits that your staff will be able to get much more value from, compared to traditional plans. And instead of paying set premiums, you’ll only pay as employees spend the money allotted to them.
3. Allow for more flexibility.
Traditional benefit plans usually offer blanket coverage that applies uniformly to all employees within a group, with little to no flexibility built in. This plan design inevitably leaves gaps in coverage for those with unique needs or fluctuating health concerns from year-to-year.
After all, when you have staff coming from different backgrounds, lifestyles, and age groups, it’s no surprise that they’ll likely have different needs when it comes to their personal health and well-being. Employee benefit plans shouldn’t be a “one-size-fits-all”, especially for today’s ever-growing diverse workforce.
With an HSA, your staff will have the flexibility to choose where their dollars are spent, based on their individual needs. Some plans even offer the opportunity to carry over unspent funds into the next year!
Additionally, most HSA plans offer a second type of account in addition to the tax-free Health Spending Account: a taxable Wellness Spending Account, which covers non-healthcare items such as fitness classes, gym memberships, cosmetic procedures, personal development courses, and more! Each year, employees can choose how to divide their total funds between the HSA and WSA accounts as they see fit—or they can simply allocate all of their funds to either one account.
As an employer, you also have the option of offering HSAs in combination with a traditional group benefits plan, allowing HSA funds to supplement existing coverage. For example, if a medication is 80% covered under the group benefits plan, an employee could then dip into their HSA to pay the difference. Or, you can cover paramedical services under an HSA instead of traditional benefits, to maximize the value for your employees.
Are HSAs worth it?
Each individual has a unique health situation, and their health plan should reflect that. The same goes for businesses—the “right” plan is different for every business, depending on a variety of factors, like your size, operations, or industry. And for smaller organizations that are looking to manage costs, an HSA could be the right choice. Plus, benefit plans play a crucial role in attracting and retaining talent. Offering more value to your staff may discourage them from leaving for greener pastures and can help you proactively save on the cost of new hires, turnover, and the business risks that come with it.
How can we help you?
If you’re looking to upgrade your organization’s group benefits plan, PROLINK is here to help. With access to a range of insurance options, our experienced advisors have the know-how and expertise to help your business find the plan of its dreams. No matter what industry you’re in or how many employees you have, we’ll take the time to learn about your needs, and guide you to the solution that fits best for your business— whether it’s a Health Spending Account and/or Wellness Spending Account, a traditional group benefits plan, or a combination of all of them!
PROLINK’s Protect & Perfect risk management approach to group benefits will help you
- Identify challenges and explore all available options to help you make an informed decision;
- Align your organization with an insurance provider that offers flexibility in healthcare choices that gives employees more value from their benefits; and
- Continuously monitor your plan so that it evolves to meet your needs long-term while keeping costs predictable.
To learn more, connect with PROLINK today!
PROLINK’s blog posts are general in nature. They do not take into account your personal objectives or financial situation and are not a substitute for professional advice. The specific terms of your policy will always apply. We bear no responsibility for the accuracy, legality, or timeliness of any external content.