Questions Employers Frequently Ask
What’s the difference between a health spending account and insurance?
- With a health spending account you commit to give each employee a personal benefit budget that they cannot exceed. With insurance you commit to covering the cost of whatever employees are able to claim.
- You control the cost of health spending account but the cost of health insurance increases at twice the rate of the Commodity Price Index (CPI) and wage inflation.
- The administration cost of a health spending account is 10% compared to 30% for insurance.
- With a health spending account employees receive benefits equally or based on hierarchy, seniority or income. With health insurance employees with the greatest need receive the greatest benefit.
- With a health spending account you may choose to support an employee with unusually high needs by provided them with a higher budget. With health insurance you are not even aware of employee claim amounts, just that price increases are the result of high claims.
Do my costs ever increase?
Since your cost is based on the contribution schedule that you commit to at the beginning of each year, you have full control over your costs. Many employers have not changed their benefit costs in over two decades.
How am I billed for benefits?
At the beginning of each month you make a health spending account contribution for each employee based on your contribution schedule.
What if an employee doesn’t use all of their health spending account contributions?
An employee may use the contributions you make this year for eligible health products and services purchased this year or next year. Contributions that are made this year and not used by the end of next year are refunded to the employer.
What if an employee quits or is terminated?
A terminated employee may claim for products and services purchased prior to their benefit termination date. Benefits may be terminated once your statutory and common-law obligations have been met (last day of employment, plus vacation payout, plus severance pay). Terminated employees have until the end of the calendar year to make claims, at which time any unused contributions are refunded to the employer.
Will my employees like a health spending account?
If this is your first benefit plan then your employees will truly appreciate a non-taxable budget to cover their health care expenses.
If you presently provide your employees with health insurance then it will be challenging to move them toward a health spending account.
- 60% of employees will like the health spending account more than health insurance since they have freedom to claim what was excluded or limited by health insurance.
- 20% of employees will miss the security of health insurance.
- 20% of employees will not have enough to cover present claims unless you provide some transition funding to increase their contribution amount.
It often takes two years and a lot of communication to successfully transition health insurance to a health spending account.