What is a Health Spending Account?

A Health Spending Account (HSA) is a unique type of account that allows individuals to pay for eligible healthcare expenses using pre-tax dollars. It is sometimes referred to as a Personal Spending Account or Health Care Spending Account.

HSAs are typically offered as an employee benefit by employers, although self-employed individuals may also be eligible to set up their own HSAs. With an HSA, an individual can set aside a certain amount of money each year to pay for eligible healthcare expenses that are not covered by their provincial health insurance plan, such as dental or vision care, prescription drugs, and paramedical services like chiropractic or massage therapy.

Contributions to an HSA are tax-deductible, and withdrawals for eligible expenses are tax-free. Any unused funds at the end of the year can generally be carried forward to the next year, although there may be limits on how much can be carried forward.

How a business owner can benefit from a Health Spending Account

Small business owners are often left without a group insurance plan to cover basic medical expense.

Lets consider a business owner that has to pay $3000 for their child’s new braces.

What's covered under a HSA

All prescription drugs

• Lifestyle drugs

Medication not listed on provincial formulary

All Dental

• Including veneering

• Orthodontics

All optical

• Including laser eye surgery

• Contacts and solution

Paramedical Services

• Chiropractic

• Massage

• Physiotherapy

• Orthotics

• Naturopathic Doctor

• Plus many more

Other Eligible expenses

MRI, tuition for special needs children, any service provided by a medical practitioner

that is approved by the Canada Revenue Agency.

It's important to note that the rules and regulations around HSAs can vary depending on the specific plan, so it's always a good idea to check with your advisor or HSA provider to understand how the plan works what which expenses are eligible.