Health Spending Account FAQ: Your Top Questions Answered
We get a lot of the same questions about Health Spending Accounts. Here are straight answers to the ones that come up most.
Q: What is a Health Spending Account?
A Health Spending Account (HSA) is an employer-funded health benefit that reimburses you for CRA-eligible medical expenses. Reimbursements are 100% tax-deductible for the business and 100% tax-free for the employee. It is one of the most cost-effective ways for Canadian businesses to cover health costs.
Q: Who qualifies for an HSA in Canada?
You need to be an incorporated business, or a business with arm's-length employees. Sole proprietors without employees do not qualify. Read our full breakdown of who qualifies for an HSA in Canada.
Q: What expenses can I claim?
You can claim anything on the CRA's eligible medical expenses list. That includes dental, vision, prescriptions, physio, massage, mental health, fertility treatments, and much more. See the complete list of HSA-eligible expenses.
Q: Is my HSA taxable?
No. HSA reimbursements are tax-free for employees in every province except Quebec, where they are taxable at the provincial level. The business deduction is the same everywhere. Learn more about how HSAs are taxed in Canada.
Q: Can I use my HSA for my family?
Yes. Your HSA can cover your spouse and children under 18, or under 25 if they are enrolled in school full-time.
Q: What happens to unused money?
It depends on your provider. Some roll unused balances over, some let them expire. With pay-as-you-go providers like Frontier Health, you only pay when claims are submitted, so there is no money sitting unused in the first place.
Q: Can I cash out my HSA?
No. An HSA is for reimbursement of eligible medical expenses only. You cannot withdraw the funds as cash. Read more about whether you can cash out your HSA.
Q: How fast do I get reimbursed?
It varies by provider. Some take weeks. Frontier Health processes claims within 24 hours and reimburses by e-transfer.
Q: Do I need to be incorporated?
To cover yourself, yes. Sole proprietors can only set up an HSA if they have arm's-length employees, and even then, the sole proprietor themselves is not eligible for benefits.
Q: How much does an HSA cost?
With Frontier Health, it is $120/year if you are solo incorporated, or $450/year if you have staff. There is also a small per-claim admin fee. No setup fees, no hidden costs.
Q: Is an HSA the same as a PHSP?
Yes. HSA is the common name. PHSP (Private Health Services Plan) is the official term the CRA uses. They mean the same thing.
Q: How do I get started?
You can sign up in about 10 minutes. Head to Frontier Health, set your monthly budget per person, and you are ready to start submitting claims.
Related Reading
- how a health spending account works in Canada -- Step-by-step breakdown