HSA vs Group Benefits: Which Is Better for Small Teams in Canada?

By Frontier Team•February 10, 2026•3 min read

If you run a Canadian business with 1-5 people, you have two main options for covering health expenses: a Health Spending Account (HSA) or traditional group benefits (insurance). For most small teams, an HSA is the better choice — lower cost, broader coverage, and full tax deductibility. But there are situations where traditional group benefits make sense too, especially if your team needs catastrophic coverage. Here is how they compare.

Quick Comparison

HSA Group Benefits
Monthly cost $0 (pay per claim) $150-$300/person/month
Tax treatment 100% deductible, 100% tax-free Premiums deductible, may be taxable benefit
Coverage scope All CRA-eligible expenses Limited to plan inclusions
Unused money Rolls forward or stays with business Gone (use it or lose it premiums)
Catastrophic coverage No Yes
Deductibles/co-pays None 20-50% on many items
Setup 10 minutes online Broker negotiation, medical questionnaires

When an HSA Wins

For most small teams, an HSA is the clear winner. Here is why:

  • You only pay when someone actually uses it. No monthly premiums draining your account whether your team visits the dentist or not.
  • Everything CRA allows is covered. Dental, vision, massage, physio, prescriptions, mental health, fertility — no plan exclusions or confusing tiers.
  • Full tax efficiency. Reimbursements are 100% deductible for your business and 100% tax-free for employees. Group benefit premiums can sometimes create a taxable benefit for employees.
  • It is simple. No broker negotiations, no medical questionnaires, no annual renewals with surprise rate increases.

If your team is healthy, costs stay low. If someone needs care, they get reimbursed fast. Either way, you are not wasting money on premiums you never use.

When Group Benefits Win

Group benefits still have a place. Consider them if:

  • Your team needs catastrophic coverage. An HSA does not cover hospital stays, disability, or life insurance. If someone on your team faces a major medical event, group insurance provides that safety net.
  • You have employees with serious chronic conditions. Expensive ongoing medications — like biologics that cost thousands per month — can exceed a reasonable HSA budget quickly. Insurance spreads that risk across a pool.

For these situations, group benefits provide protection that an HSA simply cannot match.

The Hybrid Approach

Many businesses pair a basic catastrophic insurance plan with an HSA for everyday expenses. You get the best of both worlds — protection against major events plus flexible, tax-free coverage for everything else. The insurance plan handles the rare, expensive situations while the HSA covers the dental visits, glasses, massages, and prescriptions your team actually uses day to day.

This approach often costs less than a full group benefits plan while giving your team broader coverage overall. For a deeper look at how HSAs stack up against insurance, see our guide on HSA vs traditional health insurance.

Get Started with Frontier Health

If an HSA sounds right for your team, Frontier Health makes it simple. Set a monthly budget per person, and your team submits receipts when they have health expenses. Reimbursement lands in their account within 48 hours. No premiums, no paperwork, no wasted money.

Simplify Your Business Health Benefits

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