Frontier HSA vs Coastal HSA

Comparing Frontier HSA and Coastal HSA

Coastal HSA advertises $0 annual fees with a 6% claim fee. On paper, that looks cheaper than Frontier. But there's a significant compliance question you should understand before signing up.

The CRA Compliance Concern

For a Health Spending Account to be tax-deductible, it must qualify as a Private Health Services Plan (PHSP) under CRA rules. One key requirement: the plan must be "in the nature of insurance."

What does "in the nature of insurance" mean? The CRA has indicated that a legitimate PHSP requires:

• A premium or fee structure that resembles insurance
• Risk pooling or an administrative structure
• A formal arrangement that goes beyond simple reimbursement

A $0 annual fee with only a percentage on claims raises a question: Is this truly "in the nature of insurance," or is it simply an expense reimbursement arrangement?

Why This Matters to You

If the CRA determines your HSA isn't a valid PHSP:

• Your business deductions could be denied
• You may owe back taxes on reimbursements you received
• Penalties and interest could apply

This isn't theoretical. The CRA has issued warnings about HSA providers that don't meet compliance requirements.

Frontier's Approach

Frontier charges an annual fee ($120 for individuals, $450 for businesses) specifically because it establishes the "insurance-like" premium structure the CRA requires.

Our annual fee:

• Creates a formal premium arrangement
• Covers CRA-compliant plan administration
• Provides annual reporting and documentation
• Ensures your claims are defensible if audited

The Price Comparison

Yes, Coastal appears cheaper on paper:

If you claim $3,000/year:

• Coastal: $0 + $180 (6%) = $180
• Frontier: $120 + $240 (8%) = $360

But what's the value of that $180 savings if your deductions are disallowed?

Questions to Ask Any HSA Provider

Before signing up with any HSA provider, ask:

1. How does your plan meet the "in the nature of insurance" requirement?
2. Can you provide documentation of CRA compliance?
3. What happens if my claims are audited?

A legitimate provider should be able to answer these questions clearly.

Our Recommendation

We're not lawyers, and we can't tell you definitively whether Coastal HSA is CRA-compliant. But we can tell you that Frontier HSA is structured specifically to meet PHSP requirements.

If saving $100-200/year is worth the compliance uncertainty, that's your choice. But many business owners prefer the peace of mind that comes with a provider that charges a proper annual fee.

Frequently Asked Questions

Is Coastal HSA legitimate?

Coastal HSA exists and processes claims. Whether their fee structure meets CRA requirements for a PHSP is a question for a tax professional. We've structured Frontier to clearly meet those requirements.

Why does Frontier charge an annual fee?

Our annual fee establishes the "premium" element that makes an HSA qualify as a PHSP under CRA rules. It's not just profit - it's a compliance requirement.

What if I've already been using a $0-fee HSA?

Consult with your accountant. If your provider doesn't meet PHSP requirements, you may want to switch to a compliant provider and review your past claims with a tax professional.

Can I switch from Coastal to Frontier?

Yes. Sign up with Frontier, cancel with Coastal. Your new claims go through Frontier immediately. Past claims stay with your old provider.