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The Canadian Taxpayers Federation, with the help of the CD Howe Institute, released a tax-proposal for the federal government this morning entitled Lower, Simpler, Faster – Towards a single tax rate for Canada. The proposal recommends the federal government embark on comprehensive tax reform with the goal of adopting a single personal tax rate. As an immediate first step, the authors (Mark Milke & John Williamson) recommend that Canada move to two federal income tax rates of 15% and 25% by 2012. There are currently four tax rates of 29%, 26%, 22% and 15%.
Their proposal also called for a decrease in the number of deductions available to Canadians. While they noted medical expenses as a deduction, I was disappointed to see less emphasis placed on reforming the current medical tax credit. The CTF plan proposes a generous personal exemption, stating that “Basic personal exemptions should be set at a generous level to exclude those with the lowest incomes and ensure the tax system remains progressive“. Supporters of the HSA could argue that the CTF proposal would have more support from other lobby groups (and the voting public) if it balanced their tax model with more sensible deductions.
A workforce with more money in their pockets is only beneficial if they are healthy and can produce. While I agree with the report, one could argue that the replacement of the medical tax credit with some of the HSA policies outlined in the US Medicare Modernization Act might prove to be an additional benefit. Allowing every Canadian to have access to an HSA and deduct it from their personal income taxes like an RRSP would be a good step forward to keeping Canadians healthier, and not just wealthier. While I understand the CTF proposal was focused on tax and not deductions, I certainly hope we see more discussion in Ottawa regarding the US-model for Health “Savings” Accounts as tax-savings vehicle to promote healthier and wealthier citizens.
Some more help on finding the right HSA for you in my series on items you should look for when choosing an HSA provider…
Administration Fees
Every HSA provider charges an administration fee for managing your health spending account. But what is reasonable and what should you look for in choosing the right HSA provider? To make a sensible decision, you should look at the different fees being charged and the pros and cons of each.
Administration Fee
Most HSA providers charge an administration fee. These fees tend to be in the range of 10% and 13% of deposits or claims. If you pay more than 13%, you should look elsewhere as there are many lower-cost alternatives. The fee is generally used to adjudicate your claims and manage the funds. Some HSA suppliers charge the admin fee on deposits while other charge it on claims reimbursed. Both models have their advantages. The first one takes the admin fee off on deposit, so you do not have to worry about it later when you make claims. The later charges you the admin fee each time you make a claim. They both end up costing the same, so not something to worry about – it is simply a personal preference.
Account Set-up Fee
Some HSA providers charge an account set-up fee. These fees can be as high as $300.00 simply to gain access to an account. These providers also charge an administration fee on deposits or claims. In my opinion, there is no need for a company to charge you an account set-up fee if they are charging you an administration fee – it is simply a cash grab. If you are opening an HSA for the first time, and you are unsure if it will be beneficial, I would strongly recommend using a provider that does not charge an account set-up fee. You are wasting your money!
Cheque Processing Fees
These fees are usually issued when a reimbursement cheque is issued (these fees average between $3.00-$4.00 with most HSA providers). The fee is applied to the batch of fees and not each claim. These fees cover postage requirements, cheque processing, and related charges to the trust account or bank account – depending on if you have a Health and Welfare Trust (HWT) or a Private Health Services Plan (PHSP) respectively. If a provider charges a cheque processing fee, the first thing you should look at is their admin fee. If they are charging 12% or more in admin fee, then they should not be charging you a cheque processing fee. You should never be asked to pay more than $4.00 for a cheque processing fee – the math simply does not justify it.
In summary, when choosing an HSA provider, you need to consider the fees and what works best for you. Try to avoid account set-up fees whenever possible. If you pay an admin fee, ensure that the cheque processing fee is reasonable. the lower the admin fee, the more acceptable the cheque processing fee. If the admin fee is high (over 12%) and they charge a cheque processing fee as well, look elsewhere.
I was watching the news this evening and saw yet another story about Corey Worthington Delaney, the Australian 16 year old who hosted 500 guests at his suburban Melbourne home. Sounds like a fun event until you learn that it took a host of police to break it up and caused $20,000 in damage. Now please believe me. If I was his father and I finally got my hands on him, it would take 12 Swiss surgeons to surgically remove those “signature yellow sunglasses” off the remains of what used to be his head. But the marketer inside me with a message to share has to say…bravo!
Now I am not condoning what he did, however, it does demonstrate the power of the internet and media in today’s world. In marketing, bad publicity can sometimes be as effective as good publicity – if it gets your message out. Corey’s party was promoted with zero cost using his mySpace page. He did not have to pay anyone to come, and he certainly did not need to issue a press release to get the media to cover his story. He made the spotlight on every major news network globally, using the internet. I wonder if Bill Gates is giggling at home while watching the news this evening.
My blog is devoted to Health Spending Accounts and I have decided to use this medium as a way to cost-effectively share my message to the world. Sure, I have questioned if it will be an effective medium. However, when I see the results of a 16 year-old, a mySpace page, and a desire to throw a little party for his friends – I start to realize the true power of the internet to share a message. I just hope my blog is a bit more useful for my readers out there.
Of course, if all else fails, I guess I could always cash $20,000 in stocks and get some Aussie to throw an HSA party for me!
