Travel Insurance and Your HSA

Tickets? Money? Passports?  Have you got everything for the coming Canada Day long weekend?  While many Canadians will be laying low this year with the price of gas, I myself will be making my annual trip to see friends and family abroad, at a significant premium over last year.  Like many small business owners, I have a personal out-of-province travel policy to take with me.  What many people don’t know is that these policies are an eligible expense from a Health Spending Account!

That’s right!  You can sign-up for most group medical travel plans and the premium can be claimed from your HSA, similar to a private group insurance plan like Manulife’s Cover Me or similar products from Blue Cross.  I have Travel Assist, a product from Benecaid and ETFS.  It provides me with out-of-province medical and emergency sickness for up to $5 million of coverage per trip per person and a $75,000 referral benefit to cover medical and transportation costs in excess of provincial coverage.  Even better, it provides coverage for trip cancellation and lost baggage!  Having a travel policy is essential when leaving your province and given the nominal cost, every Canadian should be investing in this type of overage, especially during the busy summer travel months.

Since it is an eligible expense from my HSA, the premiums are paid with tax-free money making it even more affordable!  If you have an HSA, or are considering one, be sure to add a travel policy, you won’t regret it.  Bon Voyage!

Happy Belated Tax Freedom Day!

I can’t believe I forgot yet another Tax Freedom Day. I am so busy this time of year. I didn’t even get my Happy Tax Freedom Day cards out into the mail until last night. What an embarrassment.

But yes, Tax Freedom Day was last week, June 14th to be exact. Virtually every Canadian added some extra cash to their pay cheque as of June 14th and to be honest, it could not have come at a better time. It costs $100.00 to fill my car each week and the price of food (based on the price of corn) continues to climb along side.

I think Tax Freedom Day will always be a bit of a second-rate holiday for people like me. While it is an important day for most Canadians, it holds little importance for HSA owners. After all, they already enjoy a greater degree of tax freedom when it comes to their medical expenses. When an individual business owner experiences savings of $5,000-$10,000 a year for their high-cost medical expenses through an HSA, you can understand why Tax Freedom Day is a bit over-rated. After all, an additional $150.00 in their pocket from mid-June to December isn’t going to change the world. They have turned Tax Freedom Day into a year-long event. Sort of like those neighbors who leave their Christmas lights up all year long…because they can’t get enough of the holidays I suppose.

But I am always looking for a reason to celebrate and even though I missed the official date, I still have 30 people coming over on Saturday for a Tax Freedom Day BBQ. You know, the kind where you drink lower-taxed domestic beer versus imports and play games like “pin the tail on the finance minister”. That reminds me, I need to order my dollar-shaped cake for the party!

Oh Doctor, Doctor! Canada is Calling, Calling!

Sorry folks for the long break since my last post.  I have been a little busy but thought that this morning I would write about the new Statistics Canada report on the shortage of doctors.  Rather, the number of Canadians without a family doctor.

According to the report, 4 million Canadians do not have a regular doctor, and recent immigrants are the most likely to be without one.  Only 73% of people living in Quebec have a regular doctor, the lowest rate in the country.  Nova Scotia, however, had the highest percentage at 94%.  Of those who do not have a family doctor, the study showed that 76% use local clinics and community health centres as their primary source of care.

This lead to me thinking…what does this mean for the corporate consolidation we are starting to see in places like Alberta and Ontario for medical services?  ListenUp Canada, as an example, are consolidating hearing clinics and making access and service more streamlined.  Will private walk-in clinics be branded next?  For those looking for new business venture ideas, might I suggest a coffee in the coming weeks?  We may be onto something here, especially if this trend continues! 

Holy Dental Bill! Help me HSA!

To continue with my dental experience, I decided to ask for a series of estimates for braces – the invisible kind not the kind Tutti wore back in the eighties.  Many of you are asking yourself…why on earth would you want braces?  Especially at your age?  Well, I have always had a bit of an overbite and when my wisdom teeth came in, they caused my teeth to be extra tight.  So, I am exploring the option of getting braces…..until I received the quote.  The cheapest solution will probably be $6,000 for what I am looking for – the equivalent of two 42″ Plasma Screen TVs or new hardwood floors in the house!

I don’t need them right away and can start saving today.  Since Gremolata is incorporated, I qualify for a Health and Welfare Trust.  I don’t want to go overboard here deposit-wise, but I could easily allocated $300 a month towards an HWT in my name.  This could be considered the core health benefit plan for the company.  This would provide me with $3,600 a year in deposits less a 10% administration fee ($360).  Using this schedule, I would have enough saved up for the braces in two years.  The dentist suggested I wait 6 months before I even consider the consultations with the specialist, so this time line works well for me.

Let’s do some tax talking for a minute.  The $3,600/year would become a business expense for the corporation as a cost of doing business – keeping me healthy.  The $3,600 deposited into my Health and Welfare Trust, as an employee of the corporation, would be a tax-free benefit for me (as long as I continue to reside outside of Quebec).  In essence, I am now receiving $3,600 in additional compensation I can use for braces without having to pay the income taxes on the amount.

So, there you have it.  I can use my Health and Welfare Trust to pay for my braces and save both myself and the company money.  I can be flexible with a deposit schedule I am comfortable with financially and use the funds when I have reached my goal.  You now understand how to save money as well as my dental records.  Ah, the internet.

A Trip to the Dentist…with my HSA…

OK.  I have to make an announcement.  One that I am sure will shock many of you out there who know me personally and read my blog.  It is a little embarrassing, however, I went to the dentist today….for the first time in twelve years!!

I know – somewhat gross, but I brush and floss daily and had perfect teeth as a child.  Not a big issue in my books.  I was one of those kids everyone hated, where I never needed braces and everything just grew in perfectly – even my wisdom teeth.  I probably should ask my father for some money in lieu of costs associated with braces, considering how much my perfect dental history saved him.  However, I have been scared of dentists and the idea of having someones fingers poking my teeth, so I resisted until I got an accidental chip on my front tooth. 

The first thing that I encountered when booking my appointment was the famous line – “do you have insurance?”.  I said yes and booked my appointment.  Since it had been a while, I had to get the full exam with those creepy x-rays and the counting of the teeth.  The dentist was a wonderful woman and I would highly recommend her to anyone in and around Oakville, Ontario (e-mail me if you want the details).  Given the painless experience, I was ready to get all kinds of treatments like whitening and a guard to stop me from grinding at night – I deal with allot of stress these days managing the upcoming re-launch of Gremolata.  The dentist said, these are all great things, but they will not be covered by insurance.  That is when I said “no problem, I have a health and welfare trust”.  She looked at me funny and that is when sales man James took over.

I explained to her about the Health and Welfare Trust I have with Benecaid and that I had a reserve of funds I could use for exactly this type of expenditure.  She noted that these costs can be substantial but I told her that I had more than enough to cover it.  She was impressed.  After all, how many clients walk into a dental office and say, give me the works!  Well, those with an HWT would.

I think this is why I am so passionate about Health and Welfare Trusts.  I don’t feel limited to a plan.  I can get the basic care I need but also invest in the things that will make me feel better about myself – such as brilliant white teeth or a new nose (the later requires more thought).  All joking aside, it is a great feeling to know that you have the tax-free money to spend when and how you want to.  It also makes me think how impressed every employee would be with the company they work for if they had access to the same HWT as I did.

Oh, and for the record.  No cavities and a healthy smile was the diagnosis I received!  Whew!

 

Albertans Could Double Their Health Tax Savings!

The Alberta government officially said goodbye to the health tax in their recent budget effective January 2009, joining seven other provinces and territories (New Brunswick, Northwest Territories, Nova Scotia, Nunavut, Prince Edward Island, Saskatchewan and Yukon) that don’t collect specific health premiums or taxes. These provinces fund healthcare out of general tax revenue.

So, what is an Albertan to do with their new found wealth?  After all, each resident is looking at savings in the range of $528 per individual and $1,056 per family.  It is a great amount to use on a new television or perhaps a BBQ for summer entertaining.  But if they are self-employed, like so many other Albertans working in the oil and gas industry, they could be putting these funds into a Health Spending Account to maximize the return.

If you think about the money they are receiving back as part of their total budgetary spending, they could simply deposit the equivalent into a Private Health Services Plan.  There are several HSA suppliers in Alberta who would be happy to take the money for them and in return, the taxpayer now has access to a reserve of funds to keep themselves and their family healthy.  The big perk, they can double dip on the tax break they receive by making it yet another tax deduction for themselves as a PHSP.  Brilliant!

I hope all self-employed Albertans will think about this as an option.  It might be a small amount of money you are getting back, but it is still a great way to make it work for you long-term.   

 

An iPhone is Sort of Like Health Benefits…

Well, in Canada that is.  Today, Rogers Communications announced that it will be bringing Apple’s iPhone to Canada on their national mobile network.  This is a big win for Rogers, but also a classic example of Canada’s long history of being a “wait to adopt nation”.  In the benefits world, this could not be any more classic a scenario.

Canada is a great “wait and see country” when it comes to health benefits.  We are situated mid-way between socialist driven Europe and Free-economy America.  That being said, we tend to wait until one of these two parties develop a new health benefit delivery model then observe performance before we pounce on it.  In marketing, we would be less “early adopter” and more “cautious analyzer”, not that it is a bad thing.  This strategy has actually been beneficial to the global delivery of health benefits as many other countries rely on us to sit back, assess, and perhaps make it better.

As an example, one simply needs to look at our Universal Healthcare system.  We did not invent it, but we certainly perfected it to meet the needs of our people (at the time).  We did not invent Flex Benefits, but we were pioneers in making the election process easier using the Web.  On-line enrollment, tele-claims, and direct-pay drug/dental cards were all heavily influenced by leading Canadian technology companies.  However, while we have had an IT-bulletin from CRA allowing HSAs for years, we have yet to fully embrace them to the same degree as our neighbors to the south.

For the last example, I don’t think we are using a “wait and see” strategy.  We were pioneers in allowing this model to exist and we could be offering these plans to every employee in Canada today.  The strategy we are using here is “cautious execution”.  I think we like the concept but want to see how other countries fare in rolling it out before we go full-throttle with any legislative changes.  Will we go down the full consumer-driven healthcare model like our friends to the south or follow the UK model?  Most likely, like everything we do, we will wait and create new HSA legislation to suit our needs and set a new standard for the world.

I wonder if this culture of “waiting to perfect” will have an impact on the iPhone?  I for one would like to see it incorporated as a TV remote as well as a phone, PDA and iPod.  Hmm, maybe I am on to something here.

 

New Content on HSAs in the USA!

Seeing how we receive questions on how HSAs in Canada are different from those south of the border, we have added a new dedicated page on Health “Savings” Accounts.  You can access this page on the top navigation under the tab US Model.

We will be adding even more content in the coming weeks.  Stay tuned folks!

Apples & Oranges – Comparing HSAs to Insurance

I was thinking about Health Spending Accounts, like I always do, and thought I would write a blog entry to clearly articulate the differences between HSAs and traditional insurance.  I thought this would be a valuable tool for consumers considering an HSA over an insured plan.  Here we go…

Insurance

Places limits on coverage to a defined maximum.  Some plans allow you to have a higher limit for a higher premium.

Health Spending Account

There are no limits in terms of specific coverage.  If you are incorporated and have a Health and Welfare Trust, the amount you can contribute is unlimited.  If you are unincorporated, you are entitled to limits based on the number of dependents eligible from your Private Health Services Plan.  Either way, you are not limited to a specific amount of coverage, you can allocate the funds to whatever healthcare costs you see fit.

Insurance

Requires a premium to be paid.  This premium is equal to the true cost of claims plus 20-30% to allow for risk factored into the plan to ensure profitability for the insurer. 

Health Spending Account

The premium is really a deposit structure equal to the true cost of claims plus 10% to cover administration of the plan.  These costs are fixed.

Insurance

The cost of the premium is defined by the insurer and can be increased at their discretion based on claims from the previous year.

Health Spending Account

The cost of the plan is driven by the consumerand there are only increases if the HSA owner wishes to deposit more money into their account.

Insurance

The plan covers immediate dependents only such as spouse and children under age 18.

Health Spending Account

These plans cover any dependent related to the account holder by blood or marriage, regardless of age, as long as they are financially reliant on them in a given year.

Insurance

These plans may limit coverage to within Canadarequiring a supplemental travel policy for out of country health care expenses.

Health Spending Account

The funds in the account can be used to reimburse claims globally provided it is an eligible expense in their home province.

Insurance

The premium paid cannot be reimbursed and is lost at the end of the year.  If no claims are made, the insurer keeps all of the premium.

Health Spending Account

The funds in the HSA roll-over to the next year and are not lost.  Note:  This applies to a Health and Welfare Trust.  If you have a Private Health Services Plan the funds are lost after 2 years from date of deposit if not spent.

Insurance

The plans do not cover all procedures and drugs. 

Health Spending Account

Funds in the account can be used to cover all drugs and treatments prescribed, dispensed, and performed by a medical practitioner including smoking cessation, fertility treatments, and elective surgery.

Insurance

These plans require basic medical underwriting and do not cover pre-exisitng conditions.

Health Spending Account

There is no medical required and the funds can be used to cover pre-existing conditions.

Cost Are Rising? Groundbreaking.

I am really getting tired of reports indicating that health care costs are on the rise. It is kind of like saying this summer’s hottest trend will be swimsuits. But yet again, another report has been released (you know who you are) stating that health-care cost increases continue to outpace other business cost increases as well as the consumer price index.  Groundbreaking study.

Where are the reports on trends in cost-containment or innovative benefit strategies?  How about a study on the trends within small to medium sized employers or recommendations from businesses to reduce costs?  As an industry, we tend to state the obvious far too much.  Unless a study reveals that costs have actually gone down, why on earth report the findings?  Especially if the report does not offer any solutions to reverse the trend. 

To my colleagues in the benefits world, for the love of god, please stop stating the obvious.  Otherwise we will all have to get new jobs in new fields where these skills are embraced.  By the way, it is currently 18°C and partly cloudy in Toronto with light winds coming from the West and as the sun sets, I expect it will get cooler.