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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.
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!
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.
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.
In previous entries I have talked about cost-containment and I recently realized that perhaps this topic needs some more clarification. Cost-containment is a buzz-word used by many in this industry and different players have different versions of what they bring to the table in terms of value. While they all offer good solutions, sometimes the simplest of models are overlooked. To support this, I ask the following…
What costs can you yourself as a business owner truly contain when it comes to health benefits?
For many, the answer is nothing. But think for a minute about what you pay and what it is used for. You pay a premium for health insurance much like you would a premium for auto insurance. The big difference is what you pay to have covered. Let’s assume your body is like a 2008 Volkswagen Passat. It has tires (or teeth) to grip the road. It also requires regular maintenance (like massage therapy or acupuncture) to keep it running and to prevent wear. Ten years down the road, you may need to spend money on a new engine not covered under warranty (like elective surgery) to keep it going for a few more years. In case you get into an accident, you buy insurance to protect you from the unforeseen and to give you the money you need to get the car back into working condition. Similarly, your body could become stricken with Cancer or Diabetes where you need drugs to help fight the disease and keep you in working condition as well.
The big difference here is that the last item, the unforeseen, is truly the only item you need to buy insurance for when it comes to your car. You don’t buy maintenance insurance or tire insurance as these are predictable expenses and it would not make sense to pay an insurance premium for something you already know you are going to need. Mind you, some form of fixed rate gas insurance might have been a good idea these days! The issue today is that we don’t treat the protection of our bodies the same way we do our cars. We insure the entire package, tires, maintenance and collision. Further, we choose a low-deductible so that we pay a higher premium unlike our cars where we tend to choose a higher one given the risk and the balance we are willing to take between upfront costs and unforeseen costs.
This is where I believe that the basics of cost-containment should be focused. For every day medical costs, we should be paying them out of our pocket in real dollars. After all, if you know that your teeth need to be cleaned every 6 months, why would you buy insurance for it and pay an inflated premium? It is going to happen just like a new set of Winter tires every November or an oil change. Instead, you should be using a more sensible financing vehicle to pay for the predictable medical costs and only purchasing insurance for the unforeseen, like Cancer, Heart Disease, or Diabetes.
To pay for the predictable costs, a Health Spending Account is the ideal solution. You can control the amount you spend and benefit from the tax savings. Secondly, you can contain the rising costs of premiums by taking away the claims you used to run through the plan and leave it for drug-only – the unforeseen costs if you will. If you are in decent health, you may wish to get a higher deductible drug plan, further reducing the premium you pay. The deductible amount can always be run through your HSA, so you are not loosing by doing this. If anything, you are saving even more money in taxes, a win-win solution.
Well, there you have it – my thoughts on cost-containment. I could have talked about per visit maximums, generic drug replacement, or electronic card adjudication and fraud monitoring. But the reality is that cost-containment really begins with the employer using the simplest of philosophies. Of course, it helps if you know a bit about cars in my analogy.
I have spent a few months looking at claims and how people submit them into Benecaid, where I currently work. Submitting manual claims can be a very frustrating experience for those not living inside the insurance world. Paperwork, mailing addresses, originals versus copies – it can be a real headache. That being said, I thought I would share some of the biggest mistakes people make when submitting claims to an insurance company.
1. Original Receipts & Prescriptions
This is by far the biggest issue for customers. You should always send the original receipt and if you have it, a copy of the prescription to validate that it was prescribed by a doctor. The second item isn’t always necessary but is handy to ensure faster processing. If you want a copy for your records, keep the photocopy AND NOT the original. The insurance provider or HSA adjudicator will question the copy and most likely return it to you. After all, if they received a copy, how many other companies did you send the copy to?
2. Use The Right Form
With so many forms, it is hard to stay on top of which one to use. Every insurer or HSA provider should have the forms readily available on-line. If you are unsure which form to use, your best bet is to call your insurer or HSA adjudicator once a year and ask. Download and print a couple and keep them on file.
3. Complete the form in FULL
Many insurers have standardized forms designed to be scanned to retrieve the data and convert it into an electronic format. This technology is used to speed up the processing and is designed to be a benefit for the customer. When you do not complete the form in full, or enter information in the wrong place, it can cause problems in scanning and slow-down the adjudication of your claim. Take your time and complete the form in full. Most insurers and HSA adjudicators have reference guides you can ask for if you need help…just ask them for a copy.
4. Send Your Claim to The Right Address
Be sure to send your original claim and the correct completed form to the right place. Many insurers and HSA providers have more than one location for adjudicating claims. If you are unsure of where to send your claim, call their customer care department before you send it. It can save you problems down the road.
5. Coordination of Benefits
If you are already covered under another plan (i.e. company plan or spouse’s plan), the insurer will most likely ask you to submit your claim to the first insurer before you submit it to them. They will cover anything not covered from the other plan up to your maximum. If you have an HSA, it is always wise to send the claim to your insurer first. When you receive the claim back, the difference can be taken out of your HSA. To do this, you simple forward the original Explanation of Benefit (EOB) received from the original insurer with a claim form. The HSA adjudicator will take the amount unpaid from your insurer and reimburse you the difference from your HSA. While it is a complex process, it does save you money in the long-run from your HSA. After all, if you already have insurance through another source and it is not costing you anything, you should take advantage of it!
These tips are not going to ensure that every claim is paid but it will help to make the process faster and ensure proper adjudication. If you follow these tips, you should see a significant reduction in follow-up with your insurer or HSA to find out…”Why won’t you pay my claim?”
I have been watching the Olympic flame protests over the past few days and have been wondering…what can I do to get the same spotlight turned to Health Spending Accounts? Don’t get me wrong, the protests regarding China, Tibet, and the Olympics are a bigger news story but I think it would be interesting if Canadians said enough is enough and headed to the streets to protest!
What would we protest? Why accessibility of course. Why are HSAs offered by only a few providers and why are they limited to business? Shouldn’t everyone have access to an HSA as they do in the United States? Is this the result of some anti-HSA sentiment lurking in the bowels of Ottawa? Why do Canadian families without a company sponsored plan have to use a high-priced drug insurance product from the big-three insurers when an HSA would be a better solution? Why Ottawa? Why?
It is a shame people do not get more enraged over this and want to start protesting. I can imagine a field of men, women, and children holding candles oustide of the Ministry of Finance in Ottawa. We would be singing classic HSA protest songs like “All we are saying is give HSAs a chance”, “We’re here we’re sick, and we want HSAs”, or my favorite…”I am HSA, hear me roar, in numbers too big to ignore..”. Good times.
Oh well, I will continue my blog until such time in hopes that someone in Ottawa will hear my cry…Vive la Revolution!
I am a bit of a looser when it comes to taxes and I am probably the first Canadian to submit their return each year. I always get a reimbursement cheque and immediately put it back into my investment portfolio. For self-employed Canadians however, there is a better option!
A smart place to put your tax reimbursement is always a Health Care Spending Account (HCSA or HSA). But what should you think about before putting your money into one? Well, if you own your own business that is not incorporated, you may want to consider opening a Private Health Services Plan (PHSP) this year. If you do, you should take a few steps to consider if this is a good option for you…
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Do a headcount of your family members. To determine your maximum PHSP allowance each year, you simply add $1,500 for each eligible adult over the age of 18 years and $750 per dependent under 18 years old. If it is you, your spouse, and your son, then you are entitled to $3,750.00.
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Top-up or Not? Take a look at your finances (high-level) and get a sense of how much money you will be getting back from your return. If you have a financial planner or broker, speak with them about topping up your RRSP contributions. They will have access to several calculators to help you determine how much your return could be if you “maximized it”. You may want to top-up to get the reimbursement to equal your PHSP allowance.
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Take a look at your family and business finances and decide if you can go a year without the reimbursement. Some families rely on their tax reimbursement each year, so deciding not to take it can be a bit of an issue. If you can live without the money and put off that trip to Disney World with the kids for the coming year, why not make it work for you next year?
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Be sure to send in your return to Canada Revenue Agency sooner than later. Why? The earlier you receive your reimbursement, the better off you are for next year’s deductions with your PHSP. The deduction for the PHSP is pro-rated, so you will want to start your contributions early in the year to get the full benefit. The faster you get your money back, the faster you can open your account. But remember, you can always simply open the account and fund it yourself until you get reimbursed – but why use your own money?
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Finally, determine the final deposit amount for your PHSP. This is done by calculating the difference between your maximum PHSP allowance (less pro-rated months if you are not early) and your return reimbursement. If you are getting more back from CRA versus your PHSP allowance, congratulations! If not, you need to look at how much your family needs for healthcare and whether or not you want to top it up with your own money. Remember, what you put into your PHSP is a full deduction for you (unlike RRSPs), so you may want to go the extra mile here.
Well, that just about covers it. If you do decide to use your tax return to fund a PHSP, remember that the strategy here is to use the funds to pay for your healthcare costs while making a sensible tax move. The money you deposit in the coming months will be 100% deductible off your 2008 return as a business expense. If you think about the same money going into an RRSP, you would never receive the full amount as a tax deduction. If you are going to be making regular RRSP contributions throughout 2008, why use your 2007 reimbursement to get a small lift when you could get a full lift from a PHSP?
It is the last week for Canadians to make contributions into their RRSP to take advantage of the tax-deduction for 2007. I myself have received numerous calls from my financial advisor reminding me to top-up my contributions for 2007 and letters indicating that my advisors will be available until the wee hours of the night to help me should I decide to add more to my investment plan. It makes me wonder, how many Canadian small business owners would put more into the RRSP each year if they could free up the extra money? Are they spent?
Financial advisors tend to focus on the after-tax money available to invest as opposed to looking at ways to free-up pre-tax dollars as a tool for investing. For many small business owners, the HSA is an unknown option. Each year, they take a few of their after-tax receipts and make a claim for the medical tax credit. A nice gesture from the federal government to reimburse for medical expenses but certainly not enough to give someone more money to invest. The reality is that if they had a Health Spending Account, they could be using the tax-savings to re-invest into their retirement plan.
Each year, some financial advisors look for ways their small business clients can contribute more without giving them any real options to free-up the funds to do it. To all my readers out there who are financial advisors with small business clients…get them an HSA today! Show them how they can make their current after-tax expenses into pre-tax business deductions. Show them how this will impact their taxable earnings and how they can use the savings to re-invest in their RRSP! Given the economic conditions and the tough time your clients have had this year, this is a great way to show them how resourceful you are in finding ways to build wealth for them using a readily available and sensible solution – the HSA.
Well, who would have thought that my posts regarding Consumer Driven Healthcare would spark so many calls and e-mails. Since a blog is an ongoing story that is forever being written, I don’t always get the chance to write every detail. Over time, this will change as I add more and more content – I can only type so much in a day.
One of the e-mails I received asked if I believed that Consumer-driven healthcare could work without insurance. The answer of course is no. If you had the chance to read my article in Benefits Canada this month, I provided some options for Canadian companies to use the US-model of delivering CDH with the use of a Health and Welfare Trust (HWT). In the article, I suggested that companies offer an Health Spending Account in the form of an HWT as a replacement to traditional insurance for predictable claims. An HSA is an ideal funding model to cover predictable claims, the ones you know your employees will incur and therefore you have no need to insure for the event. After all, nobody would ever consider buying gas insurance for their car so why would you pay a premium for your annual dental cleaning.
However, I cannot stress enough the importance of insurance for the unpredictable. That is, after all, why we buy insurance. If anyone thought that I suggested we abandon insurance and go to a cash-savings model only, I apologize. What I wanted to stress is that the decision making on how premiums are paid and what they are paid for should be part of the decision making process of the consumer. Maybe not immediately, but certainly down the road once the support network is in place to educate and inform consumers to make sensible choices. The key issue at hand is the ability for consumers to make choices and spend their money in a more sensible manner. Buying insurance for the unpredictable claims and using their HSA for the predictable is money spent, in a sensible manner.
HSA Information for Canadians 
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