Health and wellness spending account wisdom

Navigating Health Spending Accounts

Top tips for insurance brokers, advisors and employers: Part 1

Our partners in insurance and advisory tell us they are experiencing a significant increase in client requests for health spending accounts. Our own numbers validate that; we’ve seen significant growth this year in terms of companies and brokerage houses onboarded, as well as allocation. 

A recent SunLife study showed that human resources professionals in large companies are most motivated.  In fact, 50 per cent of them are looking at shifting from a traditional benefits plan towards defined dollar spending accounts.

It’s likely no surprise to read this trend is inspired by the pandemic. Human resources professionals are reexamining their benefits packages as a new light shines on employee health and wellness.  They are turning to health spending accounts (HSAs) for flexibility, customization, cost-certainty and the tax-free benefits for both employers and employees.

Given the current spotlight on HSAs, over the next several weeks Aya will provide a series of tips on navigating your HSA options, whether you are the advisor or the client. We’ll share unbiased advice on decisions you will need to make along the way, including picking a traditional plan vs. bundling alternative providers, what to expect from the modern claims and adjudication process, and how to support employees through the change.

Let’s begin by exploring the choice between prepaid versus pay-as-you-go HSAs and the difference it makes, not just to employees, but to your accounting department.

Tip 1: Choosing between prepaid vs. pay-as-you-go Health Spending Accounts

The traditional option for an HSA is pay-as-you-go. An employee has a spending limit and pays for their health-related expenses out-of-pocket, which they are later reimbursed for. It’s similar to a traditional benefits plan, except that it typically creates more flexibility around the health expenses an employee can claim. The Government of Canada stipulates which health expenses are eligible. 

The alternative is a prepaid card – a credit card with a loaded dollar amount – that employees can use at  approved health care provider locations.  While pay-as-you and prepaid options require the employee to submit claims, the prepaid card means no out-of-pocket expenses for the employee.

For an employer, the difference between the two options can be more profound, particularly for your accounting department.

Going the prepaid card route creates an upfront expense – the number of employees who will receive a card, multiplied by the amount the employer chooses to allocate to that card. For some that figure is daunting – for others it provides clarity. It also creates a business asset. A line item in the accounts receivable column. Dollars not used on the cards are returned to the business.

Pay-as-you-go, while avoiding the upfront costs, and leaves you with a liability on the books as claims roll in. Putting parameters in place, such as a policy for an annual claims cut off, can be an important tool for a business to effectively manage pay-as-you-go expenses. At the same time, employees have to spend out-of-pocket on expenses, which we know is a deterrent. 

If you would like to learn more about the choice between pre-paid versus pay-as-you-go HSAs, don’t hesitate to reach out to And watch this space for more tips on navigating HSAs for your clients or your business. 

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