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Employee BenefitsGroup Health BenefitsPrivate Health Services Plans in Canada: What's To Expect?

Private Health Services Plans in Canada: What’s To Expect?

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Are you tired of high health benefit costs? Do you wish you could offer your staff more than cramped provincial healthcare coverage or demanding insurance plans? Then, let me tell you about a unique option with some slick tax advantages — Private Health Services Plans. 

These employer-funded accounts reimburse tax-free medical expenses insurance doesn’t fully cover — like dental work, vision care, physio, prescription meds, and more. Sound too good to be true? Believe it or not, it’s legit. And it gets better…

Companies deduct every penny invested in these plans from revenue as a business expense. I’m talking tax deductions so steep Ronald McDonald would whistle.  

With traditional coverage, you lose a third of the top to things like insurer admin costs or denied claims. But Private Health Services Plan funds go straight to your employees’ healthcare without a dime wasted, thanks to account administrators connecting payouts directly from businesses to those incurring approved medical expenses.   

That’s why forward-looking companies have made these plans standard worker benefits. Adoption has grown 400% in recent years. By 2030, experts project enrollment in Private Health Services Plans to explode based on double-digit medical inflation alone.

With the tax and savings upside for businesses AND employees, now is the time to prepare. Companies and working folks need to know everything about Private Health Services Plans moving forward in the coming years.

2024 Insights: A Glimpse into the Future of Private Health Services Plans IDC
2024 Insights: A Glimpse into the Future of Private Health Services Plans

What Are Private Health Services Plans Exactly?

First, how do they work at a basic level? Essentially, employers contribute pre-tax dollars to personalized health accounts set up for each worker. Employees then submit receipts and forms when they pay medical expenses out of pocket. They get reimbursed tax-free directly from their account up to the amount funded.

In 2024, Canadians will spend about $7,000 per person on healthcare when you add up what the government covers plus all out-of-pocket costs for things insurance doesn’t handle well — namely, medications, dental, therapy, etc.  

Private Health Services Plans fill in these gaps with first-class benefits. Rather than restrictive networks, they let people freely choose their providers and treatments. There are no deductibles, no claiming headaches, and just excellent coverage complementing provincial plans.

And again, companies deduct contributions from their earnings 100%. They also reclaim partial payroll taxes through reduced remittances each period when funding employee accounts. 

That means more benefit value at lower overall costs — up to 40% tax savings for employers by some accounts. With premiums and taxes continually rising, those forced to cut healthcare contributions face serious retention issues.

Why Private Health Services Plans Are Gaining Traction?

There are compelling financial and practical reasons driving increased adoption from both sponsoring employers and participating staff.

Key Advantages Driving Employer Adoption

100% Tax Deductions On Contributions

Contributions qualify as total business expense deductions, providing significant tax savings. For the average small company taxed at 35%, every $100 contributed creates $35 tax savings.

Lower Benefit Costs

With expanded tax deductions, employers see over 30% reductions in net health benefit costs compared to alternatives. More significant savings mean increased funding potential.

Recruiting & Retention Leverage

With labour tight, quality benefits boost hiring and retention. 88% of job seekers rate health plans as very or extremely important. Private Health Services Plans provide leverage to attract top talent.

Reduced Liabilities

Proactive benefits include alleviating healthcare costs and lowering future staff health events that lead to missed work and lost productivity.

Upsides Driving Employee Participation

Tax-Free Claim Payouts

Unlike taxable income, claim reimbursements come 100% tax-free, increasing functional take-home pay. A $500 claim represents $150+ savings for the average middle-class employee.

Provider Choice & Coverage Flexibility

Rather than restrictive networks, employees access preferred providers and service choices—broader qualified expenses than provincial healthcare plans.

Administrative Ease

Straightforward claim submission directly to the plan administrator avoids insurance claim delays or denials. Employees fill out forms and receipts for fast reimbursement.

The mounting advantages make Private Health Services Plans a win-win for employers seeking to manage budgets and talent looking to bridge healthcare gaps. Rising costs and coverage limitations explain projected growth through 2024 and beyond as this solution gains traction.

Private Health Services Plans create savings and simplicity for sponsoring employers and covered employees. Too often, company leaders assume better benefits mean higher costs, and workers feel trapped choosing between lousy provincial coverage or pricey add-on insurance.

These accounts present a legit third way — central medical value at sustainable prices through tax advantage.

So, with healthcare taking up more wallet share across Canada, it is no wonder forward-thinking firms already offer Private Health Services Plans, and adoption is projected to soar through 2024.

When To Consider Private Health Services Plans

Any incorporated business can explore sponsoring these health accounts. But the best-fit industries are:

  • Professional services: consulting, accounting, legal, architects etc.
  • Tech: software, app dev, robotics, AI programmers etc.  
  • Marketing agencies and creative shops
  • Startups and small business under 100 staff

These fields tend to have younger workforces. Tech-savvy employees abhor benefits gaps with costly impacts. Firms fighting for top talent offer the gold standard in coverage. Private Health Services Plans uniquely check all the boxes on extra health advantages.

The icing is account funds unclaimed by employees don’t just disappear like insurance premiums. They remain available for future medical needs that inevitably pop up.

While any incorporated business can offer them, the benefits sync exceptionally well for the segments above.

Who Can Access Private Health Services Plans?

Crystal Ball on Health Services: Anticipating Changes in 2024 IDC
Crystal Ball on Health Services: Anticipating Changes in 2024

On the sponsor side, account eligibility requires:  

  • Incorporated business status
  • Employee documentation via T4 tax slips 

For workers, access depends on their income sources:

  • Full-time permanent staff qualify
  • Part-time and seasonal also qualify
  • Contract workers paid T4 income qualify 

Those receiving tax slips for employment earnings can leverage account contributions from an incorporated business. This covers most typical workers outside sole proprietors or gig labourers who need to incorporate first formally.

And for company leadership or owners? Good news – you can enroll yourself along with immediate family members. Essentially, personnel on official payroll paperwork get access to tax-free medical reimbursements.

How Do Private Health Services Plans Work?

Let’s break down step-by-step how companies set up and run these plans while staff leverages the accounts for healthcare expenses.

For Businesses

Document Eligible Workforce

  • Compile a list of permanent and contract employees receiving T4 income tax slips
  • Include yourself as a business owner along with any immediate family members

Set Up Health Accounts

  • Partner with a licensed administrator to establish tax-advantaged health accounts
  • Account in each employee’s name tracks contributions and processes reimbursements

Make Monthly Contributions

  • Set period contribution amount per account tied to the payroll schedule
  • Example: $100 monthly per account, contributed with regular pay cycles

Deduct Contributions As Expenses

  • Contributions count 100% as tax-deductible business expenses
  • Deductions made off gross revenue lowering net taxable income

For Employees

Receive Annual Tax Slip

  • Tax slips document annual contributions like T4 earning summaries
  • Slips validate eligible medical expenses come tax time

Incur Medical Expenses

  • Pay out-of-pocket for health services like dental, prescriptions, therapy, etc.
  • Save all invoices and proof of payment.

Submit Claims for Reimbursement

  • File claim forms and documentation to the account administrator
  • Required info: medical receipts/bills, proof of payment for services

Receive Tax-Free Reimbursements

  • Reimbursement payments are processed directly into a personal bank account
  • Payouts come tax-free up a contributed account balance amount

Third-party administrators handle everything from account setup to verification and reimbursement processing. Firms fund the plans, and then employees manage funds seeking care as health needs arise.

Rather than wrestling with insurance companies or complex claim forms, folks get paid quickly when choosing treatment timing and providers. This is much easier and more reliable than traditional benefits.  

What Medical Expenses Do These Health Accounts Cover?

Navigating the Landscape: What's on the Horizon for Private Health Services Plans in 2024? IDc
Navigating the Landscape: What’s on the Horizon for Private Health Services Plans in 2024?

A significant advantage is the 100+ qualified expenses covered:

Standard Claim CategoriesDental – cleanings, fillings, x-rays, braces
Vision – eye exams, glasses/contacts 
Prescription medications
Medical devices – braces, crutches etc.
Paramedical – chiro, physiotherapy, massage 

Case-By-Case Expenses 
Laser eye surgery 
Long-term care
Specialist treatments
Fertility assistance
Travel Medical insurance cost
Some noticeable medical expenses when purchasing this plan

Company sponsors can tailor expense eligibility to how they see fit. Want to nix massage or psychotherapy reimbursement from the plan? No problem. That flexibility keeps costs controlled.

Conversely, some pregnancy vitamin supplements or customized orthotics require doctor authorization confirming medical necessity first before qualifying for reimbursement. But owners get leeway over standard plan coverage.

That wider berth for prescribers, employees, and sponsors makes Private Health Services Accounts far more amenable than one-size-fits-all insurance packages.

Private Health Services Plan Case Study 

Pretend you operate a digital marketing firm with 35 employees, mostly under 40. You offer a basic health/dental policy, but premiums spike each renewal. High talent turnover as folks get frustrated with plan caps or change jobs lured by better coverage elsewhere.  

You start contributions of $125 monthly to Personal Health Accounts for each worker — $52500 total per year. Employees now submit routine dental invoices plus medication and therapy costs exceeding insurance limits for fast 100% reimbursement. 

New Costs To Company

$52,500 in annual health account contributions 

Company Tax Savings 

$21,000 tax deduction on contributions @ 40% rate 

$4,000 payroll tax reduction from lower premium expense 

$25,000 total tax savings = 48% of new costs

Employee Benefits

$40,000 estimated medical claims paid tax-free 

$12,000 workers save annually (@ 30% tax rate)

So, after tax math

  • The company spends a net $27,500 more on improved benefits
  • Saves an estimated $15,000 on turnover costs  
  • Workers save collective $12,000 in taxes and medical costs

With projected 20% yearly healthcare inflation, traditional coverage options would otherwise increase dramatically while covering less. Instead, you control costs with advantageous accounts that do not lose value to premium leakage.  

What’s The Verdict On Private Health Services Plans In 2024 & Beyond?  

Prognosis for 2024: Key Expectations in the World of Private Health Services Plans IDC
Prognosis for 2024: Key Expectations in the World of Private Health Services Plans

Rising premiums, shrinking coverage, and constant administrative hassles- traditional health insurance keeps getting pricier as policies grow more restrictive.  

Then, steadily climbing out-of-pocket medical expenses take a giant bite out of stagnant paychecks. Private Health Services Accounts provide possible relief for both companies and working folks feeling the squeeze.

Expect enrollment to accelerate 25-40% through 2024 and beyond as healthcare occupies more firm spending and household budgets. Savvy leaders view this option as a strategic advantage in protecting their workforce and bottom line.

But hefty taxes and legal implications mean private health services plans are only ideal for some organizations. Carefully assess unique aspects like:

  • Company incorporation structure 
  • Number of documented employees
  • Existing benefits landscape
  • Payroll withholding requirements
  • Workforce demographics and health risks  

Navigating compliance and legal considerations requires financial acumen and expert support. However, the heavy lifting can result in major savings for years as healthcare charges spiral upward.

Now is the time to explore if the considerable benefits warrant adopting Private Health Services Plans in 2024. Contact IDC Insurance Direct Canada for tailored guidance on executing this opportunity. Their pros help spearhead programs providing optimized medical coverage, talent retention, and overhead reduction.  

IDC Insurance Direct Canada stands ready to consult on how Private Health Services Plans in Canada can alleviate future budgets for both leadership and employees. Request a free quote and incentives assessment for your organization’s specific situation.

Article Sources

At Ebsource, our mission is to provide Canadians with comprehensive, truthful information to help them make prudent choices about employee benefits. We tap into the expertise of veteran financial professionals to ensure our advice aligns with industry best practices. The statistics we cite come from respected government and industry bodies like Statistics Canada and the CLHIA to guarantee accuracy.

Our recommendations stem from rigorous, unbiased research on the major employee benefits providers in Canada. This allows us to tailor suggestions to individuals’ specific budgets and needs. Ebsource upholds high standards of objectivity, transparency, and independence in all our materials. We pride ourselves on furnishing advice readers can trust by citing reputable sources and adhering to sound editorial principles. As Canada’s most trusted source for employee benefits news, we are dedicated to empowering Canadians to make informed benefits decisions.

Private Health Services Plan (PHSP) Concepts – https://www.brockhealth.ca/
Private Health Services Plan or Health Spending Account – Tax-Free Benefit for Employees – https://www.taxtips.ca/
Private Health Services Plan (PHSP) in Canada – https://lifeaccount.ca/

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