Health Care Spending Account

A health care spending account is an effective way to extend your health or dental coverage, and is a very tax efficient compensation strategy.


Think of it like a bank account. You use the money in your account to cover any expenses left over after you’ve submitted claims through other benefit plans. These could include deductibles or co-payments you would otherwise have to pay, as well as expenses not covered under any other plan.


Expenses reimbursed through a HCSA must qualify under the federal Income Tax Act as medical, vision, or dental costs. This includes everything from prescription drugs and adult orthodontia to seeing-eye dogs and organ transplants. Click here for more information on how a HCSA works.


Costs that wouldn’t be covered include: those that private insurers are not legally allowed to cover, services or supplies you’re entitled to for free; and any part of an expense that can be paid under another group plan or government plan.


The HCSA covers you and your eligible dependents. If your dependent children are no longer eligible for basic health benefits because of student age restrictions, they can qualify under the HCSA. And, individuals who don’t qualify for coverage under a regular group plan can still qualify under the HCSA if they are entitled to claim a medical expense tax credit for them under the Income Tax Act.


If you don’t spend all the money in your HCSA by the next enrolment, it remains in your account for the following year. If you haven’t spent them by the second enrolment, you lose them.


The HCSA is more tax effective than using cash, since you’re not taxed on the money you deposit in your HCSA. If you cashed it in, you’d pay income tax, so money goes farther in an HCSA.