Questions
Health Spending Accounts, answered plainly
The questions incorporated business owners and their accountants ask us most about Private Health Services Plans, also called Health Spending Accounts. If yours isn't here, ask us.
What is a Health Spending Account (HSA) in Canada?
A Private Health Services Plan (PHSP), often called a Health Spending Account (HSA), lets an incorporated business pay for health and dental expenses directly: deductible to the corporation and tax-free to the employee when the plan meets CRA's conditions. The plan reimburses the employee for eligible expenses, and the corporation pays the cost plus an administration fee. Medallion Health has administered these plans since 2016.
How the plan works →Is a PHSP the same thing as a Health Spending Account?
In everyday use, yes. "Private Health Services Plan" is the term in the Income Tax Act, and "Health Spending Account" is the name most providers and advisors use for a cost-plus PHSP. Both describe the same arrangement: the corporation pays eligible health expenses directly rather than the owner paying them from after-tax income.
Can a sole proprietor have a Health Spending Account?
Not with a cost-plus plan. CRA's position is that a cost-plus PHSP is not deductible for an unincorporated business, so Medallion plans are for corporations only. If incorporating might make sense for you for other reasons, that is a conversation to have with your accountant.
Is a PHSP worth it for an incorporated physician or dentist?
Often, yes, if the family has regular health and dental expenses. Paid personally, a $3,000 bill at a 40% marginal rate takes about $5,000 of pre-tax income. Paid through the plan, the corporation pays the $3,000, a $300 administration fee and the sales tax on that fee, and deducts all of it. The saving depends on your expenses, your marginal rate and your province, so the calculator lets you run your own figures.
Run your own numbers →Are there annual fees on a Medallion plan?
No, not on the standard plan. There is a one-time set-up fee of $375 plus GST/HST (waived with a referral code) and a 10% administration fee on each claim, plus GST/HST on the fee. The only yearly charge is optional: $100 per $5,000 block if you choose a limit above $15,000.
See pricing →Is there a minimum claim amount?
No. Any amount can be claimed, and there are no monthly premiums or per-employee charges.
What expenses can a Health Spending Account pay for?
Anything CRA accepts for the medical expense tax credit. That includes dental work, glasses and contact lenses, prescription drugs, physiotherapy, psychology and massage therapy with a registered practitioner, medical devices, health care received outside Canada, and premiums you pay personally to other health or dental plans. CRA, not Medallion, decides what is eligible.
Eligible expenses →Who can a PHSP cover?
Employees of the corporation, including an owner who works in the business, and their families: a spouse or partner, children under 18, children under 25 in full-time post-secondary education, and a child of any age who is dependent because of a physical or mental infirmity.
I'm the only employee of my corporation. Can I still have a PHSP?
Often yes, but it deserves an honest answer. CRA has raised concerns about plans that cover only a shareholder and their family. A benefit to a shareholder is tax-free only when it is received as an employee who actively works in the business, with limits comparable to what an arm's-length employee in the same role would get. Medallion's plan design is built to help you meet those conditions, but whether they are met depends on your circumstances, so talk it through with your accountant.
Ask us →Is a PHSP insurance?
No. There is no insurer, no premium and no risk pricing. The corporation pays only for expenses that are actually claimed, plus the administration fee, which is why there are no medical tests and no exclusions for pre-existing conditions.
How much can I claim each year?
Up to $15,000 per employee per plan year by default. The employer can set a lower limit for any employee. Unused room carries forward for 12 months. A higher limit can be added in $5,000 blocks during the first 30 days of a plan year.
How are claims submitted and paid?
You pay the provider as usual, then submit the claim and receipts online through the Medallion portal. A person at Medallion reviews each claim. Approved claims are funded by the corporation through pre-authorized debit and paid to the employee by direct deposit, in one of two payment runs each month.
Can I claim expenses from before my plan started?
No. A plan takes effect on the day Medallion approves the application, and only expenses incurred on or after that date can be claimed.
Is Medallion Health available outside Alberta?
Yes. Medallion is based in Calgary and administers plans for incorporated businesses across Canada. GST or HST on the administration fee is charged at the rate for your province.
Comparing providers?
See what to look for in a Health Spending Account provider, with all of our figures in one table.
General information, not tax advice. Eligible expenses are determined by the Canada Revenue Agency.