Next level for spending accounts

by | Dec 3, 2021 | Take 5 Articles

Plan sponsors are turning to health spending accounts (HSAs) for more flexible and responsive health benefits—and some are even taking vaccination status into account.

“The first time we got a request from an advisor saying we’d like a vaccinated versus non-vaccinated class, [our thought was] you can’t do that, it’s anti-selection,” said Tim Kane, CEO, myHSA Ltd., at a virtual conference hosted by the Group Insurance & Pharmaceutical Committee (GIPC) on November 17. However, further evaluation found that such an approach, at least within the framework of spending accounts, is doable and “on side with respect to CRA [Canada Revenue Agency].”

While the tailoring of eligible offerings based on vaccination status is perhaps extreme, it dramatically illustrates how “the pandemic has created a movement inside the health spending account area,” noted Kane.

At the start of the public health crisis, spending accounts “stopped overnight” as plan sponsors looked to rein in costs and protect their main plan, recalled Kane. Then within months, the situation began to turn around. “Companies were looking to open up and create new and innovative portions of their benefits plan, which quite frankly an insurance company or an insurance contract cannot maneuver, based on the needs of employees.”

As a result, myHSA—which works directly with advisors and third-party administrators and is a preferred partner of the Benefits Alliance Group—saw unprecedented growth. Its client base grew 65% (to 13,500 plan sponsors) in the past two years and its annual attrition rate declined from 3.1% in 2019 to 1.6% so far in 2021. The plan-member count jumped 85%, outpacing the growth in clients, which reflects more larger employers coming on board.

As for the accounts themselves, whether non-taxable or taxable, they became “hyper-focused on flexibility,” said Kane. New eligible items include anything to do with ergonomics (even heating pads), online music lessons, personal protective equipment, childcare and pet care. A gender affirmation allowance, student loan repayments and a vacation fund are also among the latest new options.

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This article is part of The Benefits Alliance Take 5 for Health Benefits. Take 5 is a quarterly initiative that provides a deeper look a the employee benefits space by providing examples, research and case studies on what’s working for employers in Canada.