Frequently Asked Questions:
PHSP/HSA Plan Concepts
"Dave, this is wonderful. I appreciate you walking me through this process as a "Newbie". Thank you for your service!" - Sherri G., claimant, Edmonton.
"Thank you so very much! I can't believe how painless this is, and very much appreciated." - E.B., Entrepreneur & Planholder, Waterton Lakes, AB.
"10/10. Dave was knowledgeable and very helpful. He worked directly with our accountant which assisted us greatly." - B. B-A., Interior Designer & Planholder, Nelson, BC.
"10/10. The service is great. I hope to continue referring others to take advantage of this service!" - O.O., Pharmacist & Planholder, Pincher Creek, AB.
"9.9/10" - W.A.K., Entrepreneur & Planholder, Coleman, AB.
"10/10. Working with DRA is a no-brainer. It is effiicient, easy and low-cost." - Dr. N. M., Dentist & Planholder, Edmonton, AB.
"10/10" - J.T., Building Contractor & Planholder, Edberg, AB.
"10/10. I appreciate the help and ease of the transactions; also the 5-day turnaround from submitting the claim to reimbursement." - P.G., Farmer & Planholder, Bow Island, AB.
"10/10" - R.R.D., Lawyer & Planholder, Pincher Creek, AB.
"I wish I had paid more attention and used your services sooner. Better late than never!!" - Dr. N-A M., Dentist & Planholder, Edmonton, AB.
"I feel your service and speedy replies has been great!" - Dr. A. S., Dentist & Planholder, Edmonton, AB.
"Dave Balfour, through his company DR Associates Ltd, has been working with us on contract. Throughout that period he has always been honest, hardworking, and highly ethical in his dealings with our firm. He is meticulous in his work, a stickler for detail, and yet he is able to keep the big picture in focus. We have a very pleasant working relationship. I would not hesitate to recommend DR Associates Ltd to any company considering its services." - R. Marsh, Partner, Ranchers Supply Inc.
"Dave Balfour, via his company DR Associates Ltd, has been my business consultant, and I could not be more impressed ... I have just re-hired him based on his excellent work. ... the ability to understand complex legal and accounting problems are his strong points. I wouldn't hesitate to recommend DR Associates Ltd." - G. G. Lewis, President, N/C Quest Inc.
"I have known Dave Balfour for the last twenty years both personally and professionally, and in that time all of our interactions have been honest, fair and amicable. His attention to detail and desire to get the facts correct make him a valuable asset and his addition to any business should be most welcomed." - W. A. Krywolt, BA, CIP, Western Financial Group.
"I am confident the experience you have gained will continue to be an asset ... Please accept my warmest appreciation for your important contribution ..." - Honourable M. S. Bhullar, Minister of Human Services.
"Thank you ... Your outstanding service over the past five and a half years has had a positive impact on the lives of Albertans and the valuable contribution that you have made is very much appreciated." - Honourable I. Sabir, Minister of Community and Social Services.
Direct Reimbursement Associates Ltd was incorporated on November 18, 1988 as a company with the goal of providing self-insured dental benefits to employers and their employees. The business has, over the years, also provided financial planning and investment services, insurance consulting, and small business consulting in many areas including technology start-ups and the agricultural and professional sectors. We are affiliated with a major national health administration company in Calgary, so we can handle any situation that may arise with your plan.
CRA Interpretation Bulletin IT-339R2 was released in August 1989 to address this matter. It is entitled “Meaning of Private Health Services Plan” specifically to clear up this confusion. Section 3 of this document clearly states a PHSP is a “plan in the nature of insurance” and it goes on to enumerate 5 points Canada Revenue Agency believes describe that “nature”. Furthermore, Section 6 specifically illustrates how the “cost plus” model of a PHSP should function. DR Associates' PHSP plans are ALL based on the "cost plus" model.
The basic differences between "insurance" and "cost-plus" plans is: a) insurance pools premiums from many policyholders while cost-plus only requires funds from one source and only when a claim is made, b) insurance works best for one-time financially catastrophic events like your house burning down, death or permanent disability - but doesn't work well for recurring, predictable, relatively minor financial events like optometry and dentistry, and c) by its nature, insurance must be overseen by the provincial Superintendent of Insurance, while PHSPs are overseen by CRA on a national basis.
In fact, the bulk of the PHSP/HSA service providers in Canada operate under this exact “cost plus” model. Insurance companies also offer health spending plans but these are often premium-based rather than cost-plus. Cost-plus plans allow you, the purchaser, to see exactly what you're paying for administration of the plan, whille premium-based plans don't. Premium-based plans not only obscure the actual cost of administration but are typically full of co-pays, frequency of service restrictions, percentage coverage limitations on major services, and outright service exclusions.
The “Why DR Associates?” page on this website will point you to all the major providers so you can easily compare cost-plus rates.
Yes, because you can use your plan to “top-up” your other health coverage. Any eligible health and dental expenses not covered by your traditional premium-based insured health plan are eligible for claim under your PHSP/HSA plan. For example, if your spouse has an employer-sponsored insurance health benefits plan, just submit any ineligible amounts from that plan to your DR Associates plan. Simply submit a copy of the insurance company's "Explanation of Benefits" statement received from your other plan in place of the receipt(s) you would normally send to DR Associates. Insurance premiums from other benefit plans such as travel medical insurance, health or dental benefit premiums, and catastrophic (disability or accidental death and dismemberment) insurance are also eligible for reimbursement through a PHSP/HSA plan. We've even seen businesses down-size their premium-based health insurance in favour of self-funding health expenses through a PHSP/HSA plan.
You don't need to wait until the end of your fiscal year to make one big claim submission. If you are concerned about the effect of turnaround delays on your business cashflow, we suggest you submit smaller claims more frequently throughout the year - say quarterly or even monthly. We do not have minimum claim submission levels or charge anything extra for multiple claim submissions. We are small business people too, so "we've been there"!
By establishing a PHSP plan, you are able to deduct your health costs as a business expense just like your business telephone, office supplies, or electricity expenses. This will save you a significant amount of money by making your health expenses 100% tax deductible through your business.
Families typically spend between $1,500-$3,000 on health and dental services per year. For an individual with a 30% marginal tax rate this would mean a savings of $450-$900 per year compared to using after-tax dollars to pay for the same services.
Your savings will depend on the many factors that make up your marginal tax rate; how much you spend in a year, and your province of residence. Ask your tax advisor about a PHSP plan, and start to save money!
Some of the major advantages of a PHSP/HSA plan are:
• Tax Efficiency – Make your personal health and dental expenses 100% deductible by your business and tax-free to your employees, thereby reducing both party's taxes.
• Broad Coverage – Select from a more comprehensive range of covered health services than is available under traditional premium-based insurance benefit plans.
• 100% Reimbursement – Often traditional health benefit insurance plans only partially pay or even exclude many health services; with a PHSP 100% of elligible benefits claims are reimbursed up to the limit set per claimant.
• Compatibility with other plans – Deduct any eligible expenses not covered by a spouse’s insured plan or even submit premiums from insured plans to your plan to make them deductible and reduce taxes.
• Flexibility – You can allocate your benefit dollars to where you need them most. Each employee uses the particular health services they need; they are not limited by an insurance company list of exclusions.
• Simplicity - Benefit plans have become increasingly complex, often making it hard to understand what they cover and what they don't - resulting in the need for Predeterminations and unecessary waits as a result. A PHSP is an easy way to manage your health expenses. Pay only for what you use, and get fast, efficient 100% reimbursement right into your bank account!
Another way to think of it is: if you pay for something twice but get repaid once, the net result is you’ve only paid once. We make sure that “once” is a fully tax deductible expense to your business and is tax-free in your hands.
Here’s an example:
Let’s assume you are the proprietor of a small business. You have some dental work done and pay the dentist $100. You take the detailed receipt (not the credit card slip) to the bookkeeper of your small business. Your business sends DRA the health service receipt and a claim form, along with payment for the health service you received, in this case $100 plus our 5% admin fee ($5.00) plus the GST on our admin fee ($0.25) for a grand total of $105.25. At this point you have paid personally once (the dentist) and your business has paid once (DRA). We adjudicate your claim and then reimburse you personally for the $100 you paid the dentist. The net result is you have been reimbursed by your company $100, we've earned $5.00 and the government gets $0.25.
About Private Health Services Plan Costs
The health service you paid for will be taxed differently depending on the province you received it in, and those taxes (GST, PST, HST, etc) are fully reimbursible so make sure you include them on your claim. However, because DR Associates processes your claim in Alberta the only tax you pay on our administration fee is 5% GST no matter what province in Canada you live in.
You do! You provide your employees with a pre-set annual spending limit in their HSA depending on the class of employee you establish for them. The amount for each class of employee is your choice. Canada Revenue Agency demands that all employees be included in your plan, and that employees of the same class be offered the same benefit level.
Like traditional benefit plans from insurance companies, all payments from an HSA are tax-free. However, unlike a bonus or pay increase, an HSA reimbursement is not deemed a taxable benefit to the employee. This can save your employees significant dollars compared to providing them with additional earnings (which get taxed) in order to purchase health benefits. Note: the Class A reimbursement level is reserved for the business owner (Planholder) and, if incorporated, will not have a specific annual dollar limit.
No. A DR Associates PHSP is a service sold to your business for a one-time $100 fee regardless of the number of Covered Employees. Further, we do not charge any fees to adjust your list of Covered Employees or their Coverage Classes. You can make any changes to your plan free of charge at any time. Just send us an email to add or delete employees or classes of employees or raise or lower their annual limit, or make any other change to your plan that you want to.
No, all plan changes are free of charge at DR Associates. You can simply send us an email with the changes on an Appendix A form or include your changes with your next claim and we will update the records at no charge.
Services to arrange the issuance of a health benefit policy or plan are exempt from GST. The discussion of this subject by Canada Revenue Agency is under “Exempt Supplies” in GST/HST Memorandum 17.9 - Insurance Agents and Brokers.
No. The $100 registration fee is “one time only” to cover the costs of setting up your HSA plan in our systems. There are no annual plan fees at Direct Reimbursement Associates.
No. There are no annual renewal fees, no fees to terminate your plan, no fees to make changes to your plan. We have no unadvertised charges of any kind. Our $100 registration fee and our 5% administration fee on each claim (plus GST) are the only costs you will ever pay at Direct Reimbursement Associates.
Service Date: is the date the health expense was rendered to you, your family or your employee. The health service date is only used to ensure the service was rendered to you after the Effective Date of your plan.
Anniversary Date: is the date your new benefit year commences (you get your new spending limit). Very large health expenses (such as orthodontics) can be submitted in portions over several benefit years until fully reimbursed. For example, you can claim your regular expenses this benefit year and then with any room you have just before the anniversary date of the plan you can claim a portion of any large expense to "max out" your spending limit - knowing you will get a new spending limit very soon. After a few years of doing this you will have been reimbursed all of the large expense while not exceeding your annual spending limit. Of course, this only applies as long as you remain an employee of the planholder.
Effective Date: is the date chosen by the Planholder for coverage to start. Also called the Start Date. You (as the Planholder) specify the Effective Date on the Registration Form. The farthest we recommend you go back is the beginning of your current fiscal year unless there are extenuating circumstances like a very serious illness or death.
Signing Date: is the date the Registration Form is signed by the Planholder.
Termination Date: is the last day an employee works after being notified of termination.
2) Exclusions. Certain health procedures are often completely excluded from coverage by premium-based insurance plans. PHSPs thus provide more comprehensive coverage because there are extremely few exclusions from the list of Eligible Services.
3) Co-pays (partial reimbursements) are common with premium-based plans. They are a necessary "brake" on usage of an insured plan. PHSPs typically provide 100% reimbursement, with no co-pay, up to an annual limit.
4) Lowest Fee Guides. Insurance plans find the lowest health service fee guide they can and that's all they will pay.
5) Lack of Transparency. Premium-based benefit plans are structured for providers to make a 10-30% profit margin over the cost of actual claims and administration. This means you are paying 5-25% more than you need to. Group plans typically obscure costs even more by combining coverage for death, disability, dentistry, accidental death, and dismemberment all into one policy. You don't know what portion of the premium is paying for what part of the plan!
6) Frequency of Service Restrictions. If you have gum disease and need to see your hygientist/dentist every 3 months, good luck if your policy only covers one or two such appointments per year.
7) Pre-Determination of Benefits delays your treatment. With a PHSP/HSA you get the treatment you need without any waiting for approval from an insurance company.
8) Wrong model. Insurance was invented as a simple concept to cover one-time, financially catastophic, unforeseeable events like death, disability, your house burning down, etc. Health expenses, on the other hand, are primarily recurrent, relatively inexpensive, predictable events and therefore are not well-suited to the insurance model.
9) CRA acknowledges the benefits of self-insurance. The fact that PHSP plans are in the Income Tax Act of Canada encourages business-owners to self-insure themselves and their families, and extend coverage to their employees. They were originally introduced to take some financial stress off Canada's universal healthcare plan by letting employers pay for some of their own health costs and those of their employees.
10) Lack of flexibility, speed and simplicity. With a PHSP/HSA, you spend your health dollars on whatever you need whenever you need it, and get reimbursed quickly via a simplified claims procedure.
YES. Our national provider affiliate in Calgary is an accredited member of the Better Business Bureau, and Direct Reimbursement Associates Ltd is also BBB accredited.
While no employee can be excluded from participating in your HSA plan, you as the Planholder can easily contain the costs of operating a benefit plan. This is accomplished by assigning your employees various classes of coverage. Those employees which have a key role in the company such as the owner or other principals can have a higher limit; middle management or supervisory level employees can be grouped with slightly less coverage. Clerical or labourers can be assigned a class with lower coverage still. And temporary, seasonal, or part-time employees can be managed with probation periods, minimum hour limits and still lower coverage levels. You can also make your HSA plan optional, with employees having the choice of opting out.
You can equate $2000 to a one dollar per hour pay raise over a 2000 hour working year for your employees. From our experience, an average family of 4 spends about that much in routine health expenses each year. So depending on your generosity and ability of your company to pay the costs of your HSA plan you can consider that as your middle level class. Management could be higher and operating staff could be lower. You can operate your HSA for some time and determine what limits work for you. You, as the Planholder, can lower or raise these limits at any time simply by letting us know your intentions by email.
You can always submit an eligible expense over successive multiple years until it is fully reimbursed. We will do that for you automatically at no charge, so send it in and we'll keep track of it for you.
Direct Reimbursement Associates has one of the lowest administration fees in Canada (5%) and provides great service with a guarantee of claims processing within 5 days. In addition, if you are transferring from another provider, we will waive the $100 registration fee.
Note: Some providers obscure their administration fee by lumping it in with insurance products of questionable value that can be purchased separately for less elsewhere.
While we are as legitimate as all other providers in Canada, we know we will need to earn your trust to keep your business. To be prosperous we need to have a long, positive relationship with your business, and long relationships can only be built on trust.
We’ll protect your privacy. We’ll provide a valuable service at a fair price. We’ll help you reduce your health benefit expenses. We’ll be frank and honest with you. If you can be served better by one of our competitors, we’ll recommend them to you. We succeed when our customers succeed. If we continue to do all those things, then we’ll have earned your trust.
On Appendix A: Eligible Employees you would put the mailing address for each employee. This is the default address where the reimbursement cheques will be mailed for that employee if they are not on Direct Deposit. If the employee moves or wishes to switch to electronic direct deposit, please just email us the details or forward another Appendix A so we can update their information.
A PHSP is designed as an “employee” benefit - not a “shareholder” benefit. All members of the plan must be employees (receive income), so workers who are “shareholders only” should establish themselves as employees if they want to be covered (unless they are already the spouse of an employee). For businesses who are one-person companies and use dividends for the bulk of their compensation, they should pay themselves at least some salary to meet the definition of "employee". Lump sum employment bonuses paid at year-end will avoid payroll administration. We advise you to consult your accountant or tax advisor for advice on this matter.
At the time of writing, for the purpose of plan eligibility, your "total income" is the amount from line 150 of your income tax return (before you deduct any amounts for an HSA) minus the amounts you entered on lines 207(RPP Deductions), 212(Union Dues), 217(Business Investment Losses), 221(Carrying Charges), 229(Other Employment Expenses), 231(Clergy Residence Deductions), and 232(Other Deductions).
At the time of writing, for the purpose of plan eligibility, your "income from sources other than self-employment" is the amount from line 150 of your income tax return (before you deduct any amounts for an HSA) minus the amounts you entered on lines 135 to143(Business, Professional, Commission, Fishing, Farming Incomes excluding business losses which reduced the net amount reported on those lines), 207(RPP Deductions), 212(Union Dues), 217(Business Investment Losses), 221(Carrying Charges), 229(Other Employment Expenses), 231(Clergy Residence Deductions), and 232(Other Deductions).
The easiest way to determine total income and income from sources other than self-employment is to have your accountant the calculation.
All “Covered Employees” (those receiving income from the business) need to appear on "Appendix A: Eligible Employees" form. Both spouses can be listed if they are both employees of your business. Any expenses for you, your children and your spouse can all be claimed under you as the Covered Employee.
Under CRA rules these plans cover "the employee, the employee's spouse, and any member of the employee's household with whom the employee is connected by blood relationship, marriage or adoption".
Only unincorporated businesses need to list their family members and will use "Appendix C" for that.
However, recent tax changes have made certain sports activities for children deductible on your personal tax return, and politicians know that preventing illness via a healthy lifestyle is less expensive than treating illnesses later. Consult a tax professional for more information on what is and isn't deductible at present. If something is deductible on your tax return it will should be eligible in your HSA plan too.
However, if you travel at least 80 km (one-way) from your home to get medical services, you may be able to claim accommodation, meal and parking expenses (in addition to your transportation expenses) as medical expenses. this may include travelling outside Canada.
If you travel 40 km (one-way) from your home to get medical services you can claim vehicle expenses only.
General Claims Submission
We can return the original receipts to you of any expenses disallowed by Canada Revenue Agency, if requested. However, if they can't be used in your DR Associates plan it is highly unlikely they can be used under another plan legally.
We encourage you to keep your own photocopies of all receipts which might be needed for warranty reasons before you send them to us in case they are lost or arrive unreadable by Canada Post, or are lost in cyberspace due to hacking or a system crash.
You should also always keep a copy of every claim form you send in so you can calculate the remaining dollars available of your yearly limit.
In fact, we would prefer you did NOT include your Visa or MasterCard receipt slip as that is private financial information and does not contain the details of the health service you received that we need to adjudicate your claim. Our claims staff shreds any credit card slips we receive. You should keep them to reconcile with your credit card statement each month.
For example, say a Covered Employee paid for his own dental work and the spouse of the Covered Employee paid separately for her own dental work. If two claim forms were submitted, DR Associates would issue two separate payments, one made out to each spouse.
When funding payment for multiple claims you, as employer/planholder, can just send a single payment to cover the aggregate of all the claims, administration fee, and GST charges.
Note: Always keep a copy of the claim form and receipts you are submitting. No claim will be processed without receipts, and no receipts will be processed without a signed claim form.
Note: You should always keep a copy of the claim forms you send in so you know how much of your yearly limit has been used. DR Associates places so much emphasis on the security of your personal and medical information that we do not allow access to our database to anyone - including claimants who want to check on their plan usage. Such website database portals are subject to hacking.
Electronic Claims Submission
Note: e-Courier is not just for claims, you can send any sensitive information you would normally send by mail or fax such as VOID cheques for Direct Deposit, Eligible Employee(s) forms, or Pre-Authorized Debit forms.
Note: If this is your first time using e-Courier it will ask you for your phone number for account verification purposes. Please make sure the phone number you provide is the same one we have on file for you so that e-Courier can verify your account.