Private Health Services Plans

Traditional health care plans simply do not offer the flexibility that today’s business environment demands. Increasingly, when it comes to deciding how health and dental care dollars are spent, consumers want control.

Private Health Services Plans give control to the consumer. With a Private Health Services Plan, the client gains both cost control and plan flexibility.

What is a Private Health Services Plan?

As the name suggest, a PHSP is an account set up by the employer instead of, or in addition to, an insured health and dental plan. It is also a form of self-insurance that in many cases can cost less than standard medical coverage, especially when tax implications are considered. Private Health Services Plans are also known as Health Spending Accounts, Self-Insured Plans and Cost Plus Plans.

Why are PHSPs so popular?

A PHSP provides employers with a convenient way to deliver tax effective compensation, provide employees with greater flexibility, cap spending (through a defined contribution as opposed to a defined benefit) and soften the impact of higher employee cost sharing.

Employees are empowered to select their own health and dental benefits. Successful plans increase employee understanding of their benefits. With these benefit packages, they also learn to select benefits wisely, choosing only the amount and type of coverage they need. This streamlining process can lead to substantial savings for employers.

How are Private Health Services Plans Regulated?

PHSPs are subject to Canada Revenue Agency (CRA) regulations which can be found in IT Bulletin 339R2 and IT Bulletin 85R2 and fall under the category of a private health services plan. (www.cra-arc.gc.ca)

The biggest advantage to a Private Health Services Plan is that it allows health related expenses to be paid on a pre-tax basis. That is, employees can be given tax-free reimbursement for any eligible medical or dental expenses.

How do Private Health Services Plans Work?

In a Private Health Services Plan, an employer contracts a third party administrator (DHC) to manage the employee’s claims as per the definitions of the plan. The employer promises to reimburse the cost of such claims plus an administration fee and applicable taxes. All employee claims are then adjudicated by DHC to ensure they meet the criteria established by CRA. Eligible claims are then reimbursed by DHC to the employee resulting in a non-taxable benefit to the employee.