What is a Health Spending Account (HSA)?

A Health Spending Account (HSA) is a tax-effective benefit that gives employees an annual allowance for eligible health expenses. Employees receive tax-free reimbursements, while employers benefit from tax-deductible contributions.

HSA, What is it and What’s Covered?

A Health Spending Account (HSA) is a CRA-approved plan that lets employers reimburse employees tax-free for a wide range of health, dental, and vision expenses — well beyond what a traditional group plan covers.

No Premiums · No Deductibles · No Start-Up Costs

Zero ongoing fees. You only pay when an actual claim is made, plus a small administration fee.

Employer Contributions Are 100% Tax-Deductible

Every dollar your company contributes is fully deductible as a business expense — protecting your bottom line.

Employee Reimbursements Are 100% Tax-Free

Employees receive their reimbursements completely tax-free — far more valuable than a salary increase.

How HSA Works in 3 Simple Steps

Employer sets the limit

You decide the annual allocation per employee (and may set different limits by class — for example, executives vs. staff, or by family status).

Employees submit claims

Employees pay for an eligible expense, upload the receipt through the HSA platform, and are reimbursed — typically within 48 hours by direct deposit.

Tax-free reimbursement

The reimbursement is a non-taxable benefit to the employee, and the contribution plus admin fee is a fully deductible business expense for the employer.

CRA-eligible expenses under an HSA

The following categories outline the items eligible for reimbursement under a Health Spending Account, in accordance with Canada Revenue Agency guidelines, its updated frequently. The eligibily criteriea is ultimately determined by CRA and you should follow through with the link.

Dental

Dental examination, oral hygiene, X-rays, gum treatment
Dental repair, fillings, root canal, extractions
Dentures — repair and replacement
Major restorative procedures — crowns, implants, bridges, oral surgery
Multiple allowable dental expenses (totals must be valid service dates)
Orthodontic work including braces, paid to a medical practitioner or dentist (purely cosmetic procedures are not eligible)

Medical

Any prescription medicine dispensed by a licensed pharmacist (over-the-counter medicine is not eligible)
Drugs and medical devices purchased under Health Canada's Special Access Program — amounts paid for drugs and devices not yet approved in Canada, when purchased under this program
Medicinal cannabis (no recreational purchases)*
Vaccines

Vision

Eyeglasses or contact lenses*
Laser eye surgery — paid to a medical practitioner or a public/licensed private hospital
Multiple allowable vision expenses
Optician, optometrist, ophthalmologist

Hospital

Ambulance charges — to and from hospital
Hospital bills

Expenses Not Covered by Insurance

Dental, extended health, and vision expenses that exceed your plan maximums, deductibles, or co-insurance — including any portion declined by your primary insurance carrier

Why Choose a Health Spending Account (HSA)

For the employer

Predictable, capped costs — you fund only what is actually claimed, up to the limit you set
No premium increases at renewal
No underwriting penalties for one bad claims year
Contributions are 100% tax-deductible to the business
An ideal solution for owner-managed corporations, professional practices, and small businesses where a traditional group plan is either too expensive or not yet feasible

For the employee

Real choice for employees — funds can be spent across a wide range of CRA-eligible categories
Covers everything from orthodontics and prescription glasses to mental health care and physiotherapy
Includes many items not typically covered by a traditional insurance plan
Reimbursements arrive tax-free and quickly
No co-insurance and no annual category sub-limits to navigate

Want to know more about HSAs?

Explore the full guide →

The Right Fit for an HSA

Incorporated owner-operators

Small businesses with one to five employees where a traditional group plan isn't yet feasible — an HSA provides the same tax-advantaged treatment of medical expenses, without minimum-employee underwriting requirements.

Growing small businesses

Companies in the 2 – 25 employee range that want a meaningful health benefit with predictable, defined costs — and the flexibility to scale contributions as the business grows.

Established firms adding flexibility

Employers with an existing traditional group plan who want to layer an HSA on top — to top up coverage, fund expenses outside the traditional plan, or differentiate compensation by employee class.

Get in Touch

Have questions about setting up an HSA for your business?

Our team is here to help you design a Health Spending Account that fits your business — whether you're starting from scratch or layering an HSA on top of an existing group plan. For more information, get in touch and we'll walk you through the options.

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