How does The HSA Compare to Other options?
Traditional Health Insurance
There are a number of exclusions that come with a traditional insurance (e.g. limited dental and vision coverage, naturopath, etc.) making them feel both expensive and complex.
Out of Pocket / No Insurance
Most contractors and small business owners do not have medical insurance because it is either too expensive or the coverage is minimal (or a combination of both). This is a more cost effective option to traditional insurance.
Health Spending Account
Most cost effective alternative to traditional insurance. HSA can also compliment existing medical plans. For example, HSA can be used to expense premiums or to deduct expenses not covered by existing family plans.
How much will yOU save by using a BIG heart HSA?
• You are an independent contractor and own a corporation with no other employees
• You are a family of four with two dependent children
• Each family member spends around $900 per year ($3,600 as a family) on medical expenses
• You earn between $100,000 to $150,000 per year and live in Ontario
Traditional Health Insurance
$10,250
Total Medical Cost
• You need to earn an income of $10,250 for medical expenses
• $5,800 would go toward premiums and deductibles. Assuming:
– you pay premiums of $400 per month (or $4,800 annually) and
– you have $1,000 in deductibles annually in addition to your premiums
• Pay $4,450 (at 43%) in income taxes in order to afford those premiums and deductibles
Out of Pocket / No Insurance
$6,360
Total Medical Cost
• You need to earn an income of $6,360 for medical expenses
• Pay $2,760 (at 43%) in income taxes in order to afford the medical expense
• You are left with $3,600 after tax to pay for your medical expenses
Health Spending Account
$3,875
Total Medical Cost
Company expense: $3,875 CAD
• The key difference is that this amount is no longer a personal expense. Medical expenses become a business expense when paid through the HSA.
• Fees:
-Administration fee (5% of claims) plus applicable taxes
-Provincial Premium Tax of 2% (in Ontario) must be charged on self-insured plans
• Note: You will not pay income tax on the $3,875. The final cost to you and your company is $3,875