Health Spending Accounts vs Health Insurance: What’s the Difference in Canada?

At myHSA, we see a high frequency of questions come through our support channels regarding policy numbers, submitting quotes, eligible practitioners, coverage limits, and more—so we wanted to take the opportunity to clear up some confusion on health spending accounts and traditional health insurance plans.

In general, health insurance offers pre-set coverage through monthly premiums, while a Health Spending Account (HSA) gives employees a flexible, employer-funded amount to spend tax-free on any eligible health expense.

Let’s dive a little deeper into the differences of health spending accounts vs health insurance.

Coverage: Flexibility vs. Predefined Plans

Spending Accounts

With HSAs and Wellness Spending Accounts (WSAs), employees have the flexibility to decide how to use their funds within eligible categories.

For example, they might choose to use their HSA for dental care, prescription glasses, massage, or chiropractic care. WSAs often extend this flexibility further, covering any items the employer outlines as eligible, like gym memberships, alternative practitioners, or mental health apps. There are no limits to specific categories of what employees can spend their funds on, just the overall limit of their spending account.

A myASO plan, however, is a health spending account solution that allows the employer to mimic the structure of traditional health insurance and set custom limits on specific eligible categories.

Health Insurance

Traditional health insurance comes with predefined coverage outlined in the policy. This usually includes specific limits for categories like dental care, prescription drugs, or physiotherapy.

Control Over Funds

Spending Accounts

Employees control their spending account allocations. They decide how and when to use the funds, so long as the expenses fall within the guidelines. If they don’t use the funds, they might roll over into the next year, depending on the plan design.

Health Insurance

Insurance policies are managed by the insurer, and employees don’t have direct control over how funds are allocated. If they don’t use certain benefits within the plan year, those benefits typically don’t carry over.

Claim Process

Spending Accounts

Claiming with an HSA or WSA is straightforward. Employees pay for an eligible expense, submit the receipt, and get reimbursed. The myHSA digital platform and app makes the claim submission and reimbursement process simple and easy.

With a spending account, employees do not need to submit quotes for pre-approval. They just check their list of covered items, determine the funds they have available, and submit the claim.

Health Insurance

Health insurance claims often involve navigating through forms and insurer approvals. In some cases, employees may need pre-approval or face claim denials for services that fall outside their insurance plan’s criteria.

Eligible Expenses

Spending Accounts

HSAs cover any CRA-approved medical expense, while WSAs often cover a broader range of wellness-related items. Depending on the employer, wellness items could include anything from fitness, ergonomic office equipment, rent/mortgage payments, RRSP contributions, utility bills, and more.

Health Insurance

Coverage is narrower and tied to the insurance policy’s terms. This typically includes medical, dental, and vision care and does not cover wellness expenses.

Direct Deposit vs. Direct Billing

Spending Accounts

At myHSA, we offer quick reimbursement through direct deposit. Employees upload their banking information into our secure app, so when their claim is approved, their funds are deposited in as little as 24 hours.

Health Insurance

Practitioners often submit costs or quotes directly to insurance companies to have the bulk of the eligible expense paid before the employee finishes with their service, who will then pay the remaining balance out-of-pocket.

Health Spending Accounts vs Health Insurance in Canada

Understanding the difference between Health Spending Accounts and traditional health insurance plans can help both employers and employees make informed decisions about their benefits.

While insurance offers structured coverage with less flexibility, HSAs and WSAs give employees more control and choice in how they use their funds.