At BenefitDeck, we often meet with small companies or start-ups that are stuck in a predicament – they need employee benefits for themselves and their families or for a small number of employees in their firm, but don’t have the budget to afford a group benefits plan. While a Flexible Benefits Plan might be a good option in some cases, we typically will introduce them to another employee benefits option called the Private Health Services Plan (PHSP).
1. What Is a Private Health Services Plan and How Does It Work?
A PHSP allows owners of incorporated companies to affordably provide medical and dental coverage to employees and their dependants. The process begins by setting a total budget allocated to the plan, and choosing the right PHSP provider. Since there are many ways to setup the PHSP, a knowledgeable benefits consultant can help guide owners along the way.
Typically, the global budget should comprise the total coverage amount for all employees plus a 10% administration fee for the third-party PHSP provider which will be responsible for processing claims. A one-time setup fee is also charged upon creating the plan.
The company can then decide how to split the budget between employees. A simplistic approach can be taken such as offering $1,000 to each employee, or an owner might prefer to categorize offerings by position seniority, length of employment, income level or other acceptable classification. An example would be offering $1,000 to administrative staff and $2,000 for management staff.
2. How Does the Claims Process Work?
Once the plan is in place, employees or owners with legitimate medical or dental expenses can freely make claims to the PHSP provider. All claims have to be CRA eligible expenses, and a comprehensive listing of eligible expenses can be found here. (Consult the Canadian Revenue Agency’s list of eligible medical expenses for PHSP here..) The employee or owner simply would pay for the medical or dental expense up front, and then submit the claim with receipts within an easy online portal. Once deemed eligible by the PHSP provider, the amount of the claim plus a 10% administration fee will be deducted from the company’s PHSP account. A non-taxable refund will then be issued to the employee for the claimed expenses.
3. Who Is Best Suited for Private Health Services Plan?
Small incorporated companies with one to 10 employees are typically best suited for a PHSP. Usually, our BenefitDeck team recommends this plan to professionals such as lawyers, realtors, accountants, or other similar fields. They tend to be sole proprietors with one or two employees who all would like some sort of medical and dental coverage. If the company is not incorporated, the Canada Revenue Agency (CRA) has set a limit of $1,500 of coverage per person.
4. What Are the Advantages of a Private Health Services Plan?
The advantages for a small company who chooses a PHSP plan are numerous. First, it gives them the ability to offer employees and families some medical and dental coverage. The employees are not subject to pay for the plan, and receive full reimbursements on eligible medical expenses up to their allocated limit. In comparison to group plans, there are no fees and no deductibles. So in essence, a PHSP can almost be viewed as distilled compensation, or a tax-free raise that applies only to valid medical expenses.
While the company covers all the PSHP costs, owners are able to budget according to what they can realistically afford, so there are no surprises later on. A PHSP is a more flexible and affordable way for small businesses to incentivize top talent or offer employees added-value perks.
Setting Up a PHSP with BenefitDeck
There are many ways in which a company can setup a PHSP. Some companies choose to offer this to their employees as a standalone plan while others supplement their group benefits plan with a PHSP. In that case, the PHSP can help to cover any additional expenses such as deductible amounts or medical services which are not covered under the traditional group plan. Travel insurance and disability coverage can also be combined with a PHSP when required.
With so much flexibility in a PHSP, our team at BenefitDeck works closely with clients to ensure they are getting a plan that is customized to their needs and budgets. If you would like know if a PHSP is right for your organization, please contact our team.
Whether you are with a business, association, or owner operator, we have the solution for your needs.