Information about the
Health Care Spending Account (HCSA)
Overview
Looking for information about your Health Care Spending Account (HCSA)? You’ve come to the right place.
Firstly, it’s important to remember that each HCSA is unique to its organization and membership. Not all employers offer them to their employees.
Secondly, in a general resource like this one, there are some plan details we’re unable to describe. So, if you’re looking for specifics about your own HCSA plan, please start by logging in to the plan member site and follow these instructions:
Once logged in:
- Scroll down until you find the section called Coverage and Balances. The last tab on that table is Health Care Spending Account & Wellness Account. Click there to open the tab and find your HCSA information, or ...
- Under Coverage in the left navigation menu, click on Your Benefits. That opens a sub-menu and includes the View Benefits Booklet option.
An HCSA is a health and dental benefit administration feature that can be part of a traditional or flexible benefits plan, at the choice of the employer.
Although it’s often compared to a bank account—after all, the word ‘account’ is right in its name—it’s basically a benefits plan setup that’s administered by the insurer in a way similar to other traditional health and dental benefits plans.
Essentially, an HCSA operates like this:
- An employer decides how much to deposit in an employee’s HCSA for the year
- The employee submits claims for medical expenses to be reimbursed from their HCSA
- The insurer processes the claims according to the plan rules selected by the employer
- The employee continues to submit health and dental claims until the HCSA balance is zero, or is no longer available for use
Many employees use this benefit to ‘top up’ what their employee benefits cover to pay for outstanding amounts, deductibles or dispensing fees (e.g., if the employee’s benefit covers 80 per cent of an eligible expense, the HCSA may cover the remaining 20 per cent).
Employees may also use an HCSA to cover expenses after they go over and above the maximum provided by their employer’s benefits plan (e.g., if you have a $500 massage therapy maximum for the year but continue to receive massage treatments after the $500 is spent, the costs that go over the maximum may qualify for coverage using HCSA funds [depending on your benefits plan]).
The HCSA may also cover medical expenses that aren’t covered under a provincial plan or your employer’s benefits plan (e.g., sight and hearing guide dog expenses, special equipment for persons with disabilities, or some cosmetic surgeries).
An HCSA provides the employee with tax-free funds (except in Quebec) to pay for eligible medical expenses. In Quebec, the HCSA is a taxable benefit for provincial income tax purposes, and HCSA benefit payments are taxable.
The Canada Revenue Agency (CRA) maintains a guide and a list of eligible medical expenses on the CRA website. Medical expenses that meet the CRA’s definition may be reimbursable (in whole or in part) from a member’s HCSA. However, this CRA list is not a complete list, and this list may be amended at any time by the CRA without notice. For the most current list of expenses eligible under the HCSA, please visit the CRA website.
Employees also need to check their own HCSA plan guidelines to confirm expenses are covered by their own plan.
To make a claim under your HCSA, you would submit the claim online through the plan member site, or through the Manulife Mobile app. To begin the process, log in to your plan on the website and, when prompted, make the selection to use the balance in your HCSA for the claim.
Claim forms for paper submission are also available on the plan member site.
Health Care Spending Account (HCSA) coverages, available funds and carryovers
HCSA funds can be used to cover eligible dependants as defined by the Canada Revenue Agency (CRA). According to the CRA, an eligible dependant must meet all 3 of the following criteria:
- be related to the employee (i.e., a child, grandchild, parent, grandparent, brother, sister, uncle, aunt, niece, or nephew of the individual or individual’s spouse or common-law partner);
- be financially dependent on the employee for support; and
- be a resident of Canada.
In some cases, this may include family members who aren’t covered under the employee’s health or dental benefits plan.
The amount deposited to an HCSA each year is determined by the sponsor/employer.
Using your deposit
You can use your HCSA deposit for eligible claims during your 12-month plan year (as determined by your employer). Some benefit plans include a carryover period too, but it depends on the employer’s rules. Since those rules vary, it is recommended to visit the plan member site to confirm what applies to your benefits plan.
To find your HCSA balance for the year, first sign in to your Manulife plan account. On the home page, go down to the Coverage and Balances section. The Health Care Spending Account tab is on the far right. Click on the tab to find your HCSA remaining balance information.
Additional FAQ
An HCSA may be used for hospital and medical or dental expenses or expenses incurred in connection with a medical expense that’s not covered by the employee’s benefits plan, or a provincial health plan.
Although the order may vary, typically a credit from an HCSA may be applied after the member claims any benefits under a provincial plan, under their employer’s insurance plan or, if applicable, through co-ordination of benefits under a different (e.g., a spouse’s) benefits plan.
The Canada Revenue Agency (CRA) maintains a guide and list of medical expenses (PDF) an HCSA may cover on the CRA website. This CRA list is not a complete list, and the list may be amended at any time by the CRA without notice. For the most current list of expenses eligible under the HCSA, please visit the CRA website.
Generally, HCSAs are structured as a Private Health Services Plan (PHSP), so benefits received from the plan are non-taxable. If PHSP conditions are met, an employee can enjoy the benefits without declaring it on their income tax return. In the province of Quebec, however, the HCSA is a taxable benefit for provincial income tax purposes and HCSA benefit payments are taxable.
An HCSA and an LSA are not the same thing. While some employers may offer both alongside their employer’s plan, they serve different purposes and operate under different tax rules.
- HCSA: This account helps employees cover eligible medical expenses on a tax-free basis (except in Quebec). In the Province of Quebec, the HCSA is a taxable benefit for provincial income tax purposes and HCSA benefit payments are taxable. The HCSA is designed to supplement traditional health and dental coverage available through their benefits plan.
- LSA: This account covers a broader range of health-related and wellness expenses that may not qualify as medical expenses under tax law. Amounts paid from an LSA are considered a taxable benefit and are added to the employee’s taxable income.
Typical LSA expense categories include:
- counselling
- daycare
- health and dental costs not covered by the member’s plan or HCSA
- education
- fitness
- long-term care
Other names for an LSA include: Wellness account or Taxable spending account (TSA). In addition, some employers may choose to customize the name of this account to align with their benefits plan.
By coordinating benefits plans, you can get up to 100% of a claim paid back. Here's how it works:
- If your employer’s plan covers 80% of a claim and you have coverage under another plan (e.g., a spouse’s plan), that other plan can cover the remaining 20%.
- If that other plan (e.g., a spouse’s plan) doesn't cover the entire 20%, your HCSA can be used to cover the rest.
Steps to coordinate benefits:
- Submit the claim to your employer’s plan first.
- Once you get the Explanation of Benefits (EOB) document we provide after processing a claim, you can claim the unpaid amount on your other plan (if you have one).
If you still haven’t been paid back 100% of the claim, you can resubmit the same claim to Manulife but ask to get paid the remaining unpaid portion of the claim using your HCSA balance.
Health Care Spending Accounts (HCSAs) for your business
An HCSA can:
- provide business owners added flexibility and offer employees extra benefits
- provide a way for business owners to help manage their benefit plan costs
An HCSA is one way that an employer can offer greater choice to its employees for their health and dental needs and lifestyle.
Business owners who want to discuss options and find out if an HCSA is right for their business can speak with their Manulife representative at any time.
How can I include a Health Care Spending Account (HCSA) in my benefits plan?
Only employers can decide whether they'll offer an HCSA to their employees. Employees may choose to utilize all or a portion of their HCSA benefit towards any outstanding balance for eligible health or dental expenses.
Employers interested in learning more about adding an HCSA to their benefits plan can visit our Group benefits business page. Current employers who already have an HCSA set up can connect with their account representative at any time.
More support
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Coordination of benefits (COB) -
How to submit your Group Benefits claims -
Group Benefits FAQ
The information in this article is not to be relied upon as tax or financial advice for specific situations.
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