Health Care Spending Accounts: A Tool with Many Uses

By: Bryce Parisotto | May 11, 2026

In recent years, the popularity of Healthcare Spending Accounts (HCSAs) has risen significantly. One reason is their flexibility: HCSAs can be used in different ways within an employee benefits plan, depending on the goals of the organization and its employees. They can add flexibility and choice for employees, provide cost certainty for employers, and when combined with a Wellness Spending Account, help cover expenses not typically included in traditional employee benefits plans.

Before we look at the different ways to use HCSAs, here are a few basics:

• HCSAs reimburse eligible health and dental expenses as defined by the Canada Revenue Agency (CRA) under the Medical Expense Tax Credit.
• They are funded 100% by the employer.
• They are administered by insurance companies or online providers that charge an administration fee (often a percentage of the claim amount paid).
• The employer sets the annual allotment provided to each employee.
• Unused amounts may be carried forward to the next year (subject to plan rules) or forfeited at year-end.

Common Uses of Healthcare Spending Accounts

1. Top-Up to a Traditional Employee Benefits Plan
   One common approach is to use an HCSA as a top-up to traditional insured health and dental coverage. Instead of enhancing one specific benefit, employers can allocate those dollars to an HCSA so employees can direct the funds to the areas that matter most to them and their families.
   
   For example, an employer might consider adding vision coverage to an insured plan. Only employees who need eyewear would benefit. If those funds are allocated to an HCSA instead, employees who need prescription glasses can use the account for that purpose while employees with no vision needs can use the dollars to top up other expenses, such as dental costs or additional physiotherapy. The result is broader value across the workforce.
   
   
2. Stand-Alone HCSA
   We often meet businesses that have not yet implemented a benefits plan. They want to offer support to employees, but they are unsure whether they can afford the cost of a traditional insured plan, now or in the future. A stand-alone HCSA could be the right solution. Employers can provide an annual allocation that fits within their budget, and employees can use it to be reimbursed for eligible health and dental expenses. This can be a tax-effective approach: employer contributions and administration fees are generally deductible to the business, and reimbursements are typically not a taxable benefit to employees.
   
   Employees also value that the account is funded by the employer (unlike many insured plans where premiums are shared). Finally, employers gain cost predictability by setting a maximum annual spend (number of employees × annual allotment, plus administration fees and applicable taxes). If employees do not use their full allotment, the employer does not pay out the unused portion.
   
   
3. HCSA and WSA Combination Accounts
   Wellness Spending Accounts (WSAs) differ from HCSAs in two important ways. First, the employer defines what expenses are eligible (for example: gym memberships, work boots, childcare, etc.). Second, reimbursements through a WSA are a taxable benefit to employees and must be reported on their T4 slips.

Clients can set up a combined HCSA/WSA arrangement. In this model, the employer still sets the total annual allotment, and employees choose (at the beginning of each year) how much is allocated to their HCSA versus their WSA. With thoughtful planning, employees can maximize the overall value of the dollars available, especially in years when their eligible health and dental expenses are not projected to use the full amount.

As we often tell clients, there is no “one size fits all” benefits plan. Healthcare Spending Accounts are another tool we use to tailor your employee benefits program to the needs of your organization and employees.