Health Spending Accounts (HSAs) are one of the most flexible and tax-efficient ways for Canadian businesses to provide health and dental benefits. Despite their advantages, HSAs are still overlooked by many business owners. Traditional group insurance plans remain the default — even though HSAs often provide more value, more flexibility, and better tax results.
So why aren’t HSAs used more often? Let’s take a look.
1. Group Insurance Pays Higher Commissions
The biggest reason HSAs aren’t promoted more is simple: money.
Traditional group insurance plans pay agents and brokers commissions between 4% and 10% of annual premiums. Those commissions are built directly into the premium costs, so the higher the premium, the higher the payout.
Health Spending Accounts don’t have premiums — they’re a pay-as-you-go reimbursement model. Depending on the HSA provider, there may or may not be an ongoing commission for the agent. When commissions are offered, they’re typically much lower than those paid on traditional group insurance plans.
Naturally, many advisors focus on selling traditional insurance first. It’s not that they’re against HSAs — it’s that the traditional system rewards selling products that generate recurring premiums.
2. The Industry Is Built on Tradition
For decades, group insurance has been the standard for employee benefits in Canada. It’s familiar, it’s widely marketed, and it’s profitable for insurers.
Large insurance companies have built their entire business model around collecting premiums and managing risk. HSAs don’t fit neatly into that system. They’re lean, transparent, and designed to eliminate the middle layer of pooled premiums.
That’s why you’ll often see insurers offering HSAs as an add-on to group insurance — never as the main plan. It helps them maintain traditional premium revenue while appearing innovative.
3. Awareness and Education Are Still Low
Many business owners simply haven’t heard of Health Spending Accounts or don’t fully understand how they work.
An HSA is not an insurance policy — it’s a tax-free health and dental reimbursement plan that allows your corporation to pay for medical expenses through the business.
- 100% tax-deductible to the company
- 100% tax-free for the employee or owner
- Covers any CRA-approved medical expense
It’s simple, transparent, and designed to give both employers and employees more control over how their benefit dollars are used.
4. More Businesses Are Moving to HSAs
The trend is changing.
According to Benefits Canada’s 2024 Health Survey, more than 60% of small and mid-sized employers now offer a spending account, either a Health Spending Account (HSA) or a Wellness Spending Account (WSA).
A 2023 Sanofi Canada survey found that 41% of plan sponsors are re-evaluating their benefits structure to reduce premiums and increase flexibility — with HSAs being the top alternative.
The shift is being led by small businesses, professional corporations, and startups that want modern, tax-efficient benefit plans without the unpredictable cost of traditional insurance renewals.
5. HSA vs Group Insurance — Key Differences
| Feature | Health Spending Account (HSA) | Traditional Group Insurance |
|---|---|---|
| Cost Control | Employer sets the annual budget. | Premiums are pooled and adjusted yearly. |
| Tax Treatment | 100% tax-deductible to the business; tax-free to employees. | Premiums are deductible, but benefits may be taxable depending on the plan. |
| Coverage Flexibility | Any CRA-approved medical expense. | Limited list of covered services. |
| Renewals | No renewals or premium increases. | Annual rate increases are common. |
| Transparency | No hidden fees or commissions. | Embedded commissions and admin costs. |
| Ideal For | Small businesses, incorporated professionals, and startups. | Larger organizations with pooled risk needs. |
6. Why HSAs Work So Well for Small Businesses
For incorporated professionals and small business owners, HSAs are one of the most tax-efficient employee benefit plans in Canada.
- You decide the allowance (e.g. $2,000 per year per employee).
- Your employees spend that allowance on any eligible health or dental expense.
- You get the tax deduction; they get a tax-free benefit.
There are no premium surprises, no health category limits, and no wasted dollars. Every dollar goes directly toward health care.
7. The Future of Employee Benefits in Canada
The Canadian benefits market is slowly catching up to what small business owners already know — HSAs make sense.
They’re simple to administer, cost-effective, and fair. With more businesses looking to cut costs and offer flexible, personalized benefits, HSAs are becoming the modern alternative to traditional group insurance.
As more advisors move away from commission-based selling and toward transparent, fee-based models, the adoption of HSAs will continue to grow.
Final Thoughts
Health Spending Accounts are often overlooked because they don’t fit the traditional insurance model — not because they don’t work.
They eliminate premiums, cut administrative waste, and give employers full control over their benefit budget.
For small businesses and professional corporations across Canada, an HSA isn’t just a supplement to group insurance — it’s a better standalone solution.