At Nucare, we want all our clients to understand the benefits and opportunities that a PHSP offers. Our PHSP FAQ is designed to ensure that you’re informed of all the great ways you can make your employees happier while saving money.
1. What is a Private Health Service Plan (PHSP)?
Private Health Services Plan is defined in subsection 248(1) of the Act (Tax Act) as a CRA approved plan that allows corporations and self-employed individuals to provide health, dental and vision benefits to employees and their dependents on a tax free basis while entitling the employer to a deductible business expense. Nucare PHSPs have been setup to adhere to the guidelines set forth by Revenue Canada in both IT 339 R2 and IT 85 R2.
2. Who administers the PHSPs?
Nucare Financial Services has designed and implemented a health and dental administration application that provides a systemic solution to audit and process the claim process to administer PHSPs.
3. Why use a PHSP vs Traditional Insurance?
The Universal Health Plan provides a customized health and dental administration plan that is fit for your company as well as offer administration costs that are 30-50% lower than the large companies that offer the same services across Canada. For businesses to qualify for tax deductions through a PHSP, the Canada Revenue Agency (CRA) has stated that PHSPs must be administered by a third-party, arms-length provider. Nucare Financial Services Inc., provides this service exclusively to all Canadian businesses.
4. What coverage does Nucare offer?
Expenses submitted to rk3 as part of a claim must qualify as an eligible medical expense as defined by Revenue Canada’s Income Tax Act (IT 519 R2) subsection 118.2(2). The Universal Health Plan includes many items not normally covered by traditional medical and dental insurance plans. For a summary of expense that can is eligible through Nucare please click here.
5. Can I benefit from Nucare’s plans even if my spouse already has coverage?
Yes you can benefit even if your spouse already has coverage. The plans from Nucare can be used in combination with the other plan by offsetting any expenses that cannot be claimed through the other plan. Expenses that employees pay out of their own pockets such as deductibles and medical expenses that exceed their allowed maximum can be submitted to Nucare.
6. How does my company deduct expenses incurred through Nucare?
Plans offered by Nucare qualifies as a cost-plus Private Health Services Plan. The employer can deduct expenses paid to a Private Health Service Plan as an operating expense. Contact your accountant for details of how this would be expensed.
7. Can provincial health care premiums be expensed through a PHSP?
Provincial Health Care premiums are not eligible to be expensed through the PHSP. Nucare Plans do allow all premiums that are incurred towards any private, extended dental and health plans to be expensed as part of the plan.
1. How far back can I go when I establish the start date for eligible expenses in my PHSP for my employees?
You as the planholder can specify the Effective Date. It is a bit convoluted but you do it by establishing your first “benefit year”. Your benefit year can be any twelve month period ending in the current fiscal year. Suppose your fiscal year end is October 31, and we are in the 2014 fiscal year. That means your earliest qualifying “benefit year” would end on the first day of the current fiscal year. Therefore, it must end on November 1, 2009. Working back 12 months from that date defines the start of your first “benefit year” as being November 2, 2012. The reason a PHSP can be retro-active is because a PHSP is defined as being “in the form of insurance”. However, it is not traditional premium-based insurance where premiums paid by many cover the claims of a few. A PHSP is based on each business covering the medical expenses of its own plan with a “cost plus commission” to a third party provider (i.e. Nucare Administration). Since the planholder must cover the expenses, it follows that it will be the planholder that determines what dates your employees will be covered (within reason). As the owner of that business you establish the Effective Date based on your generosity to your employees and the ability of your business to cover the financial cost. Remember you cannot “double dip” so any medical expenses you claimed on a personal tax return for a Medical Expense Tax Credit cannot be claimed again for a second benefit. However, if you did not claim them and you still have the receipts then they are deductible under your PHSP.
2. I am a Sole Proprietor and plan to open a Plan with Nucare. I have an expense coming up that will exceed the $1500 yearly limit. Can I carry forward that deduction?
Yes, you can submit an eligible expense over multiple years until it is fully re-imbursed.
3. Our company has some employees and some shareholders and some who are both. How do we ensure our PHSP is set up according to the rules?
A PHSP is designed as an “employee” benefit and not a “shareholder” benefit. All members of the PHSP must be employees, so workers who are “shareholders-only” should establish themselves as employees as well. For planholders who are one-person companies and use dividends for the bulk of their compensation, they should pay themselves at least some salary to meet this definition. Lump sum employment bonuses paid at year end will avoid payroll administration. Consult your accounting or taxation advisor for advice on this matter.
4. How do we control the costs of health benefits using a PHSP?
While no employee can be excluded from participating in your PHSP, the planholder can contain the costs of operating a benefit plan. This is accomplished by assigning your employees into classes of coverage. Those employees which have a key role in the company such as the owner or principal can have a higher limit; middle management or supervisory level employees can be grouped with slightly less coverage. Clerical or labourers can have a class with lower coverage. And temporary, seasonal or part-time employees can be managed with probation periods, minimum hour limits and lower coverage. You can also make your PHSP optional with the choice of opting out.
5. How much should I set as my class limits?
You can equate $2000 to a one dollar per hour pay raise over a 2000 hour working year for your employees. From our experience, an average family of 4 spends about that much in routine expenses each year. So depending on your generosity and ability of your company to pay the costs of your PHSP you can consider that as your middle level class. Management could be higher and operating staff could be lower. You can operate for some time and determine if that works for you. You, as the planholder can lower or raise these limits at any time simply by letting us know your intentions.
6. What is the meaning of “total income” and “income from sources other than self-employment” when I am determining if my self employed business is eligible for a PHSP?
For the purpose of PHSP eligibility, your total income is the amount from line 150 of your income tax return, (before you deduct any amounts for a PHSP); minus the amounts you entered on lines 207(RPP Deductions), 212(Union Dues), 217(Business Investment Losses), 221(Carrying Charges), 229(Other Employment Expenses), 231(Clergy Residence Deductions), and 232(Other Deductions). For the purpose of PHSP eligibility, your income from sources other than self-employment is the amount from line 150 of your income tax return, (before you deduct any amounts for a PHSP); minus the amounts you entered on lines 135 to143(Business, Professional, Commission, Fishing, Farming Incomes excluding business losses which reduced the net amount reported on those lines), 207(RPP Deductions), 212(Union Dues), 217(Business Investment Losses), 221(Carrying Charges), 229(Other Employment Expenses), 231(Clergy Residence Deductions), and 232(Other Deductions).
7. If I enroll, how can I be sure you’re trustworthy and legitimate?
Nucare has been operating and offering our health benefit plans to our clients for seven years. While we are as legitimate as any PHSP provider in Canada, we will need to earn your trust to keep your business. With our company operating on only 10% profit margin, you can be sure we are not a get rich quick scheme. To be prosperous we need to have a long, positive relationship with your business.
8. I currently have a traditional benefits plan. Why should I switch?
Benefit premiums have risen over the last few years and are set to rise again. Limits to coverage, partial reimbursement and fee guides all limit what you get back. In general, benefit plans are structured for providers to make a 35-50% margin over actual claims costs. This means that few people actually claim sufficient amounts to cover the premiums they pay. By having a PHSP you pay for only what you use and this can add up to significant saving each year on top of the potential tax savings. In addition to cost savings, a PHSP has a number of other advantages over traditional benefit plans, including more comprehensive coverage, 100% reimbursement, greater flexibility, and simplicity.
12. I currently have a PHSP with another provider. Why should I switch?
Unlike other PHSP provides that only offer a PHSP health spending account but includes a stop-loss insurance and out of country health insurance that protects you and your employees above and beyond your health spending account. Additionally, if you were to switch to Nucare from another PHSP, we will waive your sign off fees.
1. My spouse has health benefit coverage under her employer. Can I deduct the eligible expenses that are not covered by her plan under my PHSP?
Yes this is a common and acceptable usage of a PHSP. Your Nucare PHSP is supplementary to your wife’s benefit plan. The process would continue just as it is now. Once you receive the statement from her insurance company indicating the amount that was not covered by her plan, you simply send that insurance carrier’s statement to Nucare, circling the claimed amounts, along with your business cheque. You will be reimbursed for the disallowed amounts under the spousal plan. Any expenses that were only partially covered by her plan or were totally ineligible can be considered for a claim under your Nucare PHSP. If you know beforehand that a particular service is not covered (say chiropractic or massage therapy) by her plan, you can speed up your reimbursement by submitting the original receipt from the health provider directly to Nucare. If you know it will be deemed ineligible there is no point in sending it to her insurance company first. And once you have reached your annual limit on any limited service (such as orthodontics) with her insurance company, you can submit the remainder of those receipts directly to us.
2. As a result of a divorce, my biological child is living with his other parent. Are health expenses for that child deductible under my PHSP?
No. Covered Employees may only claim expenses for individuals who are living in their household. Your household means your principal home at a single address where the full time occupants, regardless of age, are dependent on you for their living expenses. This is not the same definition as “Dependent” used in many other tax related discussions.
3. My parents live full time in an attached suite in my home for which they pay no rent. Are their health expenses deductible through my PHSP?
Yes. Covered Employees may only claim expenses for individuals who are living in their household. Your household means your principal home at a single address where the full time occupants, regardless of age, are dependent on you for their living expenses. This is not the same definition as “Dependent” used in many other tax related discussions.
4. Some of my medical supplies have Sales Tax on the receipt. Should I include the GST and PST in my PHSP claim?
Yes. The full cost of eligible health expenses including GST, HST and/or PST should be included on your claim.
5. I have to pay for parking when I visit my doctor. Is this a deductible health expense?
No. That is not a health services expense.
6. Are vaccinations for travel overseas an eligible expense for our PHSP?
Yes, provided they are prescribed & delivered by a nurse or doctor licensed in your province.
7. Can I deduct the cost all my activities that are proactive healthy pursuits, such as sports, gym or swimming lessons?
No. A PHSP is intended to cover the cost of health services and treatments provided by medical practitioners. It is not legislation designed to influence healthy lifestyles. However, recent tax changes have made certain sports activities for children deductible on your personal taxes. Consult a tax professional for more information on this.
8. I have employees who travel to foreign countries. Are premiums for travel medical insurance a deductible expense on our PHSP?
Although Nucare’s Plan include an out of country insurance plan. If you decide to enhance your plan through with additional Travel Insurance for personal injury or medical expenses, it is an eligible expense. Other travel related insurance that is not specifically for health expenses is not covered. Things such as flight cancellation insurance, or liability insurance are not eligible expenses.
9. One of my employees is very risk averse and wants to purchase commercial health insurance with the funds I allocate to him per year with our PHSP?
Yes. This is an eligible expense. It does mean that employees will not have any funds left over for 100% coverage or the routine expenses.
10. In order to prescribe PHSP eligible services, what is the definition of a medical practitioner?
In layman’s terms, a medical practitioner is an individual registered as such by the appropriate provincial or national governing body for that profession, such as a College or Association. Further clarification is provided by the CRA Interpretation Bulletin IT 519R2
Claim Submission Process
1. Do we have to send the original medical receipts or are photocopies acceptable? I am concerned in case the originals are lost or not approved?
Generally Nucare Administration requires original receipts for our records. We do recognize they are not available in some circumstances and we will accept photocopies of receipts on occasion. We do not suggest you send photocopies routinely. If any expenses are disallowed we will return the original receipts to you. We do strongly recommend you make photocopies of the receipts as postal mail does on occasion get misdirected.
2. Do we have to submit a claim form for each separate member of the family for a Covered Employee?
No. You can mix children and spouses on the same claim form. The re-imbursement cheque will be made out to the payee shown on the top of claim form. You would only submit separate claim forms if you want separate cheques. For example, if a Covered Employee paid for his own dental work and the spouse of the Covered Employee paid separately for their own dental work. If two claim forms were submitted, Nucare Administration would issue two separate cheques made out to each spouse.
3. My year end is May 31. How long after that date do we have to submit our expenses for the year?
Unlike RRSP transactions, Nucare Administration operates our PHSP service on a transaction date model. We expect to receive all expense claims on or before your year end date. This allows us time to prepare your annual summary and tax receipt and deliver it to you in time for your tax advisor to do your corporate tax return. If you are expecting a large expense near your year end, please contact us via email at email@example.com to make special arrangements to keep your file open for a short time.
4. I have expenses for last year and some for this year already. Do I have to make separate claims for each fiscal year?
It is the transaction date with Nucare Administration, not the medical service date that determines to which fiscal year the expense will apply. The medical service date is only used to ensure it is after your planholders Effective Date. Once your fiscal year closes, you will receive a tax receipt that will be deductible against your taxes for that fiscal year. The Nucare Administration transaction date is recorded as the day the claim is received at our office. If your miss a particular health expense it can always be claimed the following year, but it will apply to your business taxes in the year it was claimed.
5. One of my Covered Employees has a big expense with his children’s orthodontics. It is larger than I have budgeted to cover in a year on our PHSP limit. What can he do?
It is an eligible expense so he can submit the expense in chunks (multiple times) over several years until it is fully re-imbursed. For example he can claim his regular expenses this year and then with any room he has at year end he can claim it against these orthodontics. After a few years, he will have recovered his expense while not exceeding your company budget for the PHSP.
6. How often can claims be submitted? Is there a time limit or a minimum claim amount?
At Nucare Administration you can submit as often as you like for any amount you like. We have no minimum claim amount nor frequency restrictions. The cost is simply a percentage of the claim so it does not affect the timing. There are no surcharges or hidden fees if you make small claims or submit numerous times.
7. When I submit claims do you need the bank receipt if I pay by MasterCard or Visa?
No. You only need to submit the health expense receipt from your medical practitioner. Your method of payment has no bearing on your PHSP claim. In fact, we would prefer if you did not include your Visa or MasterCard receipts as that financial information is private and is not required in the course of our PHSP business. Our claims staff shreds those receipts when they arrive.
8. How come I have to pay the whole medical expense again? Why can’t I just submit a cheque for your admin fee and the GST/HST?
You must submit the whole amount of your claim including the medical expenses, administration fee and GST. The reason for this is there are 3 legal entities involved in two separate transactions. Your business is paying Nucare and Nucare is reimbursing the Covered Employee. If there is not a full payment by the employer under the PHSP, then the reimbursements would not be tax deductible. Interpretation Bulletin IT-339R2 Section 3 explains the basic elements of a PHSP and the indemnification of one party (the Covered Employee) by another party (the PHSP planolder)
9. Do I get my receipts back when I submit them to Nucare Administration?
No. Nucare Administration keeps the original receipts in secure storage for 7 years and then shreds them. This is for any investigation that Canada Revenue Agency might launch against any of our customers. We cooperate fully with CRA in those circumstances. However, if you need the original receipts, for example in warranty issues with a device, we will be happy to return the originals (and keep photocopies). There is no charge for that. We do encourage you to keep your own photocopies of all receipts before they are submitted, in case they are lost in the Canada Post mail.
10. Do you accept MasterCard or Visa for claim payments?
No. We only accept cheques for claim payments. Becoming a credit card merchant would significantly increase our administration fees. In any event, since we are required to collect original medical receipts in the mail for adjudication, a credit card transaction would not expedite the claim processing time.
11. Does it matter if the original medical expense is paid with the business credit card, or my personal credit cards?
You wouldn’t use your business credit card in this instance. The medical services were delivered to real human beings not a business entity; they are the Covered Employees, so they can pay the medical practitioner by any means at all, including their personal credit cards.
12. How quickly will I receive my reimbursement cheques?
Even though we promise 5 day turnaround on our reimbursement cheques, we actually have enough staff to process all claims on the same day or next day. So depending on your mail delivery timE, you will see your re-imbursement cheque within about a calendar week. If you are concerned about the effect of delays on your business cash flow, may I also suggest you submit smaller claims more frequently? We do not have minimum amounts or charge anything extra for numerous claim submissions. For quicker turnaround, we do recommend scanning your claim form along with your medical receipts and submit to firstname.lastname@example.org.
13. I have a large claim with multiple pages. Can I send one lump sum cheque, or do I need to send one check for each page of claims?
Yes, you can send one lump sum cheque for the entire claim, regardless of how many pages. One small hint; if you are using the MS Excel electronic claim form you can put the “Total Claim” (not the “Total Fee Payable”) from your first page as “Balance Forward” on the first line of the subsequent page. Then the last page of the spreadsheet will have the correct “Total Fee Payable” for the entire claim.
1. Do we need to pay $295 enrolment for each employee when we sign up for our PHSP?
No. A Nucare Administration PHSP is a service which is sold to the company (planholder) for one single $295 fee regardless of the number of Covered Employees. Further, we do not charge any fees to adjust your list of Covered Employees. You can make changes free of charge at any time.
2. Does it cost anything to change my list of Covered Employees?
No. You can simply send us an email or include your changes with your next claim and we will update the records at no charge.
3. Is the $295 enrolment fee an annual charge?
No. The $295 enrolment fee is “one time only” to cover the costs of things like paper, computer program, data entry, postage, printing etc. An annual fee of $95 is charged to upkeep the trust fund account that is setup by Nucare with TD Canada Trust.
4. My business is registered in Nova Scotia. You don’t mention HST (Harmonized Sales Tax) on your website. What tax do you charge on administration fee for businesses in Atlantic Canada?
Yes, we do charge HST for customers in Atlantic Canada. We have separate forms available that show and calculate the HST on the Nucare administration fee. We include a selection of those forms with each enrolment.
1. I paid my dentist in full with my credit card. I don’t understand why I have to pay Nucare Administration a second time. I don’t think getting free dental coverage with a PHSP. Am I correct?
A PHSP does not provide free health benefit coverage. If you are comparing it to premium-based health insurance, there are some differences. In both cases the medical practitioner was paid in full by credit card. Health Insurance charges you fixed monthly premiums whether you make a claim or not. When you make a claim the insurance company pays it from their pool of premiums collected. In a PHSP your business does not have pay premiums of any kind. You submit your company business payment to us with your PHSP claim. Nucare Administration uses that money to pay the re-imbursement to your covered employees.
2. Do you have any references for existing customers of Nucare Administration?
Yes, references and testimonials are available on request.
3. How long has Nucare Administration been in business?
Nucare Administration is one of the newest PHSP providers in Canada. It was started in 2007 after observing the Private Health Service Plan market could be served by a lower cost yet still fully comprehensive PHSP product offering. We currently service customers in 4 provinces from Ontario to British Columbia.
4. Our family has significant health care costs and writing such a big cheque will affect my business cash flow?
You do not need to wait until the end of your fiscal year to make a claim submission. If you are concerned about the effect of delays in turnaround on the reimbursement cheque on your business cash flow, we suggest you submit smaller claims more frequently; say quarterly or monthly. We do not have minimum amounts or charge anything extra for multiple claim submissions.
5. What are the major advantages of a PHSP for a small business?
Some of the major advantages of a PHSP include:
- Tax Effective – Make your Health and Dental Expenses 100% deductible by your business and tax free to the employee to reduce your taxes
- Broader Coverage – Get a comprehensive range of coverage that is often excluded by traditional benefits plans
- 100% Reimbursement – 100% of eligible benefits claims are reimbursed up to the limit you set
- Works with Other Plans – Deduct any eligible expenses not covered by a spouse’s plan or submit premiums from insured plans to your PHSP to make them deductible and reduce taxes
- Greater Flexibility – You can allocate your benefit dollars to where you need them most. Each employee uses the particular benefit that is needed not the insurance company.
- Simple. Benefit plans have become increasingly complex. A PHSP is an easy way to manage your Health and Dental costs. Pay for only what you use.
6. What are the advantages of a PHSP over covering my health expenses “out of pocket”?
By establishing a PHSP, you are able to deduct your Health and Dental costs as a business expense in a similar fashion to phone, office supplies, or parking expenses. This will save you a significant amount of money by making your health and dental expenses 100% tax deductible through your business. Families typically spend between $1,500-$3,000 on Health and Dental per year. For an individual with a 30% marginal tax rate this would mean a savings of $450-$900 per year versus compared to using post-tax dollars. Your savings will depend on the many factors that make up your marginal tax rate, how much you spend in a year and your tax rate. Ask your tax advisor about a PHSP.
7. Our family has coverage under a traditional benefits plan. Is a PHSP still useful for me?
Yes. You can use your PHSP as a “top-up” plan. Any eligible Health & Dental expenses not covered by your traditional benefits plan are eligible for claiming under your PHSP. For example, if your spouse has an employer sponsored benefits plan, submit any non-reimbursed amounts from that plan as eligible expenses for your PHSP. Simply submit the original Explanation of Benefits statement received from your other plan in place of the original receipt to Nucare. Insured premiums from other benefit plans such as travel medical insurance, health or dental benefit premiums, and catastrophic insurance are also eligible for reimbursement through a PHSP. By establishing a PHSP, in combination with an insured plan you can make these costs 100% tax deductible as a business expense and save money.
8. Can a PHSP be set up for my employees to help them save money while still providing comprehensive coverage?
Absolutely! You can easily provide your employees with a PHSP having a pre-set spending amount for the various classes of employees, from a few hundred to several thousand dollars per year. The amount is your choice. Like traditional benefits plans from insurance companies, all payments from a PHSP are tax-free. However, unlike a bonus or pay increase, a PHSP reimbursement payment to the employees is not deemed as a taxable benefit to the employees. This can save your employees significant dollars compared to providing them with additional earnings (in after tax dollars) to cover their benefits. A PHSP provides employees the ultimate flexibility, broad coverage and optimizes benefit dollars. While for employers it is a simple way to provide employee benefits and have cost certainty on your benefits plan. A PHSP is a great way to attract and retain employees!