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Inflation and Health Spending Accounts

Updated: Jun 5, 2023

Insurers never forget to apply inflation to traditional benefits rates at renewal time. Are you forgetting to apply inflation to health and wellness spending account limits?

In a nutshell, spending accounts are a fixed allowance of dollars set aside for employees to use on eligible expenses; if expenses rise and are suddenly more expensive, the allowance won’t go as far.

Inflation is forced upon us through the cost of groceries, gas, and other living expenses. Remember $2 Tuesday at the movie theatre? But with an HSA, increasing HSA amounts due to inflationary pressures falls on us and our clients.

Unfortunately, dental and health inflation outpace regular inflation:

  • Dental Fee Guide Increases in 2023 range from 5.25% in Manitoba all the way up to 9.8% in Quebec

  • The medical trend rate for 2023 is forecasted to be 7.5%

  • Consumer Price Index, or CPI, is about 5.9% according to the Bank of Canada

In the context of traditional group insurance, inflation is applied automatically at renewal. But there is no automatic mechanism for this to happen in the health and wellness spending account environment.

Here are some quick tips to determine if it might be time to increase health spending accounts if your budget allows:

  • Most employees are using 100% of their Health Spending Account balance prior to the end of the benefit year.

  • You set up the account more than 5 years ago.

  • You are reducing insured coverage with an eye to push costs to a fixed-contribution environment

  • Employee feedback

We know that increasing costs in this tumultuous time is not always possible, but if you are interested in having a discussion about health and/or wellness spending account balances, please book a meeting.


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