Health Spending Accounts (HSA) in Canada: Eligible Expenses, Rules, and Canada Life Options Explained

Sarah Delorme
Market Insights
July 7, 2025
12 min read

This Blog Answers these questions

  • What is a Health Spending Account in Canada and how does it work for employees?

  • Which expenses are eligible under a Health Spending Account in Canada?

  • How does Canada Life’s Health Spending Account differ from other providers?

  • What are the rules for using a Health Spending Account in Canada?

  • Can employers customize allowances within a Health Spending Account for their team?

  • Is a digital employee benefits platform better than traditional group insurance?

  • How do wellness spending accounts in Canada support team well-being?

  • What are the benefits of offering a digital experience platform for employee perks?

  • Are unused HSA funds rolled over year to year in Canada?

  • How secure are digital platforms for managing health benefits and reimbursements?

Introduction

HSA is a health spending account in Canada, a pre-tax benefit strategy whereby the employer can reimburse the worker for eligible medical expenses. In Canada, health spending accounts (HSAs) are subject to the rules of the Canada Revenue Agency (CRA), that is, they can spend the funds solely on an eligible medical expense as designated in the Income Tax Act.


According to the Canadian Life and Health Insurance Association, an increasing number of employers currently provide flexible employee benefits, giving employees the freedom of approaching the HSAs.


The Income Tax Act contains specific rules according to which health care spending accounts Canada Life function. The CRA shows an option to provide Canada health spending accounts as a non-taxable benefit on the condition that certain requirements are met by the employer.


This allows the Canada Life health spending account to be a legally acceptable and workable solution to allow businesses to satisfy the health requirements of its employees, all the time lowering the taxable income.


Most Canadian businesses that provide their employees with the services of Canada Life health care spending account or any other offerings offer health spending accounts Canada along with regular insurance packages or instead of the latter.

Why Health Spending Accounts Are Gaining Momentum in Canada

The rising cost of healthcare combined with diverse employee needs has made traditional group insurance feel rigid and outdated. Enter the HSA—a more adaptive, cost-controlled, and customizable solution that:

  • Covers a wide range of eligible medical and paramedical expenses

  • Offers tax advantages for employers and employees

  • Is easy to manage digitally, especially through platforms like GoKlaim

Compared to fixed benefits, HSAs empower employees to spend their allowances based on personal priorities, whether that’s dental care, physiotherapy, or mental health.

What Is a Health Spending Account in Canada?

HSA is a tax-free benefit scheme in which employees are paid back by the employers on eligible healthcare expenses. In Canada, the health spending account (HSA) is governed by the Canada Revenue Agency (CRA) regulations, and hence Canadians can only utilize it on eligible medical expenses as indicated in the Income Tax Act.


The amount of HSA allowance and how frequently one takes it is determined by the employers—who are allowed to provide it monthly, quarterly, or annually—meanwhile, employees claim expenses whenever they arise.

This creates a personalized, flexible benefit experience.

Many Canadian companies—including those working with Canada Life—offer HSAs either in addition to or as a replacement for traditional insurance plans.

Eligible Expenses Under a Health Spending Account in Canada

One of the biggest advantages of an HSA is the wide coverage range. Common eligible categories include:

  • Medical expenses: Prescriptions, diagnostic tests, surgeries, hospital stays

  • Dental care: Exams, cleanings, fillings, orthodontics

  • Vision care: Eye exams, prescription glasses, contact lenses, LASIK

  • Paramedical services: Chiropractors, osteopaths, dietitians, massage therapists

  • Mental health: Therapy sessions, psychologist consultations

With providers like Canada Life health care spending account, employees can access these services with ease and confidence, knowing their expenses fall within the approved guidelines.

How Canada Life’s Health Spending Account Works

Canada Life is one of the leading providers of health spending accounts in Canada. Their program integrates with employer benefit structures to give flexible, tax-advantaged coverage.

Employers can:

  • Set allowance limits by employee group

  • Customize frequency of disbursement

  • Choose to allow carryover of unused balances

Employees can:

  • Track their claims online or via mobile

  • File claims in under two minutes

  • Receive reimbursements directly in their bank accounts

HSAs with Canada Life or through a digital employee benefits platform like GoKlaim make benefits more accessible and tailored for today’s workforce.

Rules and Regulations: What You Must Know

Using an HSA comes with responsibilities. According to Revenue Canada, employers must:

  • Ensure that claims are for CRA-approved medical expenses

  • Set reasonable maximums per employee

  • Provide clear documentation of claims

Employees must:

  • Keep receipts and proof of payment

  • Submit claims within the defined benefit period

To stay compliant, employers may work with digital providers like GoKlaim who are SOC II certified and implement AES-256 encryption for data protection.

Why Employers Are Choosing Digital Platforms Like GoKlaim

Platforms like GoKlaim offer modern features that enhance both compliance and user experience:

  • No setup or transaction fees

  • Reimbursements in 24–48 hours

  • Support for dependents

  • Real-time reporting for finance teams

  • Mobile apps with biometric login

These features, combined with 99+ customizable categories, help businesses tailor benefits to their team's lifestyle and health needs.

Flexible Employee Benefits: A Smarter Way to Compete

Offering HSAs allows small and medium-sized employers to:

  • Boost retention and morale

  • Compete with large companies offering traditional insurance

  • Gain predictable cost structures by capping yearly HSA allowances

Moreover, wellness spending accounts in Canada, like those supported on GoKlaim, can extend coverage to:

  • Gym memberships

  • Nutritionist consultations

  • Travel-related health costs

This diversity in offerings helps employers build loyalty by investing in employee wellness.

Frequently Asked Questions

1. What is a Health Spending Account in Canada and how does it work for employees?
An HSA is a tax-free benefit that reimburses eligible healthcare costs, offering flexibility and control to both employers and employees.

2. Which expenses are eligible under a Health Spending Account in Canada?
Medical, dental, vision, mental health, and paramedical expenses approved by CRA are typically eligible.

3. How does Canada Life’s Health Spending Account differ from other providers?
Canada Life offers robust digital tools, claim flexibility, and integration with group insurance plans.

4. What are the rules for using a Health Spending Account in Canada?
Expenses must be CRA-approved, properly documented, and submitted within the eligible period.

5. Can employers customize allowances within a Health Spending Account for their team?
Yes, platforms like GoKlaim allow employers to set allowance frequency, amounts, and eligible categories.

6. Is a digital employee benefits platform better than traditional group insurance?
For many SMBs, digital platforms offer cost predictability, speed, and customization traditional insurance can't.

7. How do wellness spending accounts in Canada support team well-being?
They cover non-medical wellness options like fitness, mindfulness apps, and healthy living supports.

8. What are the benefits of offering a digital experience platform for employee perks?
Ease of use, real-time data, secure access, and instant reimbursements.

9. Are unused HSA funds rolled over year to year in Canada?
It depends on the provider. Many, like GoKlaim, offer rollover features to maximize employee benefits.

10. How secure are digital platforms for managing health benefits and reimbursements?
Platforms like GoKlaim are SOC II certified and encrypted with AES-256 to ensure data safety.

Conclusion

As health costs continue to rise, health spending accounts in Canada are becoming a cornerstone of progressive benefit programs. Employers want flexibility and budget control. Employees want personalization and speed. HSAs—and platforms like GoKlaim—deliver both.

Whether you're considering a Canada Life health spending account or building a self-managed program through GoKlaim, the benefits are clear: streamlined reimbursements, wide eligibility, and digital ease.

Ready to give your team the benefits they’ll actually use?
Book a Meeting today and transform the way your company supports employee wellness.