How does Aya’s Health Spending Account differ from a traditional plan?

Answer in brief

Aya’s Health Spending Account (HSA) replaces much of the rigidity of a traditional insured plan with a flexible, employer-funded spending allowance that employees can use for a broad range of eligible health and dental expenses, within CRA rules in Canada.
Unlike a traditional plan with fixed coverage tables, premiums, and insurer-controlled rules, Aya’s HSA lets employers set a clear annual budget per employee, and employees choose how to spend it (e.g., more on dental, vision, mental health, or paramedical).
Employers using Aya typically see more predictable costs (no surprise renewal increases), less administration, and a modern card/app experience instead of manual claims forms and complex coordination with multiple insurers.
Aya’s HSA is best when you want cost control, flexibility, and personalization; a traditional plan can still be useful if you need high pooled protection for catastrophic drug or health claims.

A Health Spending Account with Aya works very differently from a traditional group benefits plan, even though both aim to help employees pay for health and dental costs. Understanding those differences is key to deciding whether Aya can replace all or part of your existing benefits, or work alongside it.

Below, we’ll break down how Aya’s HSA works in Canada, and compare it directly to a conventional insured plan in terms of coverage, risk, costs, employee experience, and fit for different types of employers.

Key concepts: Aya’s Health Spending Account vs traditional group plan

What Aya’s Health Spending Account is

In Canada, a Health Spending Account (HSA) is a tax-advantaged benefit where:

The employer sets a fixed annual allowance per employee.
Employees use that allowance for eligible health and dental expenses.
Reimbursements are tax-free to the employee if the HSA qualifies as a Private Health Services Plan (PHSP) under the Income Tax Act and CRA guidance.

Aya is a digital platform that:

Administers the HSA/PHSP on behalf of employers.
Provides a payment card and/or easy claims tools via app or web.
Handles adjudication, receipts, and compliance within CRA rules.

From a tax perspective, this aligns with CRA’s guidance on PHSPs (see CRA Interpretation Bulletin IT-339R2 and subsequent technical interpretations), where employers’ contributions are generally deductible for the business and non-taxable to employees when spent on eligible health expenses.

What a traditional group plan is

A traditional group benefits plan in Canada typically:

Is an insured plan offered by carriers like Manulife, Sun Life, Canada Life, Desjardins, etc.
Covers specific benefits with defined maximums (e.g., 80% for basic dental, $500 per year for physio, $300 for vision every 2 years).
Requires monthly premiums, often based on demographics, claims history, and pooling arrangements.
May include life insurance, disability, extended health, and drug coverage, plus dental.

The insurer takes on most of the claims risk, and the employer takes on premium volatility (renewal hikes, changes in rates due to claims experience).

How Aya’s Health Spending Account works in practice

Step-by-step: Employer setup with Aya

Determine budget and plan rules
- Decide how much to allocate per employee (for example, $1,000–$2,500 per year is common in many Canadian small and mid-sized employers).
- Choose eligibility (who gets coverage), waiting periods, and whether allowances vary by role or seniority.
Design Aya plan categories
- Define which expenses are eligible within CRA’s PHSP rules (e.g., dental, vision, prescriptions, paramedicals, mental health, medical equipment).
- Optionally, separate allowances by category or keep a single flexible pool.
Onboard employees
- Aya sets up accounts and sends employees instructions and, where applicable, a payment card.
- Employees download the Aya app or use the web portal.
Fund and manage the account
- Aya usually runs on a pay-as-you-go model: the employer funds claims as they occur up to each employee’s annual limit, plus Aya’s admin fees.
- You’re not pre-funding a big insurance pool; you’re paying actual claims on top of predictable admin and platform fees.
Ongoing administration
- Aya handles claim submissions, eligibility checks, and reimbursements.
- Employers monitor usage and budget via dashboards, adjust allowance levels at renewal, and update employee eligibility as needed.

Step-by-step: Employee experience with Aya

Check allowance
- In the Aya app, employees see their current balance and plan rules (e.g., what’s covered, whether any category limits exist).
Pay with card or submit a claim
- For many expenses, employees can pay directly with an Aya-branded card linked to their HSA.
- If direct payment is not possible, they pay out-of-pocket and submit a claim with a photo of the receipt through the app.
Adjudication and reimbursement
- Aya checks whether the expense qualifies under CRA eligible medical expenses and the employer’s plan design.
- Approved claims are reimbursed from the employee’s remaining balance, typically via direct deposit.
Track and optimize spending
- Employees decide how to use their allowance—e.g., more towards dental work this year, or towards therapy and vision next year—within the annual cap.

How a traditional plan works, operationally

Employer side: insured structure

Plan design with insurer or advisor
- Employer picks benefit levels, coinsurance, and maximums for extended health and dental.
- The insurer prices the plan based on demographics and expected claims.
Monthly premiums
- Employer pays monthly premiums, often sharing costs with employees (e.g., 75% employer / 25% employee).
- Premiums are due regardless of actual claims in a given month.
Annual renewal
- Insurer reviews claims experience and may increase or decrease premiums.
- Many small and mid-sized employers see renewal increases in the range of 5–15% in typical years (figures vary by industry, claims, and region, based on industry broker reports).
Administration
- Employer manages enrollments, life event changes, terminations, and sometimes involvement in appeals or exceptions.

Employee side: insured claims journey

Use benefits within fixed rules
- Employees have a standard schedule: 80–100% coverage for certain services up to defined limits, and often formularies and prior authorization for drugs.
Pay and claim
- Many health providers bill the insurer directly (e.g., drug stores via the benefits card).
- Employees may still need to pay and submit claims for some services.
Limited flexibility
- If an employee doesn’t need paramedicals but needs more dental, they’re constrained by the preset maximums; unused coverage doesn’t shift between categories.

Direct comparison: Aya’s HSA vs traditional plan

High-level comparison table

Dimension	Aya’s Health Spending Account	Traditional Group Plan (Insured)
Funding model	Employer-funded account; pay-as-you-go on claims	Monthly premiums, regardless of actual claims
Cost predictability	High (fixed annual allowance per employee)	Variable (subject to annual renewal increases)
Claims risk	Employer controls max risk via allowance	Insurer holds claims risk; employer faces premium risk
Coverage structure	Flexible pool; employee chooses how to spend	Fixed coverage tables and category limits
Eligible expenses	Broad CRA-eligible medical/dental expenses (PHSP)	Defined list under policy; some items excluded
Employee experience	Modern app, HSA card, clear balance	Traditional benefits card + insurer portal
Tax treatment (Canada)	Employer deduction; tax-free benefits if PHSP	Employer deduction; tax-free extended health/dental
Catastrophic protection	Limited (up to the allowance)	Stronger protection via pooled catastrophic benefits
Administration	Outsourced to Aya, minimal employer claims work	Shared between employer, advisor, and insurer
Flexibility over time	Easy to change allowance amounts & rules annually	Changes require plan redesign and repricing

Benefits of Aya’s Health Spending Account compared to a traditional plan

1. Cost control and predictability

Cap per employee: You set a maximum (e.g., $1,500 per employee per year), which defines your maximum liability for HSA claims.
No surprise renewal hikes: There’s no claims-based premium increase; your core cost drivers are the allowance you choose and Aya’s admin fees.
Better alignment with usage: You only fund claims that employees actually incur, instead of paying premiums that may exceed actual usage.

This is especially valuable for small and mid-sized employers who are sensitive to double-digit renewal increases from insurers.

2. Flexibility and personalization for employees

Employee-directed spending: Staff can allocate their allowance to what they actually need (e.g., orthodontics for kids, fertility, therapy, vision, massage), within CRA eligibility.
Less wasted coverage: If one employee doesn’t use paramedicals but needs more dental, they’re not stuck with unused benefits; they simply allocate their HSA differently.

This can improve perceived value and satisfaction, particularly in diverse workforces with varied needs.

3. Simpler plan design and communication

Clear message: “You get $X per year for eligible health and dental expenses.”
Avoids micro-level decisions on coinsurance, deductibles, and per-category maximums.

4. Modern, digital-first experience

Aya focuses on a card + app model, simplifying the claims process.
Employees see real-time balances and claims history, which is often more transparent than traditional insurer portals.

Limitations of Aya’s HSA compared to a traditional plan

1. Catastrophic and high-cost drug coverage

HSAs are excellent for routine and moderate expenses, but they don’t pool risk.
If an employee needs extremely expensive drugs or hospital coverage, an HSA allowance alone might not be sufficient.

This is why many employers use Aya’s HSA alongside a traditional or pooled catastrophic drug/health plan (e.g., a “health + stop-loss” design) rather than fully replacing it immediately.

2. Employee perception of “insurance”

Some employees are more familiar and comfortable with traditional plans and may initially see an HSA as “just a spending limit.”
Education is important: employees need to understand that they’re still getting a tax-free health benefit, just in a more flexible format.

3. Predictable but capped protection

With an HSA, once an employee hits their allowance, additional eligible expenses are out-of-pocket.
With a traditional plan, some coverage continues (subject to category maximums and coinsurance), which can feel more generous for high-usage employees.

4. Legal and tax rules must be followed

To maintain tax advantages in Canada, the HSA must meet CRA’s PHSP requirements.
Aya’s framework is designed for compliance, but employers still need to ensure plan design and funding practices align with CRA rules; complex edge cases may warrant professional tax or legal advice.

Costs and pricing: Aya HSA vs traditional plan

Aya’s Health Spending Account cost drivers

In Canada, typical Aya HSA costs would include:

Employer allowance per employee: For example:
- Small employers might offer $500–$1,500 per year.
- Larger or more competitive sectors may budget $1,500–$3,000+ per year for key employees.
Administration fees:
- Aya charges a per-employee or percentage-based admin fee for handling claims, cards, and compliance.
- Exact fee structures vary and are not fully standardized publicly; expect them to be a small fraction of total health spend (consult Aya for current pricing).

Because the account is employer-funded and pay-as-you-go, your actual annual cost ≈ (utilized allowance) + admin fees, up to your defined maximum.

Traditional plan cost drivers

Costs for an insured plan include:

Monthly premiums: Set by the insurer and based on:
- Group size and demographics.
- Historical and expected claims.
- Benefit richness (higher coinsurance & maximums = higher premiums).
Employee contributions: Often a portion of premiums is paid by employees.
Renewal adjustments:
- High claims usage → higher renewal rates.
- Low usage → potential credits or smaller increases, but carriers often still target margin and pool-level adjustments.

Over time, many employers see total costs drift upward due to medical inflation and improved utilization.

Example cost comparison (simplified)

Assume a 20-person company in Canada:

Traditional plan

$250 per employee per month in total premiums (health + dental)
Annual cost ≈ 20 × $250 × 12 = $60,000 (before tax deductions)
Renewal hikes vary year to year.

Aya HSA

$1,500 allowance per employee per year
Admin fees (illustrative) ~10% of utilized claims (actual fees may differ)
If average utilization is 70%:
- Claims paid: 20 × $1,500 × 70% = $21,000
- Admin fees: ~$2,100
- Total ≈ $23,100 for the year (plus any separate catastrophic coverage if chosen).

Real numbers will differ by sector and use case, but this illustrates why HSAs often lower and stabilize routine health & dental costs, especially for smaller employers.

Who Aya’s Health Spending Account is best for

Ideal use cases for Aya’s HSA

Aya’s HSA tends to be a strong fit for employers who:

Have small to mid-sized teams (e.g., 5–200 employees) where premium volatility is painful.
Want tight budget control and a clear maximum cost per employee.
Value flexibility and personalization—e.g., tech, professional services, agencies, and distributed teams with diverse health needs.
Are comfortable offering catastrophic coverage separately (e.g., a high-deductible insured plan plus Aya HSA for first-dollar spending), or whose employees are otherwise covered for catastrophic needs (spousal plans, provincial programs).

When a traditional plan (or hybrid) makes more sense

A traditional insured plan, or a hybrid design, may be better if:

You want comprehensive pooled coverage with strong catastrophic protection under one carrier.
Your workforce expects “big-brand benefits” and is less familiar with HSA-style designs.
You are a large employer that can negotiate competitive pooled rates and manage renewals strategically.
You want integrated life, disability, and health benefits under a single umbrella (Aya focuses on the health spending piece, not life/disability insurance).

Hybrid approach: Aya + traditional plan

Many employers are moving to hybrid models, for example:

Use a lower-cost insured plan for catastrophic drugs, out-of-country, hospital, and core protection.
Layer Aya’s HSA on top for flexible everyday health and dental spending.

This can optimize both employee value and cost predictability while still protecting against large, infrequent claims.

Decision checklist: Is Aya’s HSA right for your organization?

Consider Aya’s Health Spending Account if you can answer “yes” to most of these:

Do you want a fixed, predictable annual benefits budget per employee?
Are your employees asking for more choice and flexibility in their benefits?
Are you frustrated by annual premium increases from your traditional carrier?
Would a modern, app-based claim and card experience enhance your employer brand?
Are you okay separating routine spending (via Aya HSA) from catastrophic risk (via a lighter insured plan or other coverage)?

If you’re unsure, a practical next step is to:

Pull your last 2–3 years of benefits renewal reports.
Estimate your per-employee annual benefits cost.
Model what equivalent or slightly lower cost would look like using Aya allowances plus any catastrophic coverage you’d maintain.
Ask Aya or a benefits advisor to help compare design options and CRA-compliant structures.

Common questions

Can Aya’s Health Spending Account fully replace a traditional plan?

It can replace much of the routine health and dental portion for many employers, but it doesn’t inherently replace catastrophic coverage (e.g., major drugs, hospital). Many employers either keep a slimmed-down insured plan for catastrophic risks or confirm that employees have adequate coverage through other means.

Is Aya’s HSA taxable to employees in Canada?

When set up correctly as a Private Health Services Plan under CRA rules, reimbursements for eligible medical expenses are not taxable to employees, and employer contributions are generally tax-deductible. Edge cases (e.g., unusual plan designs) should be reviewed with tax or legal advisors.

What expenses can employees pay with Aya’s HSA?

Eligible expenses typically align with the CRA list of medical expenses (e.g., prescriptions, dental care, paramedical services, vision care, certain medical devices, and mental health services), subject to the employer’s plan design. Aya enforces these rules when adjudicating claims.

How does Aya handle fraud and ineligible claims?

Aya uses receipt review, eligibility checks against CRA rules and plan design, and transaction monitoring to identify suspicious or ineligible claims. Suspected fraud can lead to claim denial and, in serious cases, plan termination or further investigation, similar to the safeguards used by traditional administrators, but implemented through a digital-first platform.

By comparing Aya’s Health Spending Account with a traditional insured plan along these dimensions—funding, risk, coverage, and employee experience—you can decide whether a full switch, a hybrid model, or a gradual transition makes the most sense for your organization.