An employer comparing a Health Spending Account (HSA) with a bundle of benefits should ask two questions: does the medical plan qualify as a Private Health Services Plan (PHSP), and what obligations arise from the sales arrangement? Those questions have different legal tests.
What tied selling means
A bundle is not automatically disqualified merely because an HSA and another product are sold together. Assess the medical plan’s PHSP qualification separately from the sales arrangement. Competition Act section 77 defines tied selling and provides a fact-sensitive test involving market conditions, exclusionary effects and a substantial lessening of competition, with statutory exceptions. It is not a blanket CRA ban on every bundle. Other insurance or consumer rules may apply to the particular provider, transaction and province.
Section 77 includes both a requirement to acquire another product and certain inducements through more favourable terms. Its definition is only the starting point: whether an order can be made depends on the full statutory test and exceptions.
Sources: Competition Act section 77; Competition Bureau: Exclusive dealing, tied selling and market restrictions.
Keep the medical plan’s qualification separate
The HSA must meet the requirements of a Private Health Services Plan (PHSP) for the federal employee tax treatment described here. The plan must be in the nature of insurance and meet the applicable expense and participant conditions. For a self-insured plan, CRA’s all-or-substantially-all test generally examines benefits actually paid during the calendar year; an insured plan uses the relevant premiums. Allocating an allowance is not the same as paying an eligible medical benefit.
Assess what each plan covers, how benefits are funded and which people are eligible. A bundle does not make an ineligible medical expense eligible. Conversely, the fact that another insurance product is sold alongside an HSA does not, on its own, determine the PHSP’s tax status.
Sources: CRA: Medical expenses and PHSP requirements; Income Tax Act subsection 248(1), PHSP definition.
Compare the actual offer
- Identify every product, supplier, fee and cancellation condition.
- Ask whether each product can be purchased separately and what the alternative price is.
- Read the medical plan’s coverage and funding terms rather than relying on a label such as standalone or bundled.
- Check the provider’s role and any insurance licensing or consumer rules relevant to the transaction.
Transparent terms help an employer compare value. A standalone format is not a CRA certification, and a bundle is not automatically a breach of competition law.
Sources: Competition Act section 77; CRA: Medical expenses and PHSP requirements.
Keep claims and records clear
Document which benefit pays which expense and keep records that support the treatment of the payment. Personal wellness benefits require separate tax analysis; combining them on one platform does not convert them into medical expenses.
The employer remains responsible for adequate records even where an administrator maintains them. Check the accepted agreement for the administrator’s services and responsibilities.
Sources: CRA: Keeping Records RC188; CRA: Medical expenses and PHSP requirements; Wellbytes public Administrative Services Agreement.
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