The Health Benefit Plan (HBP): The Flexible, Low-Fee Alternative to the Health Spending Account (HSA)

Posted under: Business Owners, HBP

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As we move through 2026, employee benefits are being reconsidered by organizations to attract and retain top talent. However, traditional health insurance premiums are rising.

For business owners looking for a tax-efficient way to cover medical expenses without the recurring “cost-plus” fees of a Health Spending Account (HSA), the Health Benefit Plan (HBP) is an excellent solution.

What is a Health Benefit Plan (HBP)?

A Health Benefit Plan (HBP) is a corporate vehicle that allows employers to pay for employee medical expenses using pre-tax corporate dollars:

• For the Employer: Payments are 100% tax-deductible as a business expense.
• For the Employee: Reimbursements are received tax-free and are not considered a taxable benefit.

Unlike with an HSA, which typically charges an administration fee on every single claim, the HBP is self-administered and does not charge the HSA’s “Cost-Plus” fees, maximizing the amount of money that stays in the business.

HBP vs. HSA: The “Cost-Plus” Difference

The defining difference between GBL’s HBP and a standard HSA is the fee structure. Most HSAs operate on a “Cost-Plus” model, charging a 5%–10% administration fee on top of every dollar spent on medical care.

The HBP eliminates this. GBL charges a one-time setup fee, with zero recurring administration fees thereafter. The below cost comparison example illustrates the potential for cost-savings over a 5-year period through an HBP versus a HSA:

Feature / Cost	GBL Health Benefit Plan (HBP)	Traditional HSA (Cost + 10%)
Fee Structure	One-time Setup Fee Only	No Setup Fee, 10% on all claims
Year 1 Costs	$2,000	$1,000
Year 2 Costs	$0	$1,000
Year 3 Costs	$0	$1,000
Year 4 Costs	$0	$1,000
Year 5 Costs	$0	$1,000
5-Year Total Fees	$2,000	$5,000

*Assumption: A company with $10,000 in annual medical expenses.

In this scenario, the HBP pays for itself within the first two years compared to an HSA.

Companies with annual medical expenses in excess of $10,000 will see even higher short and long term savings.

How the HBP Works: The Self-Adjudication Model

To eliminate monthly fees, the HBP utilizes a self-adjudication model. This keeps the process simple, flexible, and internal.

1. Submission: The employee submits their medical receipt to the employer.
2. Adjudication: The employer reviews the claim to ensure it is a valid medical expense.
3. Transfer: The employer transfers the exact claim amount from the corporate operating account to the dedicated HBP bank account.
4. Reimbursement: The HBP account pays the employee 100% of the expense tax-free.

Strategic Use Cases for the HBP

The HBP is flexible. It allows you to customize classes of employees (e.g., Executives vs. Managers) with different coverage limits.

1. As a Standalone Plan

For small businesses where traditional insurance is too expensive, the HBP acts as a complete health benefits solution, providing coverage where none existed before.

2. As an Enhancement (“Top-Up”) Plan

For companies that already have group insurance, the HBP covers the “gaps” in coverage, such as the remaining 20% that will not be reimbursed in a plan that covers 80% of the medical cost.

• The Dentist Example: If a $500 dental visit is only covered 80% by insurance, the employee usually pays the remaining $100 out of pocket. The HBP can cover that $100 gap, making the visit cost-neutral for the employee.
• The Massage Example: Standard plans often cap massage therapy at $500/year. Once an employee hits that limit, they stop going. The HBP can fund the additional visits, keeping your team healthy and productive.

How to Explore if an HBP Makes Sense for Your Company

Reach out to your GBL representative to discuss.  We will evaluate your unique circumstances, provide a recommendation, and guide you through the process along the way.

Frequently Asked Questions (HBP)

Is the HBP legally compliant?

Yes. The HBP is structured to meet CRA requirements for Private Health Services Plans (PHSP). The setup process includes customized legal documentation to ensure all classes of employees are defined correctly.

What expenses can be claimed?

Generally, any medical service that qualifies for the Medical Expense Tax Credit (METC) under the Income Tax Act is eligible. This includes dental, vision, prescription drugs, and paramedical services (massage, chiro, physio).

What types of companies are best suited for self-adjudication?

Self-adjudication removes the middleman. By handling claims internally, you avoid paying a third-party administrator 10% of your total benefit spend.

That said, as your company grows larger, self-adjudication will grow increasingly difficult due to the increasing volume of medical claims. 

While there is no exact headcount limit for self-adjudication, we generally recommend the HBP for companies of up to 20 employees.

Ryan Ackers is GBL’s Senior Vice President, Growth & Corporate Development.

Founded in 1995, GBL is a leading provider of retirement, health, and cross-border solutions for business owners across Canada, and corporate pension administration and consulting. With offices in Calgary and Toronto, we have served 7,000+ clients, have 3,000+ Financial/Investment Advisors in our network, actively manage 2,000+ IPPs and RCAs, and have created 1,000+ HBPs and 3,000+ FMVs. We’re known for our industry leading client service and administration, as well as our top-notch actuarial group. Contact us today at  info@gblinc.ca or 403.249.1820 and follow us to learn how we can help Build Your Future.  www.gblinc.ca

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Tagged with: Benefits, Business Owner, HBP, Health Benefit Plan, Health Benefits, Health Spending Account, HSA