Costplus / Medical Reimbursement Programs
Cost Plus is a reimbursement program in which a company self-insures claims and processes payment through an insurance company for maximum tax effectiveness.
Cost Plus is a tax-effective method of reimbursing medical and dental expenses that are not covered by the company’s Group Benefit Plan or that exceed the limits.
It provides flexibility to reimburse non-insured expenses for shareholders and other selected key personnel as well as their dependents. The employer defines which employees are eligible, as well as any maximum limit of coverage. Any medical expenses eligible under the Canada Revenue Agency Income Tax Act can be reimbursed. Expenses must be reasonable for the service or treatment provided.
The Cost Plus arrangement has several distinct advantages:
- Uninsured expenses in excess of the plan’s deductible, coinsurance, maximums and high end benefits (e.g. vision care, orthodontics) can be covered.
- Use of the program will not affect the loss ratios, which determine the rates for the existing Group Benefit Plan.
- The cost is deductible as a business expense and is not taxable as a benefit to the employee.
To pay a claim, a Cost Plus claim form is completed, and forwarded to the insurance company with a cheque in the amount of the claim plus the administration fee and taxes. The insurance company then issues a cheque to the employee in the amount of the claim for reimbursement for medical services.