What Is a PHSP? HSA vs Private Health Services Plan in Canada

A PHSP (Private Health Services Plan) is a health benefit arrangement recognized by the Canada Revenue Agency that allows an employer to reimburse employees for eligible medical expenses, tax-free to the employee and deductible to the business.

PHSP and HSA tend to be used interchangeably.

Here’s the bottom line: a properly structured HSA is a PHSP.

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PHSP Meaning: CRA’s Official Definition

As per the CRA, a PHSP is a private plan that lets employers reimburse employees for qualifying medical expenses on a tax-free basis. It must meet strict criteria to qualify.

To be considered a PHSP, a plan must:

• Reimburse only CRA-eligible medical expenses
• Ensure that at least 90% of all plan payouts are for those eligible expenses (i.e. minimal or no non-medical reimbursements)
• Include five legal elements that make it insurance:
  1. An undertaking by one person
  2. To indemnify another
  3. For an agreed consideration
  4. From a loss or liability
  5. The happening of which is uncertain
• Provide coverage only to the employee, their spouse, or dependants

If the structure doesn’t meet all of these, the CRA may view it as a taxable benefit or deny it entirely.

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So... Is a PHSP the Same as an HSA?

A Health Spending Account (HSA) is a a way to structure a PHSP that allows a business owner to set an annual limit for tax-free health reimbursements.

For that HSA to be legitimate, it must operate as a PHSP under CRA rules.

At Hiveworks, every plan runs on a compliant PHSP foundation.

Each claim must be tied to a real medical event, reviewed for eligibility, and reimbursed only after the expense is incurred, with a fixed annual limit that cannot be changed mid-year.

If you’re using an HSA in Canada, it needs to meet PHSP standards.

Many HSA providers do not meet these standards. Ours does.

Learn more about HSAs here, or explore the technical details in our guide for accountants.

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How Hiveworks Works

The process is simple. Four steps from personal expense to tax-free reimbursement:

1. Pay Out of Pocket
   You pay for an eligible health, dental, or vision expense.
2. Submit a Claim
   Upload a dated receipt through your Hiveworks dashboard.
3. Your Corporation Funds the Claim
   We invoice your business. You fund the exact amount.
4. You’re Reimbursed Personally
   Once the claim is funded, we reimburse you directly. Tax free.

The entire process is digital, secure, and typically completed within 3 to 5 business days.

More details on how it works are here.

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Who Can Use a PHSP?

PHSPs are beneficial to Canadian corporations that meet CRA eligibility rules. To qualify for a Hiveworks HSA, you must:

• Be incorporated
• Receive T4 income (not just dividends)
• Have no arm’s length employees
• Cover only yourself, your spouse, and eligible dependants
• Set a reasonable annual limit (Hiveworks caps it at $15,000)

Hiveworks enforces these rules to protect you from the start.

See full eligibility details here.

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What Can You Claim Under a PHSP?

Only expenses that qualify under the CRA’s Medical Expense Tax Credit (METC) can be reimbursed. Examples include:

• Dental care and orthodontics (braces, invisalign)
• Vision care (glasses, contacts, laser eye surgery)
• Physiotherapy, massage, mental health therapy
• Prescription drugs
• Medical equipment and medically required travel

Every claim is reviewed against CRA guidelines. Reimbursements are tracked and recorded.

Here's a full list of eligible HSA expenses.

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Using a PHSP with a Spouse’s Group Plan

If your spouse already has insurance, Hiveworks can fill the gaps:

• Reimburse co-pays or leftover amounts to pay out-of-pocket
• Cover excluded or capped services
• Claim health and dental premiums if 90% of the plan covers eligible expenses

This lets you make the most of both plans without duplication.

Furhter details can be found here.

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Why Hiveworks?

Hiveworks is built for incorporated Canadians who want a smarter, compliant way to manage personal healthcare costs through their business. You get:

• An HSA that aligns with CRA PHSP rules
• No monthly fees - one simple annual fee
• Digital-first claim flow with fast turnaround
• Built-in enforcement of eligibility and annual limits
• Support for dependants and spousal coverage
• Exportable records to simplify bookkeeping

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Want to see how much you could save? Try our savings calculator.