A Private Health Services Plan (PHSP) is defined in subsection 248(1) of the Tax Act
as:

• a contract of insurance in respect to hospital expenses, medical expenses or any combination
  of such expenses, or
• a medical care insurance plan or hospital care insurance plan or any combination of such
  plans.

The Canadian Income Tax Act allows businesses to reimburse an employee for
reasonable medical expenses which are tax deductible to the business and are
non-taxable benefits to the employee.

In a "cost plus plan" an employer contracts with the trusteed plan or an insurance company for the
provisions of indemnification employees' claims on defined risks under the plan.

The employer promises to reimburse the cost of such claims plus an administration fee to the plan
or insurance company.

A contract exists between the employer and the trusteed plan or insurance company in which the
insurance company agrees to reimburse the employee for claims on defined risks for so long as the
employer's contract is in good standing.