Simply stated, payments by a PHSP on behalf of a self-employed individual or an employee are not considered part of the individual's or employee's income and thus are not taxed. From the perspective of the business owner, the contribution or premium paid to the PHSP is a business outlay or expense, thus being deductible.
A third party administrator must be contracted to hold the premiums in trust, to scrutinize and adjudicate claims, and to issue appropriate accounting records for business purposes.
Canada Customs and Revenue Agency's meaning of "Private Health Services Plan"