Why a tax on private healthcare plans would be negative: coalition

The Independent Financial Brokers of Canada has joined forces with a coalition of associations that’s campaigning against a possible federal tax on private healthcare plans.

If the premiums of these plans become taxable, says the coalition, many employers—especially smaller employers—could discontinue or reduce insurance coverage. That could leave thousands of Canadians without affordable access to extended health, dental and other mental and physical care services that aren’t covered under provincial healthcare plans, it adds.

Currently, about 24 million Canadians are covered under private or employer-sponsored benefit plans, says the IFB. Executive director Nancy Allan adds, “Provincial healthcare systems are already strained, [so] implementing this tax will reduce private coverage and push people back into the public healthcare system.”

Allan points out, “This change would affect our members on both a business and personal level.” She wants to “ensure the federal government and elected officials understand just how negative the impacts of this change could be.”

More details

Aside from the IFB, the associations supporting the campaign include:

• the Canadian Life and Health Insurance Association
• the Canadian Association of Occupational Therapists
• the Canadian Association of Optometrists
• the Canadian Chiropractic Association
• the Canadian Dental Association
• the Canadian Dental Hygienists Association
• the Canadian Physiotherapy Association
• the Canadian Psychological Association
• Dieticians of Canada
• Speech-Language & Audiology Canada
• Organizations for Health Action

As BenefitsCanada.com reports, these industry groups are worried that axing the employer-sponsored health-care tax exemption will result in several disadvantages. For example, in a letter to Finance Minister Bill Morneau, president-elect of the Canadian Dental Association Larry Levin writes, “Removing the exemption would discourage employers from offering benefits, which currently save $32.2 billion for public healthcare systems through preventative treatments.” He noted the exemption would only add $2.9 billion to federal coffers.

Karen Cohen, chief executive of the Canadian Psychological Association, said in a release that when benefits are subject to taxes, “younger and healthier employees given the choice may opt out of participating.” And, “with older and sicker employees opting in, premiums will rise. Employers who continue to offer these plans may reduce coverage to control costs […].”

Levin noted that having fewer employers participating in plans would reduce pooling effects, leading to costs for the remaining plan sponsors spiking.

In early January, Benefits Canada also conducted a poll that asked readers whether they thought the feds should tax employer-paid healthcare benefits. Check out the results here (at the bottom of the post).

For more on healthcare, read:

Innovation driving global healthcare growth

How to invest in 2 promising biotech areas

How controversial drug pricing affects healthcare

Make sure great employees have purpose