The Federal Government is considering taxing health and dental benefits plans, which would increase taxes for employees. In many cases, this tax would result in small and mid-sized companies no longer offering benefits or significantly reducing benefits coverage.
Millions of Canadians could lose access to affordable extended health, dental, and other care services that aren’t covered by provincial healthcare plans.
Furthermore, this tax would increase wait times for healthcare, as the public health system becomes overwhelmed with people whose coverage has been reduced or eliminated.
Currently, health and dental benefit plans are tax deductible for an employer and received tax-free in the hands of the employee – helping to keep healthcare affordable. Let’s keep it that way.
We must act now to tell the Federal Government that we don’t want our benefits plans taxed!
How to Take Action
We can all help protect businesses, employees, and families by telling the government we don’t want our health benefits taxed.
Go to donttaxmyhealthbenefits.ca to easily send a letter to your MP and the Minister of Finance saying you are against this tax!
Help spread the word and share this message with your clients, employees, and friends.
A Deeper Analysis
Having employers provide supplemental health benefits through benefits plans should be encouraged. Purchasing insurance as part of a group reduces underwriting limitations because it prevents a principal known as adverse selection or anti-selection. This allows insurers to cover/qualify individuals for coverage and limits they may not otherwise be able to on their own, as there is no health evidence required. It also enables a lower cost from insurers through scale and buying power.
How will this change with the implementation of a tax?
When a similar tax was introduced in Quebec in 1993, 20% of employers stopped offering group plans for employees. Certain groups were disproportionately impacted, including non-unionized workers and small companies with 20 or less employees.
“The effect of the tax subsidy therefore appears to be substantially greater in firms with less than 20 employees than in firms of larger size” and “these results therefore suggest that the tax subsidy plays a very important role in getting small firms to offer supplementary health insurance”.
Put differently, the federal government is encouraging behaviour amongst large employers through tax subsidies, when research suggests that they would engage in that behaviour regardless. Conversely, smaller firms behave in this manner in large part because of the subsidy. We cannot treat these groups the same and assume we are treating them equally.
For millions of individuals (represented by an estimated premium loss of $7B), the result of this tax would be to lose their access to group coverage and the underwriting advantages outlined above. It would also create further inequality by marginalizing employees particularly in small, non-unionized firms.
This would be a very unfair way to deal with the situation to recapture some of this tax revenue, and many of the costs would show up directly or indirectly in the public health system. And if we assume the implementation of a refundable tax credit as a replacement, revenue would not increase and yet millions of working Canadians and their families would now have less choice and access to supplemental care.
Is this what is best for Canadians?
Once again, I urge you to reach out to your MP and the Minister of Finance to speak out against this tax. Click here to go to donttaxmyhealthbenefits.ca and make your voice heard!
The Benefits Trust helps business owners build custom benefits plans that suit their specific needs. Get in touch with us today!
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- Common Benefits Advisor Problems: Plan Design – Don’t Be a Commodity [Case Studies] - May 25, 2017
- Can I Offer Benefits for Employees over 70? - March 14, 2017
- Tell the Government You Don’t Want Your Health and Dental Plan Taxed! - January 30, 2017
- Hybrid Benefit Plan Design – What’s Your Spot on the Line? [Video] - January 10, 2017
- The Employer-Employee Relationship Is Changing. Is Your Benefits Plan? - November 28, 2016
- Your Benefits Plan Has a Drug Problem – It’s Time for an Intervention. - September 27, 2016
- Do You Know These Details about Healthcare Spending Accounts? - May 14, 2015
- How Benefits Plans Discriminate Against Executives - September 18, 2014