Groups representing nine health-care professions are urging the federal government to reconsider axing the employer-sponsored health-care tax exemption.

Removing the exemption would discourage employers from offering benefits, which currently save $32.2 billion for public health-care systems through preventative treatments, Larry Levin, president-elect of the Canadian Dental Association, wrote in a letter to Finance Minister Bill Morneau. He noted the exemption would only add $2.9 billion to federal coffers.

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The associations also pointed out that when Quebec introduced a tax on health benefits in 1993, employer-sponsored benefits dropped by roughly 20 per cent. Among small employers, that number rose to 50 per cent.

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

Levin also noted that having fewer employers participating in plans would reduce pooling effects and costs for the remaining plan sponsors would spike.

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“Taxing these benefit plans will not simplify the tax code, bring more fairness to Canadians or help grow the middle class,” wrote Levin. “It will download complexity onto Canadian employers and leave many Canadians and their families and dependants without the care they need.”

The groups involved are 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, and Speech-Language & Audiology Canada.

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It was inevitable that premiums would be taxed as a benefit like most other forms of compensation. The inherent incentive to insurers NOT to control costs, has resulted in a truly massive non-taxable premium write-off base that no government can ignore now. I am not sure that insurers truly appreciate what this is going to do to their group earnings. Many plans will switch from conventional group arrangements, where risks are no longer pooled anymore anyway, to a la carte voluntary plans, which most carriers can’t handle well on either the enrollment, pricing or admin. fronts. I shudder to think how they will handle conversions from one basis to the other, especially given some of the anecdotal things ones hears about the elementary teachers admin. conversion from Manulife to OTIP.

Friday, December 23 at 10:53 am | Reply

John Case:

Our governments are out of control with another tax attacking the pockets of all Canadians. We need to stop this.

Friday, December 23 at 12:53 pm | Reply

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