The cost of private health insurance premiums in Canada have been increasing. They went from just $139 per person in 1988 to more than $700 today.
That fact alone is more than enough to have you rethinking private health insurance. Like many Canadians, you may believe the public healthcare system provides everything. You might also have employer-sponsored health benefits.
The truth is, you probably don't have enough coverage. Even if you have employer-sponsored benefits, you may still be paying out of pocket. The public system has reduced coverage for many medical services and items.
That's one reason for rising premiums in the health insurance industry. A health insurance premium is determined by the likelihood the insurer will need to pay a claim. As Canadians get less public coverage, they rely more on private insurance.
If you're paying for private health insurance or thinking about it, you're wondering how you can save money. One thing you should consider is tax deductions in Canada.
We'll help you understand what you can claim and how to claim it. Tax deductions can help make the health insurance you need more affordable.
Why You Need Supplemental Health Insurance
First things first. Why do you even need private health insurance in Canada?
Many Canadians believe they don't need any more coverage than what's covered by the public system. Unfortunately, public healthcare in Canada doesn't cover anything. Without supplemental health coverage, you could end up paying a lot out of pocket.
The average Canadian spends nearly $1,000 a year out of pocket, even if they have private health insurance. For those who don't, the bill is often higher.
Out-of-pocket health spending has been increasing in recent years. The cost of prescription medications is one factor. Reductions in coverage under the healthcare system have been another.
More Canadians are also living longer with more health conditions. Your likelihood of experiencing a critical illness has also increased.
In short, a supplemental health insurance policy is the best way to protect yourself.
The Costs of Private Insurance
There are many reasons Canadians don't carry private health insurance. One reason is they think they have enough coverage.
Another reason is cost. As we mentioned, health insurance premiums have continued to climb over the last 30 years or so. Canadians pay much more now than they did.
There are many reasons for this. One is the increasing costs of healthcare in Canada. As noted, prescription medications are expensive and they've been getting pricier.
Another factor is reduced coverage in the public system. Canadians turn to private insurance more often. It's more likely insurers will pay claims.
So how much can you expect to pay?
The answer is it depends. A health insurance premium is determined by many factors. The likelihood of paying out a claim is one of them.
Your age, your health, and even lifestyle factors can affect how much you pay. Another factor is what your policy covers. A policy covering $5,000 worth of dental work will cost more than one that offers you $500.
A Health Insurance Premium is Tax-Deductible
You might wonder what you can do to make your health insurance premiums more affordable. You already know the Canada Revenue Agency offers tax deductions for medical expenses.
Now you're asking, "Is there a tax credit for health insurance premiums?"
The answer is yes and no. There isn't a specific tax credit you can use to claim health insurance premiums. Premiums are tax deductible, though.
You can use the Medical Expense Tax Credit (METC) on your personal income tax. To qualify, the majority of your plan must cover qualified CRA medical expenses. The CRA publishes a list of eligible medical expenses.
Claiming Your Premiums
Now you've answered the question, "Are my health insurance premiums tax deductible?" The next question you have is, "How much health insurance premiums can I deduct?"
The METC is fairly complex to calculate. You'll need to add up all your medical expenses, including health insurance premiums.
Next, you'll subtract either the minimum threshold or three percent of your income, whichever is lower. For 2018, the minimum threshold was $2,268. If you made less than $75,000, you'll use the three percent mark.
Now you'll multiply the sum by the lowest combined tax rate in your province. In Ontario, that's a rate of 20.05 percent.
A Practical Example
Let's suppose you made $50,000 for the year 2018. You'll use the minimum threshold of $2,268. Your only medical expense was your health insurance premiums, which cost $700 for the year.
You'll subtract $2,268 from $700. Then you'll multiply the result by 20.05 percent. You have a credit of about $315.
If you owe tax, then you can deduct this amount from what you owe. Otherwise, the government will boost your refund by $315.
Other Ways to Claim Premiums
Using the METC is a smart move for individuals. If you own a business, you might want to consider a health savings account.
An HSA can also make your health insurance premium tax deductible. It often results in higher tax savings for small business owners than the METC.
Individuals can't use health spending accounts because HSAs must meet certain requirements. One of the guidelines in the plan must be undertaken by one person to insure another.
Protect Yourself with Better Coverage
If you've been thinking about supplemental health insurance for you and your family, now's the time to act. You can protect yourself and your future with better coverage.
If the costs of a plan have been holding you back, knowing that a health insurance premium is tax deductible offers some reassurance. These tax deductions can reduce the costs of better healthcare coverage.
Let us help you find the best plan for your needs. We can help you find the best rates in Canada, so you can get better coverage for less.