Canadian Life and Health Insurance Association
President Frank Swedlove
called the plan a “misguided” action that would result in several negative unintended outcomes.
“While supporters of this policy idea say that employer-paid health and dental plans mostly benefit the wealthy, it is actually middle-income and lower-income Canadians who will feel it the most,” Swedlove said in a piece published by the Financial Post
. The measure, he explained, would cause employers who want to avoid costs to pull back on health benefits.
Even if a refundable medical expense tax credit (METC) were provided, he said, there would still be a gap: healthy, younger individuals often go without insurance and therefore would not be protected against sudden health expenses, while older individuals are likely to be denied coverage or charge higher rates because of existing or serious health issues.
The measure would also place unintended cost burdens on employers, said Swedlove, as taxation of employer-provided health benefits would trigger the requirement for CPP (Canada Pension Plan) and EI (Employment Insurance) contributions by employers and employees on those amounts. Lower-middle-income Canadians earning below $55,000 and their employers would have to shoulder additional costs of over $1 billion annually. “Many employers will have to choose between offering benefit plans and sustaining employment levels, and individuals will have less money to help them get through the week,” Swedlove warned.
Taxing employer-paid health and dental benefits, he added, would result in little to no savings for the federal government. “Analysis — including in the Naylor report itself — clearly shows that introducing a refundable tax credit for individual insurance would likely cost more to the treasury than the savings from taxing health benefits,” he noted. And as individuals work to recoup their additional out-of-pocket healthcare expenses, the government will face increased costs as it pays out the METC.
Swedlove also noted that the public health system stands to suffer from increased pressure if Canadians have less access to private health insurance, which covers many preventative healthcare services.
“Should the government pursue a tax system that it is as fair, efficient and simple as possible? Certainly. But let’s do it in a way that raises everyone up rather than taking everyone down,” he said.
The free-market case for taxation of health and dental plans
Tax on employee dental and health benefits being considered
Slamming a proposal to tax employee health and dental benefits,