Paying For Your Healthcare Expenses

The following is a guest blog article by Ferdinand Milan CFP, CGA, FMA, FCSI, Certified Financial Planner

In British Columbia, our BC provincial Medical Service Plan (MSP) provides a great foundation for healthcare coverage, but we generally underestimate the high cost of health and dental expenses.

If you own your own business (incorporated or sole proprietor) there are 3 ways to pay your healthcare expenses.

banknotes and coin1 Paying For Your Healthcare Expenses

The first way is through traditional extended health insurance plans. You and/or your employer pay a monthly premium which covers a defined list of medical and dental expenses for you and your family. The coverage is limited, and you probably will pay for items like braces for the children, eyeglasses, or acupuncture treatments. If you claim far less than the premiums you pay, it’s your loss and the plan is designed in favour of the insurance company.

The second and simplest way is to pay with cash, but it is also an expensive way to pay for your health expenses. It will actually cost you up to 77.6% more than you think! You need to earn the money and pay tax on it before you pay the bill and the highest marginal tax rate in this province is 43.7%. To pay $1,000 in medical or dental expenses, you will need to earn up to $1,776. Ouch!

An excellent third way is the use of a Private Health Services Plan (PHSP).

In 1988, CRA (Canada Revenue Agency) stated that if your medical and dental benefits are administered through an independent administrator, they can be 100% tax deductible to your company without being a taxable benefit to you or employees of the company.

How does it work you say?

1. You pay your health or dental expenses directly.

2. Your company sends the PHSP provider a claim form with the receipts and a cheque to cover the expenses plus an administrative fee (usually around 10%).

3. The PHSP provider provides you with a tax-free reimbursement of the expense.

4. The company gets a tax-deductible receipt for the full expense and the administrative fee.

What’s covered? Any product, procedure or service you may receive from a health care professional who is authorized to practice in the province and certified to the practitioners’ governing body. The list of covered expenses is extensive (including acupuncture) and you only pay for what you use.

The downside. . . catastrophic medical events are not covered in a PHSP. You need to make sure that you have “stop-loss” insurance that covers long-term disability, critical illness, and out of province medical expenses.

A PHSP is worth looking into if you’re self-employed. They require a bit of planning and you should consult with a financial advisor experienced in setting these up.

The opinions expressed above are those of Ferdinand Milan CFP, CGA, FMA, FCSI, a Certified Financial Planner in Richmond, BC.


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