CLHIA questions report on taxation of health benefit plans

Taxing employer-provided benefits would raise health care costs for low- and middle-income earners, the group says

CLHIA questions report on taxation of health benefit plans

On Thursday, the Parliamentary Budget Office’s (PBO) released a report that looks into the impact of taxation on employer-provided health benefits. It noted eight different areas that would be affected as a result of such benefit taxation, including the federal personal income tax, CPP contributions, Old Age Security, and the Canada Child Benefit.

Lifting current tax exemptions on health and dental benefits for Canadians, the PBO said, would result in high-income Canadians shouldering the majority of costs. It also concluded that the decline in disposable income would increase with employment income, suggesting that the measure would weigh most heavily on high earners. A combination of higher inflows from taxes and reductions in federal benefit payments would increase the federal government’s bottom line by about $3.8 billion.

Following the PBO report, the Canadian Life and Health Insurance Association (CLHIA) issued a statement arguing that it was based on assumptions that do not reflect the current state of health benefits in Canada.

“Taxing health benefits would raise health care costs for low and middle-income earners dramatically and put their highly valued benefits plans at risk," said CLHIA President and CEO Stephen Frank.

Frank noted that more than 13 million Canadian workers are covered by employer-sponsored plans. Take their families into account, he said, and that means more than 25 million Canadians depend on employer-provided plans to help pay for prescription drugs, dental and eye care, and other treatments.

“The PBO assumptions do not take into account the past experience in Canada that many employers would drop coverage and millions of Canadians would lose access to the benefits they depend on," he added. “Further, this is not a tax that would only hurt the rich as the report claims -- millions of low and middle- income Canadians currently covered by employer sponsored plans would see their costs for health care rise dramatically.”

Frank concluded by saying that a tax on employer-provided health benefits would not only increase the tax burden on middle- and low-income Canadians, but it would also raise the risks of Canadian workers and their families losing access to health benefits.

“This would ultimately result in significantly worse health outcomes for all Canadians,” he said.