Shortfall in Canadian private health insurance

Private health insurance should cover whatever Canada’s public health system doesn’t – but is it actually doing that?

by Leo Almazora

Canada’s public health system is the envy of many countries all over the world. It’s considered one of the most equitable healthcare systems and provides coverage that far exceeds that of many other countries. But as wide-reaching as that safety net is, it doesn’t cover every cost.

This is explained in a commentary piece in the Hamilton Spectator by John Have, fellow of the Canadian Institute of Actuaries and president of Have Associates, and Robert L. Brown, an expert advisor with and a fellow with the Canadian Institute of Actuaries.

“That Canada has completely publicly funded healthcare is true for medically-necessary care, such as hospital, diagnostic and physician services. But most Canadians must fund dental, vision and pharmaceutical drug costs privately,” the piece says, as well as health-care services that are deemed non-essential under the Canada Health Act, such as chiropractic or physiotherapy services.

The healthcare costs Canadians must pay or insure privately have surged in the last 40 years, increasing by more than 220% on average since 1975 – a figure that’s already been adjusted for population growth and inflation. Currently, Canadians must absorb 30% of health costs themselves.

The increased private healthcare costs can be separated into several ballooning variables, such as the aging population, increased per-session costs of health services, and rising drug costs. The last is especially significant, as Canada is one of only a few universal health systems that doesn’t include prescription drugs as a medically necessary benefit. The possibility of a national pharmacare program is now being discussed at federal and provincial levels.

Meanwhile, many Canadians are counting on private health insurance to cover medical interventions and treatments that fall outside the jurisdiction of public healthcare. Many get this from group insurance they get at work. Employees who are laid-off lose the benefit, but they are typically offered limited coverage within 60 days of their termination – the key word being “limited.”

Those who are underemployed, unemployed, or self-employed have to apply for private coverage on their own. However, if they cannot provide medical evidence of good health – which usually means they have pre-existing medical coverage – they may avail of only limited coverage, assuming they’re allowed any coverage at all.

In the present situation, those who cannot afford or avail of private health coverage, even if they want it, are out of luck; they’ll have to pay out-of-pocket for or go without health services they cannot afford.

Though things look broken now, that doesn’t mean they’re unfixable. In fact the authors propose one insurance solution in the case of those who lose coverage due to termination.

“Existing group life insurance regulations and guidelines could offer a path forward. In stark contrast to group health insurance, when someone is laid-off work, group life contracts in Canada must allow the employee to convert their group life insurance to individual life insurance plans up to a maximum of $200,000 (for those under age 65). The key component? They don't have to provide any evidence of insurability,” the piece says. In other words, those who are terminated are guaranteed the opportunity to purchase a reasonably-priced life insurance plan without having to pass any health tests.

“This simple solution won't address all the concerns around private health costs in Canada, but it is something governments and insurers could work together to implement without too much difficulty,” the piece concludes.

Related stories:
Hybrid public-private healthcare: a solution that requires regulation
Is it time to patch up insurers’ inconsistent birth control coverage?