The health insurance industry is changing and the direction it is going is not one that supports people with affordable health care.Today insurance companies are putting more and more limitations on what they cover for people as well as adding clauses like no coverage for pre-existing conditions. What insurance companies are saying to you is, buy when you can still get coverage. If you wait till you have a health issue, anything you need will not be covered. While it is true that taking care of your health proactively is wise, the money you will pay in premiums over the years is huge.
Business owners have an option.
Under the income tax act, a business owner can set up a Private Health Service Plan where they self direct and self administer their own plan. This means, you own your own health benefit plan. The limits are set according to what you and your family needs and you get to choose what streams of health care you want to access as long as it is considered health care in Canada. You administer your own plan and you get to deduct 100% of your medical costs from your business income. No premiums to pay to outside insurance companies, no percentage of expenses taken by a middle man. You simply pay for your health care and reimburse yourself through your company. Corporations and Proprietorships or Partnerships are managed differently.
Insurance companies put limits on what you can claim to save them money. When you own your own plan, you can choose what works best for your health. Medical expenses have a definition and a comprehensive list associated with them under the Income Tax Act. The list breaks down the items that are considered medical. As a general rule you can think of this as anything that supports your health that a doctor would agree with. Many items require a prescription from a doctor. This is simply to bring an outsider into the picture to verify that it is for your health, not simply your pleasure. There is a list put out by Revenue Canada as a guide called Allowable Medical Expenses. What is important to remember here is that this list is not exclusive. It covers what the act clearly covers and it interprets other areas that are more general and open to interpretation. As cases go through tax court more clarity is developed. The other part of the equation is which practitioners are covered. The list also put out by Revenue Canada called Approved Medical Practitioners is a great resource. Again this list is not exclusive. Collaborative Business Solutions keeps an eye on these changing topics and posts the changes for our clients to keep up to date. We created a general breakdown to give you an idea how expansive it really is. This sheet is an introduction. To give you an idea of what is Not Allowed, provincial medical costs, MSP in BC, are not covered. Other than that the list is really pretty short.
Is it really that simple? Almost, there are some differences for Proprietorships and of course, Revenue Canada has all kinds of requirements and criteria that have to be met. These do have to be set up properly. There are a number of reference documents on my site for you to look at. Come and consider the option that gives you the most freedom and flexibility with your health and reduces what you send to the tax man.