By Guest Blogger Ryan Lewenza
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Getting older really blows! I’m only 45 so I should probably stop my bitchin’ but things are starting to go. In my thirties I started having acid reflux flare-ups, my lower back hurts from time to time, and just recently I started experiencing “tennis elbow”. As my body slowly degrades it reminds me of a great Brad Pitt quote from the movie Fight Club, “Hey, even the Mona Lisa’s falling apart”.
Luckily I have a job (a great one at that) where my company offers a comprehensive health plan to help pay for drugs, vision care, and all the physio appointments I need to keep me from turning into the Hunchback of Notre Dame. But what about the millions of Canadians who are not so lucky and do not have an extended health care plan to cover all these different expenses? In today’s blog I cover this critically important topic.
First let’s review what’s covered by our government health plan to determine those missing benefits that we need to solve for.
Canada’s universal health care program, which is funded by taxes, covers any necessary hospital stays, any treatment or surgery required, prescriptions drugs while in the hospital, and any visits or treatments from a physician and clinic. What it does not currently cover includes drug prescriptions, dental and vision care, and items like wheelchairs or prostheses. So our universal health program covers all the basics but Canadians then need to address things like prescription drugs, dental expenses and physiotherapy. This is where extended health care plans come in.
Roughly 65% of Canadians have additional coverage through private health insurance plans with the majority of Canadians getting their extended health care coverage through their employer. For example, our company uses Manulife and the benefit plans cover things like eyeglasses, prescription drugs and massage therapy.
According to the Conference Board of Canada, average annual premiums for one full-time employee are $2,102 for extended health care coverage and $1,419 for family dental coverage. So for two parents and a couple of kids the total costs per year would be roughly $5,632 per year. However, the company usually doesn’t foot the whole bill, often covering 70-80% of the plan costs with the employee covering the difference. This can end up costing an employee roughly $1,000 for family coverage.
Now some believe this is their only costs for health care. They forget that a portion of their taxes is going to pay for the universal health care coverage that the government provides.
The Fraser Institute, a conservative think tank, published an interesting report called The Price of Public Health Care Insurance, which attempted to calculate the costs Canadians pay for their universal health care through taxes. They estimate that the average single person pays $4,544 and a family with two kids pays $13,311 per year in health care costs through taxes. So adding the costs of the universal government health care coverage and what a family would pay through their work extended health care plan gets you close to $15,000 per year. While we have a pretty good health care system it ain’t cheap!
Estimated Costs for Public Health Care Insurance by Family Type
Source: The Fraser Institute’s Canadian Tax Simulator 2019
What about those who don’t have an employer health care plan? This would include self-employed, unemployed or retirees.
That’s where private health care plans comes in from companies like Manulife or Green Shield. You can purchase private health care plans that cover the costs of dental, drugs, and other health care expenses. These companies offer different packages that range in costs with the ability to customize the plan through add-ons based on one’s needs.
I reviewed Manulife’s Flexcare plans and for a couple in their 50s who select the Enhanced Plan it will cost $4,312 for the full year. This enhanced plan covers drug costs (up to $10,000/year), dental (up to $920/year), vision ($250 every 2 years) and travel emergency health coverage. For a single person aged 50 it will be roughly half that at $2,100/year.
For these plans you can get add-ons like travel insurance, life and disability coverage, which would take costs for a family closer to $6,000/year.
FlexCare Monthly Premiums – Ontario
Source: Manulife
So the question is, do you believe your health and the inevitable costs that you’ll incur as you age are worth the $4,300 for a family or $2,100 for a single person? Maybe it’s easy for me to say yes since I’m fortunate that I have coverage through my employer, but it seems like an easily justifiable expense, given that our health is the most valuable thing. Sure, having a big investment portfolio is nice to have, but if you’re not around to enjoy what’s it really worth.
Ryan Lewenza, CFA, CMT is a Partner and Portfolio Manager with Turner Investments, and a Senior Vice President, Private Client Group, of Raymond James Ltd.