Why private health insurance coverage in Canada needs a review

By John Have and Robert L. Brown

A version of this commentary appeared in the Hill Times, Hamilton Spectator and Waterloo Region Record

Why private health insurance coverage in Canada needs a review

Last week, the media carried a story about a nine-year-old boy in New Brunswick who was denied private health coverage because of his weight (at 5 foot 2 inches and 135 pounds).  His family were shocked — as were many reading the story — that a child could be denied private health coverage in Canada.  In fact, it’s not only possible — and entirely legal — it may be a sign of things to come.

The boy’s father had been laid off work in January and, as a result, the Doiron family lost their extended health insurance provided by his employer.  So they wanted to buy private coverage to ‘top up’ what is not covered by Canada’s publicly funded health system.

Canadians tend to think that we have completely publicly funded healthcare.  While this is true for medically-necessary care, such as hospital, diagnostic and physician services, most Canadians must fund their dental, vision and pharmaceutical drug costs privately, along with other healthcare services, such as chiropractic or physiotherapy, not deemed ‘essential’ under the Canada Health Act.

Canadians must insure or pay out-of-pocket a whopping 30 percent of health costs with only around 70 percent covered by our publicly funded health system.

Private healthcare costs in Canada have grown dramatically over the last 40 years.  Adjusting for population growth and inflation, private healthcare costs have increased by over 220 percent on average since 1975 — or around $1,800 per person.  That’s no small figure for most Canadian families.

What’s driving up the cost?  Some of this increase is due to overall aging of the population but most is due to increased costs for health services as well as expanded use and availability of services. Drug costs over the years have increased dramatically, and may continue to do so with the emerging use of personalized medicine and drugs for rare conditions.

In fact, Canada is one of few countries in the world with a universal health system that doesn’t include prescription drug coverage as a medically-necessary benefit. Some health policy experts have been calling on the federal government to increase publicly funded health coverage by establishing a national pharmacare program. This is currently being discussed at both federal and provincial levels.

In the meantime, many Canadians rely on private insurance to help with the 30 percent of health needs not covered by our public health system.

For many, the private healthcare component is provided through group insurance at their place of work.  Families lose this coverage if laid off — or don’t have it in the first place if they work on contract or part-time.

Some insurers do offer limited coverage to those who recently lost their jobs (within the last 60 days) without having to provide medical evidence; however, maximum annual benefits are typically very limited compared to their previous plans.

For those unemployed, under-employed or self-employed, purchasing individual private health plans for their families is the only option.  But to be eligible for individual coverage, medical evidence of good health must be provided to the insurer, and anyone in the family with a pre-existing medical condition may be offered only limited coverage or even denied coverage completely.

The alternative is for Canadians to pay out-of-pocket for private health expenses or forego some health services altogether because they can’t afford them.

So what about all those individuals and families across Canada who want private insurance coverage and can’t get it — or can’t afford it?  This is a question our provincial and federal governments need to address.

The loss of healthcare coverage through loss of job may actually have a simple insurance solution.

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 do not have to provide any evidence of insurability.   In other words, they are guaranteed the possibility of purchasing a reasonably-priced life insurance plan with without having to pass any health tests to get it.

Isn’t it time to use the group life insurance conversion model for group health insurance when someone in Canada is laid off?  This would allow families access to adequate private health coverage without punishing their finances or making them go without.

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.  It would’ve helped the Doiron family and the many others like them.

John Have, Fellow, Canadian Institute of Actuaries; President, Have Associates. 

Robert L. Brown is an expert advisor with EvidenceNetwork.ca and a Fellow with the Canadian Institute of Actuaries. He was Professor of Actuarial Science at the University of Waterloo for 39 years and a past president of the Canadian Institute of Actuaries.

August 2016

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