Medical and Dental Insurance

One of the major concerns at retirement or job termination is the continuation of one’s benefit package. This article is about medical and dental insurance, which often ends at retirement or when employment terminates.

In Canada, of course, we have universal basic medical coverage through Medicare. Always a subject of government and popular debate, and always in some degree of crisis as to funding, the system does provide more or less universal access to basic medical services. Not dental services. There is an array of services and products it does not cover and for which insurance is available. In Ontario, chiropractors and optometrists have been cut from the OHIP list of paid services except in some specific circumstances. Prescription drugs and a host of paramedical services are not funded, or are only partly funded, by OHIP. For those over 65, some prescriptions are covered by OHIP, but not all.

On a happier note, however, for those who are self-employed, the premiums for medical and dental insurance are a deductible expense. An alternative, for those who are self-employed, would be a Health and Welfare Trust.

Let’s first look at the problem. Medical expenses will rise as you get older and need more prescription drugs and services. You can’t get insurance for it, other than through a group, unless you are well. The expenses will be on-going and increasing as you and your partner get older. You do need insurance in case these expenses become prohibitive for you to pay yourself.

Dental insurance is another issue. Not many people (other than dentists and insurance brokers) make money out of their dental insurance, although some do in some years. The premiums are expensive and, often, the benefits paid are less than the premiums collected. Until the Ontario government allowed the dental premiums to be a deductible expense for those who could characterize themselves as self-employed, we did not recommend dental insurance. Now it bears a closer look in terms of the after-tax cost of the dental premiums versus just paying your own dental expenses and deducting them from your taxable income.

There are choices for this coverage. Various affinity groups such as local Chambers of Commerce offer such plans you can tap into, although membership dues are added to the cost. The Canadian Association of Retired People (CARP) has a voluntary plan for members. Private plans are also available: Blue Cross and Manufacturers Life (formerly Liberty Health) are probably the best, and best known, choices. Both offer good medical and dental insurance coverage with lots of choices. You should get quotes from both as they are quite competitive with each other and the choices differ quite widely. And there are many other insurers offering coverage but you will want to satisfy yourself that they will continue to be in the business since many come and go.

In getting quotes it is important that you consider what you need versus what you might have had in your previous benefit package. Remember, now you are paying the whole cost, not just the employee portion. Dental insurance is rarely a huge issue and could be better self-funded. But medical insurance is essential since, during a time when you are not covered, you or a family member could develop a condition which might require a lifetime of expensive medication. We strongly recommend that all our clients seriously consider insurance and avoid any hiatus in coverage since, if a condition arises when you are not covered, getting coverage will be difficult if not impossible. Indeed, if you have lost your job, and develop such a situation, getting another job could be difficult, especially with a small company, since the potential of your claims could pose a real problem for the new employer’s group insurance claims history.

A viable alternative to dental insurance, and to pick up any slack not paid for by the medical insurance company, is a Health and Welfare Trust. For this you need to be self-employed, or virtually self-employed. You pay a fee to the trustee for managing the claims. You pay the medical and dental expenses yourself. You submit the claim to your company who then sends them to the trustee along with its cheque to cover the cost plus the trustee fee. This is a deductible expense for the company. The trustee sends its cheque to you for the reimbursable amount of the claim, which amount you receive without income tax consequences.