British Columbia: Reduction in provincial medical premiums
In the 2017 budget update tabled on September 11, 2017, the British Columbia government announced that Medical Services Plan (MSP) premiums will be reduced by 50% for all residents effective January 1, 2018. This change could result in savings of $450 per year for individuals and $900 per year for families currently paying full premiums. MSP premiums are based on annual net household income and the net income threshold at which individuals are fully exempt from paying MSP premiums will increase from $24,000 to $26,000, while couples with two children and family net income below $35,000 will also be exempt.
BC is unique in collecting monthly premiums from individuals to fund health care as other provinces do so through income or employer payroll taxes; however, in many cases, employers pay at least a portion of those premiums for their employees. MSP premiums had been increasing by 4% annually for the last number of years, up to January 1, 2017, when the premium structure was revised to no longer consider the number of children and the 4% increase was cancelled (see our News & Views of March 2017).
The government has also announced that it will establish a task force to recommend the best way to eliminate MSP premiums and replace lost revenue. The task force will report back to government in the Spring of 2018, with the target date for elimination of the premiums in four years. This is a more specific timeframe for the elimination of MSP premiums than was announced earlier in the year as the previous government had stated that the timing would be “influenced by the Province’s fiscal capacity”.
Unlike the previous government’s announcement earlier in 2017, the MSP reduction is not contingent on household income or any other criteria. No application will be required to obtain the 50% reduction in MSP premiums and the adjustment will apply to all BC residents. In cases where BC employers pay at least a portion of MSP premiums on behalf of their employees, the reduction and future elimination of MSP premiums is favourable for employers, but it remains to be seen what measures will be enacted to replace this revenue source for government. Those employees will receive a lower taxable benefit while employers stand to gain from the premium savings. Employers should review employment contracts and collective agreements to determine the specific impact of this change. Employers may also proactively consider the planned elimination of MSP premiums within four years in their total compensation strategy.