In case you weren’t aware, life just got a little more expensive for British Columbians.
Medical Service Plan (MSP) Premiums have just gone up again. This tax is applied to anyone living in BC for six months or longer and requires them to pay monthly premiums for health care coverage. While some individuals can apply for premium assistance, these subsidies dry up as soon as a person earns a net annual income of $30,000 or more.
Healthcare costs money. There’s no denying that we need to support the medical services we rely on.
However the way MSP Premiums work in British Columbia is regressive, hurting those who can least afford it.
It’s time we followed the path Ontario has taken and rolled the MSP Premiums into our income tax system.
Currently in BC a person who earns $30,000 a year pays the same rate for their MSP Premiums as someone who is earning $3,000,000 a year. This is what it means to have a regressive tax – what you pay is not based on what you make.
MSP Premiums become even more regressive when you factor in who actually pays them. The fact is, many large employers pay all or part of an employee’s MSP premium as part of a negotiated taxable benefit of employment. But for many, if not most, low and fixed income British Columbians, as well as small business owners, they must pay the costs themselves.
And they have been going up constantly.
Back in 2000, the MSP premium for a single individual was $36/month. Today that same individual pays more than twice as much, now up to $75/month. Just since 2010 there has been a 40% increase. For a family of three your new rate as of January 1st 2016 is $150/month, up from $142/month.
Let me put this another way: The BC Government rakes almost as much revenue in from MSP Premiums as it does from corporate income tax.
The government’s response has generally been to point out that it does have some premium assistance available. But this too is not without significant issues.
First, the assistance program is an opt-in program rather than an opt-out. One academic paper found that 26% of families that earned less than $30,000 a year were not enrolled in the system.
Second it would be a mistake to assume that once you are earning $30,000 a year that this is now an affordable tax.
Before moving on I'd like to acknowledge, with thanks, Lindsay Tedds at the UVic School of Public Administration for her thoughtful blog post on this issue.
MSP Premiums are a regressive tax that are contributing to the issue of affordability so pervasive in our province. What do we do about it?
The answer is very straightforward. British Columbia should follow the path taken by Ontario in 2004 when they introduced the Ontario Health Premium (OHP), and rolled it into their income tax system.
In Ontario if you earn $20,000 or more a year you pay the OHP. It ranges from $0 if your taxable income is $20,000 or less, and goes up to $900 per year if your taxable income is more than $200,600. Instead of the mail-out system we have in BC, the OHP is deducted from the pay and pensions of those with employment or pension income that meets the minimum threshold. The full range of premium rates in Ontario for those at different incomes can be viewed here.
Remember - only Ontario's top earners are paying $900 per year. Right now people in British Columbia are paying $900 a year regardless of whether they earn $30,000 or $3,000,000 a year.
It is past time that the BC Government adopt this straightforward change. Last year, when I brought this issue up there was an outpouring of interest and support for the idea. Even the government indicated that they weren’t opposed to talking about it.
Yet, a year later, nothing has changed except that MSP Premiums have once again gone up.
This needs to be corrected. The 2016 budget will be tabled on February 16th 2016. Please join us in calling on our government to implement this common sense change for inclusion in this year’s budget.
One thing is certain, a BC Green Party government would eliminate the regressive monthly MSP premiums. Instead, we would introduce a progressive system in which rates are determined by one's earnings. And a net administrative savings to taxpayers would arise in rolling MSP premiums into the existing income tax system.