By John Have
Canadian Institute of Actuaries
and Robert L. Brown
University of Waterloo
A nine-year-old New Brunswick boy was recently denied private health coverage because of his weight (135 pounds at 5 foot 2 inches). The idea that a child could be denied coverage in Canada shocked many. But it’s entirely legal and may be a sign of things to come.
The boy’s father was laid off in January and the Doiron family lost the 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 health care. This is true for medically-necessary care, such as hospital, diagnostic and physician services. But most Canadians must fund dental, vision and pharmaceutical drug costs privately. They must also fund health-care services such as chiropractic or physiotherapy that are not deemed essential under the Canada Health Act.
Canadians must insure or pay out-of-pocket a whopping 30 per cent of health costs.
Private health-care costs in Canada have grown dramatically over the last 40 years. Adjusting for population growth and inflation, they have increased by over 220 per cent on average since 1975. That’s around $1,800 per person – no small figure.
Some of the 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 have increased dramatically, and may continue to do so with the emerging use of personalized medicine and drugs for rare conditions.
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 called on the federal government to increase publicly-funded coverage by establishing a national pharmacare program. This is now being discussed at federal and provincial levels.
In the meantime, many Canadians rely on private insurance to help with health needs not covered by our public system.
For many, private health care is provided through group insurance at 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 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, medical evidence of good health must be provided to the insurer. Anyone with a pre-existing medical condition may be offered only limited coverage or even denied coverage.
The alternative is for Canadians to pay out-of-pocket for private expenses or forego some health services because they can’t afford them.
So what about all those Canadians who want private 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 health 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 don’t have to provide any evidence of insurability. So they are guaranteed the possibility of purchasing a reasonably-priced life insurance plan with without having to pass any health tests.
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 is a fellow of the Canadian Institute of Actuaries and president of Have Associates. Robert L. Brown is 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.