Health Insurance for Self Employed Canadians | Long-term and Short-term Plans

August 3, 2021 | Editorial Team

A rising number of Canadians are taking the leap and moving from a traditional workplace. They are instead choosing a more flexible and independent lifestyle by becoming self-employed. Being self-employed has an abundance of career, financial, and lifestyle advantages.

But, one aspect that often leaves people concerned is the lack of access to benefits. This includes benefits such as health insurance, dental coverage, and vision care.

How Do You Get Health Insurance if You’re Self-Employed?

So, how does a self-employed person ensure they have the coverage they need? In this article, we will investigate the different healthcare cover available. Our goal is to help you reduce your health care expenses. And while this post focuses on the self-employed, our health insurance pages dedicated to Alberta, British Columbia, Quebec, and Ontario, are helpful, too.

Health Insurance If You’re Self-Employed for a Short Time

Getting a short-term health insurance plan can be a confusing and time-consuming process. Few insurance companies offer short-term plans, resulting in limited information available. Will your self-employment last less than a year?

You may need to take out a corresponding health insurance plan to prevent unexpected or unnecessary medical expenses. A short-term health plan is usually accessed by directly contacting a private insurance company.

Once you have spoken to the insurance company, a short-term health insurance plan usually comes into effect after 24 hours. They can last anywhere between 1 month and 12 months, depending on your preference. A big advantage of short-term coverage is you can cancel the coverage at any time. This can usually be done for no additional fee.

When buying short-term health insurance, including dental insurance or vision care, the insurance plans may not be as regulated as long-term plans. Additionally, costs can vary greatly with unexpected expenses.

Health Insurance If You’re Permanently Self-Employed

Canadian citizens benefit from Canada’s Universal Health Care System. This provides many health care services for free. However, additional coverage would usually be funded by the insurance that is provided by your employer.

This includes vision care, dental care, certain mental health services and prescription drugs. As a self-employed person, you will be responsible for these expenses. The majority of self-employed people choose one of the following options when organizing their medical care.

  • Health Spending Account – This allows you to pay for all of your medical expenses through your business. The Canada Revenue Agency (CRA) guidelines allow your business to refund 100% of your out-of-pocket payments. These reimbursements will be tax-free to you personally, as well as being tax-deductible for your business. In order to qualify, you must be a business owner and pay income tax.
  • Private health and dental insurance. This involves paying a monthly, quarterly or yearly premium for medical, dental and vision coverage. Many people prefer to pay for an insurance policy rather than risk unexpected medical expenses.
  • Having no coverage. Some self-employed people will choose to have no additional medical coverage. This is especially true of those with smaller businesses or those who are only recently self-employed. Having no coverage involves paying for any medical expenses, such as prescription drugs, out-of-pocket.

Private Health Insurance

There are many different health insurance plans and providers available to self-employed people. The cost of private health insurance can vary greatly, depending on what type of policy you choose. How much coverage you need impacts the price. Below is a summary of some of the more popular health insurance providers.

  • Blue Cross – They cover a wide range of medical needs, as well as providing travel insurance. Their policies are completely customizable. They also include an Advantage Program to provide you with discounts and savings.
  • Manulife – Allow you to tailor the plan to only include the services you need. They have a variety of plans to suit different budgets and requirements. You can also choose a simpler policy, only covering hospitalization and catastrophic illness.
  • Sun Life – Has three different plans you can choose from. They also offer coverage for additional issues. These include preventative and restorative dentistry and semi-private hospital stays.
  • GMS – Provide a variety of health care options. GMS policies also recognize the importance of your overall wellness. They offer a variety of services such as massages, acupuncture and physiotherapy in their plans.
  • CAA Health Insurance – Highly customizable plans are available. CAA’s policies also include extras such as speech therapy, orthotics and hearing aids.

Self-Employed Health Insurance Tips

To ensure that you have the best coverage to suit your needs, you should pay attention to the following tips:

  1. Ensure that your policy covers the things that you require. For example, do you need dental coverage but not travel insurance? Choose an insurance company that allows you to tailor the policy to your needs.
  2. Research whether the plan you have chosen is eligible for a tax deduction.
  3. Consider whether you want individual or family coverage.
  4. Act quickly and be prepared! You may have a limited amount of time (usually two months) to access some health insurance policies.
  5. Shop around! Always compare several policies before making your final decision. This ensures you have the best insurance plan to suit your needs at an affordable price.

Remember the Self-Employed Health Insurance Tax Deduction

An important factor to consider when you’re self-employed is the Medical Expense Tax Credit. This can have a significant reduction in your income tax. You can make sure your insurance premiums are eligible for a tax deduction. To do this, you must guarantee that at least 90% of the premium is for eligible medical expenses.

Ensure you check with your health care provider that your policy is eligible for the deduction. Health and dental plans and hospitalization are included in the eligible premiums.

Ensuring that your health insurance plan qualifies for the reduction can be time-consuming. However, it’s worth it. You must compare the list of eligible medical expenses provided by the Canada Revenue Agency (CRA) to your policy. Also, ensure you fill out your tax return correctly.

A Highly Deductible Health Plan Makes Financial Sense

A high deductible health plan (HDHP) generally feature lower premiums with higher deductibles. This means you will cover a pre-agreed initial payment personally. You will then be covered by your insurance. This amount is usually more than $2000. HDHPs can be advantageous in cases of catastrophic illness or prolonged hospitalization.

HDHPs are continuously popular because they result in significantly lower monthly payments. Additionally, they can be used alongside your Health Spending Account. This allows you to pay the initial payments via your business and then claim this as a tax deduction.

Having an HDHP can be an effective way of managing your healthcare costs. Thus, it can make the most financial sense for you and your business.

The Bottom Line

If you are considering becoming self-employed there are plenty of advantages, but there are some logistics that need handling and one of those is ensuring you are fully insured. Yes, you’ll be covered for primary care, in other words, the health care that is essential. But you won’t be covered for dental, elective, mental or eye care.

It boils down to you having 3 major choices. You could pay for your health care via your business with a Health Spending Account. The other option is to get coverage with private health care insurance. Or finally, you could risk it and take the hit if you need the care.

It’s your choice, there is no right answer, just be sure you’ve thought it through. You wouldn’t want any nasty surprises, especially when it’s preventable with a little planning.