British Columbia to eliminate medical service plan premiums in 2020

A premium long viewed as a financial irritant in British Columbia that is paid by individuals and families for health care will be eliminated on Jan. 1, 2020. (Pixabay photo)

VICTORIA — A premium long viewed as a financial irritant in British Columbia that is paid by individuals and families for health care will be eliminated on Jan. 1, 2020.

The provincial government had already announced it was cutting medical service plan premiums in half on Jan. 1, 2018, and in the provincial budget it took the next step to eliminate them.

The government says once the premiums are eliminated, an individual will save up to $900 a year and families up to $1,800 annually.

To cover the loss of revenue, the government will introduce a new payroll tax on Jan. 1, 2019.

That means businesses with a payroll of more than $1.5 million will pay a tax of 1.95 per cent, those below $500,000 will be exempt, and employers whose payrolls fall in between will pay a lower rate.

The Chartered Professional Accountants of British Columbia said the new tax will be a concern for businesses.

“While this tax may not impact the coffee shop around the corner, it will impact many businesses within British Columbia,” said Lori Mathison, the organization’s president and CEO.

The government says it collected $2.6 billion in premiums in the 2016-17 fiscal year, and the new payroll tax will provide $1.9 billion in revenue in 2019-20.

Finance Minister Carole James said by eliminating the premium, it is falling in line with the other provinces.

“B.C. is an outlier in Canada as the only province that levies unfair, regressive MSP premiums that penalize families and individuals,” she said in her budget speech to the legislature on Tuesday.

The government says the premium cost a person earning $45,000 a year the same amount as someone making $250,000 annually, and the 1.95 per cent tax rate on payroll to help recover the loss of revenue is the lowest in Canada.

James said the premiums were “complex and expensive” for businesses to administer.

Eliminating them, she said, “will take some pressure of people’s pocketbooks. And it will make our tax system more fair and progressive.”