Private Health Services Plan (PHSP) for Canadian Businesses (Part II)
To Insure or Not Insure
The oxford dictionary defines insurance as: an arrangement by which a company or the state undertakes to provide a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a specified premium. In essence, insurance is about transferring risk in exchange for a payment or a premium. A common example is auto collision insurance or a homeowner’s policy covering fire, wind, hail, or water damage.
In these examples, insurance for your home or auto will pay the insured if a loss occurs. The loss is always a result of an unplanned event.
Planned vs. Unplanned
When we talk about dental insurance or health insurance, we need to separate what can be insured from what cannot be insured.
My ten year old son dove into the pool at the local recreation center and broke his tooth on the bottom of the pool. This dental “accident” can be insured as it is an unplanned event that damaged his tooth.
On the other hand, when I take my ten year old son to the dentist for his scheduled checkup – this is a planned event. I can insure for the event I never planned for – like his broken tooth, but I cannot insure the event that I plan to do – take my son to the dentist for a checkup and cleaning.
Maintenance and Service
We readily take on our auto maintenance such as changing the oil, replacing worn tires, replacing an old battery, touching up paint, fixing window chips, and washing the car. This is understood as the basic costs of owning a car.
Yet when we go to the dentist to have a checkup – cleaning, scaling, polishing, maybe an x-ray and fluoride treatment – clearly maintenance work – we somehow think these services can be insured.
Buying a personal insurance plan for health and dental services with an insurer is really just buying an expensive budget. The services you will claim regularly fall under the heading of maintenance not insurance. They are planned events. Cavities, major dental and orthodontic work fall under maintenance, upkeep and beautification. These services may cost a lot of money, but insurance events they are not.
Where did we get the idea this was insurance?
Our confusion over health and dental insurance is mostly derived from our experience in our first job or when we were kids. As a kid, my mother took me to the dentist and filed a claim with an insurance company through her employer. In laymen’s terms, this must be insurance because just as surely as she filed the claim she received a reimbursement for 70% or 80% of the bill or maybe even all of it.
In reality, her employer was paying the dental bill as part of her compensation package under health and dental benefits. The employer ‘sponsors’ the plan and pays premiums to the insurer, deducting them as a business expense. The insurance company pays the employee claims, which the employee receives, tax free. The difference between paid premiums and paid claims is the insurer’s profit margin. If paid claims increase, there is a good chance premiums will increase as well. Also, if during a certain time period you claim nothing the premiums paid seem a waste.
That is the essence of dental and health insurance – it is simply an arrangement to provide tax free benefits from an employer to an employee with the process and plan managed by an administrator – in this case an insurance company.
What to do?
The best option is to pay for your services as you go along. Negotiate the best price or shop for your dentist, chiropractor, massage therapist, physiotherapist and optometrist as you would for any other service. Then, start a budget – put the money aside monthly or with each pay cheque in order to prepare for the time when you need to pay. Any shortfall will be easier to come up with if you need a surprise root canal.
A patient who has or is contemplating having an orthodontist establish a plan to straighten teeth knows this is no accident. This falls under the heading of dental ‘beautification’ not dental ‘insurance. Use a budget and save up a lump sum and negotiate paying the balance monthly until the work is paid off.
If you own your own business and are incorporated, you can use your company to establish your own health and dental plan. Your company will sponsor the plan. Similar to the example of my mother filing my dental claim with the insurance company, except your company is the plan sponsor and you are the employee. You can claim all your health and dental receipts for yourself. If you have a spouse and kids you can claim their expenses, just as my mother claimed mine.
The difference is that your company can set the spending limit high enough to capture all that you would typically spend during the year. The insurance company exceptions dictating certain services are allowed up to certain amounts or percentages dissolve. With no exceptions, you have the freedom to claim all your families planned expenses. Your company expenses the family’s health and dental claims and you are reimbursed tax free. The benefits are all yours – flexibility, freedom and control.
The next time someone asks you about ‘dental insurance’ or ‘health insurance for vision or massage therapy’, you can smile knowing there is no such thing and be assured that your plan with Olympia is the best choice for a small business owner.