June 21, 2004

ONTARIO HEALTH PREMIUM
Healthier Ontarians and a Healthier Ontario

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The Ontario Government has proposed legislation to introduce an Ontario Health Premium. Revenue from the premium would be invested in reducing wait times, improving access to doctors and nurses, home care and long-term care. It would also enhance preventative health measures and expand mental health services, contributing to a healthier Ontario.

Transforming health care in Ontario

Health care costs through the Ministry of Health and Long-Term Care have been continually rising, up $2.2 billion from last year. Given the inherited structural deficit and the need to make investments in the health care system and other priority areas, a health charge is necessary to avoid any further 'crowding out' of available funding for other priorities in the future.

Over the next four years the Ontario Government intends to invest in and reform the health care system by:

• Shortening wait times;
• Expanding primary and community-based care;
• Increasing the number of doctors and nurses;
• Delivering results in a more cost effective manner; and
• Ensuring that the system has the resources it needs.

The premium is expected to generate $1.6 billion in 2004-05, contributing a significant amount to the $2.2 billion additional investment in the Ministry of Health and Long-Term Care and the $2.4 billion total investment in health.

Some examples of the cost of certain health procedures would include:

• Hip replacement ($11,846)
• Knee replacement ($10,551)
• Cataract surgery ($1,669)

Premium structure

The premium would be based on taxable income for a taxation year. Taxable income is income after allowable deductions, such as child care expenses, RRSP and pension contributions, union dues and non-taxable benefits (e.g. Guaranteed Income Supplement, Ontario Disability Support Program, social assistance, and workers' compensation).

Individuals with taxable income of $20,000 or less would pay nothing. That means that 43 per cent of all Ontario tax filers and 48 per cent of Ontario senior tax filers would pay no premium at all. Individuals with the highest income would pay a maximum of $900 per year.

Built into the legislation is a provision for legislative review of the premium within five years. There is also a provision that would require the Public Accounts process to report on how the revenue was being used to invest in health in Ontario.

This table provides examples of how much individuals can expect to pay:

Proposed Ontario Health Premium
Individual Taxable Income	Premium for 2004 Tax Year	Premium for 2005 Tax Year	Monthly Amount of Premium
Up to $20,000	$0.00	$0.00	$0.00
Examples between $20,000 and $25,000 (phased in at 6%):
$21,000	$30.00	$60.00	$5.00
$22,000	$60.00	$120.00	$10.00
$23,000	$90.00	$180.00	$15.00
$24,000	$120.00	$240.00	$20.00
From $25,000 to $36,000	$150.00	$300.00	$25.00
Examples between $36,000 and $38,500 (phased in at 6%):
$36,500	$165.00	$330.00	$27.50
$37,000	$180.00	$360.00	$30.00
$37,500	$195.00	$390.00	$32.50
$38,000	$210.00	$420.00	$35.00
From $38,500 to $48,000	$225.00	$450.00	$37.50
Examples between $48,000 and $48,600 (phased in at 25%):
$48,100	$237.50	$475.00	$39.58
$48,200	$250.00	$500.00	$41.67
$48,300	$262.50	$525.00	$43.75
$48,400	$275.00	$550.00	$45.83
$48,500	$287.50	$575.00	$47.92
From $48,600 to $72,000	$300.00	$600.00	$50.00
Examples between $72,000 and $72,600 (phased in at 25%):
$72,100	$312.50	$625.00	$52.08
$72,200	$325.00	$650.00	$54.17
$72,300	$337.50	$675.00	$56.25
$72,400	$350.00	$700.00	$58.33
$72,500	$362.50	$725.00	$60.42
From $72,600 to $200,000	$375.00	$750.00	$62.50
Examples between $200,000 and $200,600 (phased in at 25%):
$200,100	$387.50	$775.00	$64.58
$200,200	$400.00	$800.00	$66.67
$200,300	$412.50	$825.00	$68.75
$200,400	$425.00	$850.00	$70.83
$200,500	$437.50	$875.00	$72.92
$200,600 and over	$450.00	$900.00	$75.00

The first premium level of $300 per year would be phased in at six per cent of taxable income in excess of $20,000. For example, an individual with taxable income of $22,000 would pay a premium of $120 in 2005.

The second premium level of $450 per year would be phased in at six per cent of taxable income in excess of $36,000. For example, an individual with taxable income of $37,000 would pay a premium of $360 in 2005.

This six per cent transition rate for the second premium level is a technical change from the Budget, which proposed a 25 per cent transition rate. Individuals affected by this change would realize the benefits when they file their 2004 tax returns.

Each subsequent increase in premium level would be phased in over the first $600 of taxable income in that range at a rate of 25 per cent.

Collection through the income tax system

The Ontario Health premium would be collected through the income tax system. Starting July 1, 2004, the premium would be deducted from pay and pensions as part of income tax.

Individuals who pay their taxes by instalments will have the option of adding the premium to their remaining instalments for 2004 and the first two instalments of 2005.

Other provinces

Two other provinces currently have health premiums. In British Columbia, a single individual pays $648 per year. A family of two pays $1,152 and a family of three or more pays $1,296. In Alberta, a single individual pays $528 per year and a family of two or more pays $1,056. Ontario would be the only province with a health premium based on income.

Tax competitiveness

A single person in Ontario earning $25,000 a year with no dependants or other deductions would pay less this year in combined provincial and federal income taxes, including the health premium, than in any other province. Ontario's tax rate for the first income bracket - up to about $33,000 a year - remains the lowest in Canada.

In particular, for single individuals earning between $20,000 and $60,000 a year, Ontario would continue to have the lowest combined income taxes and health premiums of any province.

Employers

Some existing collective agreements refer to coverage of the old OHIP premiums. However, unlike the old OHIP premiums, the new premium would be a tax on individuals under the Income Tax Act. Whether the Ontario Health Premium would be captured by those agreements would depend on the interpretation of those agreements.

Although it might be possible for employees to negotiate with their employers to be reimbursed for the premium as part of their compensation, it would be considered a taxable benefit to the employee and would be subject to personal income tax.