Entrepreneurship & Small Business

Health insurance for 1 person small business

  • Last Updated:
  • Dec 30th, 2017 3:41 pm
[OP]
Newbie
Oct 19, 2013
22 posts
2 upvotes
Toronto

Health insurance for 1 person small business

Hi, I established my own company working as a contractor for about 3 years.
Never thought about buying insurance for company so I can use it for massage, dental and also coverage for families until now.
Any recommendation and approximate cost? Thanks
13 replies
Sr. Member
User avatar
Jan 8, 2009
808 posts
66 upvotes
GTA
littleStrong wrote:
Nov 7th, 2017 12:02 am
Hi, I established my own company working as a contractor for about 3 years.
Never thought about buying insurance for company so I can use it for massage, dental and also coverage for families until now.
Any recommendation and approximate cost? Thanks
Traditional plan would be in excess of $300 a month for a family coverage. You can use Brock health as an alternative.
Insurance & Financial Advisor

All posts on this forum are for information purpose only and can't replace your policy contract. Please contact your own broker, agent or company before acting on my suggestions. There is more to insurance than just price!
Deal Addict
Feb 29, 2012
2654 posts
1426 upvotes
Richmond
Check if there are any industry associations you can join that offer group coverage. That's often the cheapest way to get into a group.

But honestly if you're thinking of health insurance as a way to cover routine expenses like the ones you listed, you're dreaming. You think insurance companies are charities? Quite the opposite - they'll charge you double what those routine services cost to make their profit. Insurance is only useful to cover catastrophic expenses that you couldn't afford to cover yourself. At best you might come out slightly ahead if you can manage to get into a group which has much lower average costs than you, such as mostly young people with no families who don't use their health benefits.
Sr. Member
Feb 25, 2007
993 posts
427 upvotes
Ottawa
Agree with the above.

A bit of an explanation.
Employer-provided health insurance exists for 2 reasons.
1. Spread out the risk of huge covered expenses
2. Pay health expenses, small or large, with pre-tax dollars (without the 3% of income limit that applies if you claim health expenses on your personal taxes)

#1 can only work if there is a large enough pool of covered people that the healthy ones (or their employer) pay for the less healthy ones. If you are a sole prop, there will always be the question why you specifically want coverage, i.e. you will be (or appear to be) a poor underwriting risk and so get either very limited coverage, or obscenely high rates, or both.

The alternative is something like Brock Health, which addresses #2. You self-fund your actual health expenses with your corporate money, pre tax, and the "insurer"/processor (Brock Health in this case) pays you back personally, taking a small cut.

Bottom line - you can get the govt to chip in on your massages and dental work, but you can't average it out over an insured pool of one.
Deal Fanatic
Aug 29, 2006
7014 posts
1112 upvotes
Brock is the way for a 1 man business since anyone living with you can claim
The Devil made me buy it - RFD. :twisted:
[OP]
Newbie
Oct 19, 2013
22 posts
2 upvotes
Toronto
So there are two options now:
1. Brock Health
2. Group coverage.

So the benefit of Brock Health is for tax reduction because it is considered expenses.
For the group coverage, I belong to an alumni group and did some quote online. The monthly premium for a family of 3 is ranging from $160 to $300 depending on the package (basic/bronze/silver/gold). Is it a normal premium?
Deal Guru
Aug 2, 2010
11764 posts
2636 upvotes
Here 'n There
houska wrote:
Nov 7th, 2017 1:05 pm
Agree with the above.

A bit of an explanation.
Employer-provided health insurance exists for 2 reasons.
1. Spread out the risk of huge covered expenses
2. Pay health expenses, small or large, with pre-tax dollars (without the 3% of income limit that applies if you claim health expenses on your personal taxes)

#1 can only work if there is a large enough pool of covered people that the healthy ones (or their employer) pay for the less healthy ones. If you are a sole prop, there will always be the question why you specifically want coverage, i.e. you will be (or appear to be) a poor underwriting risk and so get either very limited coverage, or obscenely high rates, or both.

The alternative is something like Brock Health, which addresses #2. You self-fund your actual health expenses with your corporate money, pre tax, and the "insurer"/processor (Brock Health in this case) pays you back personally, taking a small cut.

Bottom line - you can get the govt to chip in on your massages and dental work, but you can't average it out over an insured pool of one.
Exactly. Insurance companies are not going to insure 1-man companies so they can lose money.
Deal Addict
Aug 28, 2007
1823 posts
232 upvotes
Calgary
Both options are tax deductible as business expense.

With group coverage you will pay monthly premiums, submit claims, and you'll get back "somewhat less" than that ( or else the insurer would go bankrupt). The type of plan (gold, silver etc.) will dictate the size of the premium, which in turn determines the size of "somewhat less". If you pay a higher premium you'll get more things covered. Generally, the premiums amongst insurers for similar plans are reasonably comparable because in a competitive market one insurer can not be so low priced as to get all the business. So Yes, those $160 to $300 per month figures are probably reasonable.

So if you think about this, for everyday medical expenses you are really just getting a portion of your own money back. The key reason why you'd opt for a group plan is if you are really worried about a catastrophe where a huge expense will exceed the monthly premiums.

On the other hand, if you are not worried about a catastrophe and just want to have your business cover the cost of the everyday expenses for your family, then a flat fee PHSP is more practical.
Newbie
Jul 12, 2010
5 posts
Toronto
What do you guys think of this interpretation by the CRA with regards to a corporation where the sole-employee is also the sole-shareholder?

https://taxinterpretations.com/cra/seve ... -0521301e5
However, a cost-plus plan under which the administrator agrees to reimburse the sole employee-shareholder, his or her spouse, and members of his or her household for actual medical and hospital expenses and receives, as consideration, an amount equal to the amount reimbursed plus an administrative fee, does not qualify as a PHSP since it does not contain the necessary elements of insurance. Effectively, the sole employee-shareholder is paying for the personal hospital and medical expenses for himself or herself and his or her household members through his or her solely-owned corporation without any risks being assumed by the Plan administrator. Therefore, it is our view that a cost-plus plan for a sole employee-shareholder would not likely constitute a plan in the nature of insurance.

The tax implications will depend on whether the individual is receiving benefits in his or her capacity as an employee or shareholder. The determination of whether the sole employee-shareholder is receiving benefits in his or her capacity as an employee or shareholder is a question of fact. Generally, where a sole shareholder is also the sole employee, CRA would consider the sole shareholder-employee to receive the benefits in his or her capacity as a shareholder unless he or she can demonstrate that employees, who are not shareholders, with similar duties and responsibilities to another corporation of a similar size receive similar benefits under a similar Plan.
Sr. Member
Feb 25, 2007
993 posts
427 upvotes
Ottawa
flightcommander wrote:
Dec 29th, 2017 9:36 pm
What do you guys think of this interpretation by the CRA with regards to a corporation where the sole-employee is also the sole-shareholder?

https://taxinterpretations.com/cra/seve ... -0521301e5
Interesting, and somewhat concerning. There is also https://members.videotax.com/technical- ... vices-plan , which is a bit more positive.

My layman's interpretation of both, plus of a random suggestion with unclear justification I saw somewhere (sorry long time ago and don't have my notes since I'm travelling) that benefits should not exceed 10-15% of (employment) income, plus Brock's and others' recommendation to make sure equal benefits are offered to all employees of the same class (if you do have multiple employees), is:
  1. CRA understandably takes a dim view where a PHSP would be used to turn into pre-tax expenses large amounts of shareholders' and their dependents' medical benefits in excess of what an employee could reasonably expect to receive, as a tax-advantaged way of the shareholder to take money out of the corporation.
  2. One can probably successfully argue benefits to oneself (as owner and employee) were paid "in capacity as employee" if they are not out of line with what decent health benefits would be available if you were working elsewhere, with that being easier if you do have other employees that you genuinely treat equally, and harder if you treat yourself better than other employees (neutral if you have no employees...)
  3. These are both CRA tax interpretation bulletins (along with others in earlier years), i.e. what the CRA tells people when they ask, and therefore representing how the CRA would like it to be. The acid test would be only if there were real case law about this, which there does not yet(?) seem to be.
Note am not a lawyer or accountant, just a self-employed consultant who trusts his professional advisors but also reads up and stay informed.
Deal Guru
Aug 2, 2010
11764 posts
2636 upvotes
Here 'n There
houska wrote:
Dec 30th, 2017 8:22 am
Interesting, and somewhat concerning. There is also https://members.videotax.com/technical- ... vices-plan , which is a bit more positive.

My layman's interpretation of both, plus of a random suggestion with unclear justification I saw somewhere (sorry long time ago and don't have my notes since I'm travelling) that benefits should not exceed 10-15% of (employment) income, plus Brock's and others' recommendation to make sure equal benefits are offered to all employees of the same class (if you do have multiple employees), is:
  1. CRA understandably takes a dim view where a PHSP would be used to turn into pre-tax expenses large amounts of shareholders' and their dependents' medical benefits in excess of what an employee could reasonably expect to receive, as a tax-advantaged way of the shareholder to take money out of the corporation.
  2. One can probably successfully argue benefits to oneself (as owner and employee) were paid "in capacity as employee" if they are not out of line with what decent health benefits would be available if you were working elsewhere, with that being easier if you do have other employees that you genuinely treat equally, and harder if you treat yourself better than other employees (neutral if you have no employees...)
  3. These are both CRA tax interpretation bulletins (along with others in earlier years), i.e. what the CRA tells people when they ask, and therefore representing how the CRA would like it to be. The acid test would be only if there were real case law about this, which there does not yet(?) seem to be.
Note am not a lawyer or accountant, just a self-employed consultant who trusts his professional advisors but also reads up and stay informed.
These points all make sense to me. However, the interpretation of the CRA is not merely how they would like it to be but actually how it will be if you get audited and CRA disallows your PHSP deductions. One would then have to challenge the CRA in court and few if any of the sole employee-shareholders (who are most at risk from this interpretation) are going to have medical expenses so high that the tax benefit they are receiving from the deduction is worth fighting in court.

As an example, I have a friend who has his own 1-man handyman business. He's billing about $30K/year and earning nets just $10K/yr after all expenses. He had a lot of dental expenses this year, comprising about $5K, which he put through a PHSP. Does it seem reasonable that just because he has this business that he should be able to deduct the $5K in medical expenses? Would he receive this level of benefit anywhere else? No. Does it sound like a plan in the nature of insurance (using CRA's test)? No.
Sr. Member
Feb 25, 2007
993 posts
427 upvotes
Ottawa
eonibm wrote:
Dec 30th, 2017 10:17 am
These points all make sense to me. However, the interpretation of the CRA is not merely how they would like it to be but actually how it will be if you get audited and CRA disallows your PHSP deductions. One would then have to challenge the CRA in court and few if any of the sole employee-shareholders (who are most at risk from this interpretation) are going to have medical expenses so high that the tax benefit they are receiving from the deduction is worth fighting in court.
Good point, but a funny bit of a logical catch-22. If the expenses are low, they are less likely to be out of line with comparable employees (however that might work). If they are high, it's more worth fighting. Bottom line: if it feels as if it's too good to be true, then it may well be, but if it's reasonable, seems it could/should pass muster.
eonibm wrote:
Dec 30th, 2017 10:17 am
As an example, I have a friend who has his own 1-man handyman business. He's billing about $30K/year and earning nets just $10K/yr after all expenses. He had a lot of dental expenses this year, comprising about $5K, which he put through a PHSP. Does it seem reasonable that just because he has this business that he should be able to deduct the $5K in medical expenses? Would he receive this level of benefit anywhere else? No. Does it sound like a plan in the nature of insurance (using CRA's test)? No.
Don't know the full context here, of course, but at those (personal) income levels he's not getting taxed much. Why go through the hassle, and pay 5% or more in PHSP admin fees, versus paying himself the same amount as additional (employment) income, and if necessary taking the personal medical expenses deduction?

More broadly, I haven't looked into the details, but it seems that if your medical expenses are sky-high and your income is moderate, you'd do better to save the admin fees and take the personal medical expenses deduction. So the PHSP solution applies best when medical expenses are moderate (below or close to the 3% personal deduction threshhold). And in those cases it's also less likely to be out of line with what is reasonable for any employee. What am I missing? Of course a high flow of (taxable) dividends might disrupt things....
Deal Guru
Aug 2, 2010
11764 posts
2636 upvotes
Here 'n There
houska wrote:
Dec 30th, 2017 3:13 pm
Good point, but a funny bit of a logical catch-22. If the expenses are low, they are less likely to be out of line with comparable employees (however that might work). If they are high, it's more worth fighting. Bottom line: if it feels as if it's too good to be true, then it may well be, but if it's reasonable, seems it could/should pass muster.
I agree.
houska wrote:
Dec 30th, 2017 3:13 pm
Don't know the full context here, of course, but at those (personal) income levels he's not getting taxed much. Why go through the hassle, and pay 5% or more in PHSP admin fees, versus paying himself the same amount as additional (employment) income, and if necessary taking the personal medical expenses deduction?

More broadly, I haven't looked into the details, but it seems that if your medical expenses are sky-high and your income is moderate, you'd do better to save the admin fees and take the personal medical expenses deduction. So the PHSP solution applies best when medical expenses are moderate (below or close to the 3% personal deduction threshhold). And in those cases it's also less likely to be out of line with what is reasonable for any employee. What am I missing? Of course a high flow of (taxable) dividends might disrupt things....
He has an accountant that does his taxes so one would think he'd be advised, but you are correct that he needs to compare using the PHSP vs claiming medical expenses.

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