Insurance Is Upset at Flaherty - But Why?

The recent federal budget got the whole Canadian insurance world up in a tizzy.  While most people did not notice the entry, everyone in the benefits consulting and insurance world started freaking out over one paragraph.  It wasn’t in the budget speech.  Rather, it sat in the bowels of the 416 page budget details document.  So what could have gotten everyone so upset?  Well, on Page 282, Appendix 4, the following was documented…

Budget 2008 also proposes to clarify the METC provisions regarding the eligibility of drugs and medications.

Currently, drugs, medications and other preparations are eligible for the METC when they are both prescribed by a recognized medical practitioner (or a dentist) and recorded by a pharmacist. These two requirements are intended to ensure that only costs for substances not generally available to the public and required for medical reasons receive tax relief. However, recent court decisions have interpreted this measure to include, in some cases, the cost of vitamins, supplements and drugs that could otherwise be purchased without a prescription. Such an interpretation goes beyond the policy intent of the METC.

Budget 2008 therefore proposes to clarify the wording for eligible drugs and medications to ensure that those that may be purchased without a prescription remain ineligible.

Holy Cow Batman!  Do you mean that I cannot claim Flintstone Vitamins from my HSA?  I actually need to have a prescription from a doctor and actually see the pharmacist to get something a little more legitimate?  What could the insurers and consultants be so upset about?

Well, they believe that this wording will eliminate ALL over the counter prescriptions.  This is because there is a disconnect on what the government is trying to achieve and what the consultants and insurers understand as “the realm of their industry”.  The goal here is to stop sole-proprietors from buying over-the-counter (OTC) vitamins then claiming them as eligible expenses on the METC.  The consultants and insurers are assuming that the wording will eliminate over the counter drugs completely and not what the federal budget suggests “Items without a prescription”.  There is a difference.  

Yes, this may have some implications on certain health benefit plans and coverage.  But certainly not anything to be too concerned with here.  You can always assume that the CRA will look at each case with what is the best interest of CRA and whether the taxpayer (individual or corporate) acted in good faith given their interpretation of the rules.  After all, they are not all evil monsters out to tax you to death.  The problem here is that the wording regarding OTC drugs and the METC has been grey for far too long and has caused multiple headaches for sole-proprietors and CRA.  So they want to clarify the rules.

Let’s just see what they come up with before everyone starts claiming that the sky is falling.  PS - If you do get hit on the head be sure to see your Doctor first if you need some form of pain reliever - just to be safe!