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Normandin Beaudry

Drugs available without a prescription remain eligible

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There, in black and white

Bulletin NB Vol. 11 N. 4, March 2008

In its budget tabled on February 26, 2008, the federal government addressed a few provisions pertaining to the Medical Expense Tax Credit (METC). Amongst other things, Budget 2008 proposes to clarify the METC provisions regarding the non eligibility of drugs and medications available without a prescription. This Bulletin confirms that this provision will have no consequence for group insurance.

In Budget 2008, the federal government proposes to clarify the wording of the provisions of the Income Tax Act concerning eligible drugs and medications under the METC to ensure that those that may be purchased without a prescription are clearly ineligible, whether they are obtained with or without a prescription. If adopted, this clarification would take effect retroactively to February 27, 2008.

In addition to affecting taxpayers' income tax returns(1) for 2008 and subsequent years, this measure could have had a significant and immediate impact on most Canadian group insurance plans. Indeed, under the Act(2), to qualify as a "private health services plan" (PHSP) and thereby continue to enjoy an advantageous tax status, Canadian plans must reimburse expenses only for drugs considered eligible under the METC. Thus, many insurance representatives interpreted that any plan covering at least one "over the counter" (OTC) medication, even if prescribed, could have lost its federal preferred tax status.

Final impacts

The Canadian Life and Health Insurance Association (CLHIA) asked the government to clarify its proposal.

In an official statement released on March 7, 2008, CHLIA announced that discussions with Department of Finance staff have confirmed that amongst other things:

  • The Budget's clarification regarding OTC medications is specific to the METC, while PHSPs are not restricted only to cover METC;
  • The Budget was not intended to change the existing treatment of PHSPs with regards to OTC medications.

Proposed actions

No modification to group insurance plan must be done following the federal budget 2008.

However, even if your plan does not provide reimbursement for any OTC medications, clear communication to insureds could prove beneficial in effectively managing the message they receive. Mentioning that even if the clarifications regarding METC still apply, they will not affect the coverage of their group insurance plan.

Other proposed modifications

The government also proposes to extend eligibility under the METC to the cost to purchase, operate and maintain some devices prescribed by a medical practitioner. These devices, related in majority to severe mobility impairments or speach disorders, are not intended for a large number of individuals.

It is also proposed to extend eligibility under the METC to recognize expenses for service animals specially trained to assist an individual who isseverely affected by autism or epilepsy.

These modifications will be affecting taxpayers' income tax
returns for 2008 and subsequent years. At this time, group insurance plan will be authorized to reimburse these expenses and maintain the PHSP status. Plan sponsors will have the choice to cover these expenses or not.

(1) Normandin Beaudry information bulletin on tax credits for medical expenses (Vol. 11, No.1, February 2008)

(2) Interpretation Bulletins IT-339R2 and IT-519R2

 

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