British Columbians will no longer be required to pay for Medical Service Plan (MSP) premiums beginning on January 1, 2020.
Today’s new budget under the BC NDP provincial government calls for the removal of the fees, which will save individuals up to $900 per year and families up to $1,800 per year and remove an administration burden for businesses.
“BC is an outlier in Canada as the only province that levies unfair, regressive MSP premiums that penalize families and individuals,” said BC Minister of Finance Carole James during her budget speech.
“It will take some pressure off people’s pocketbooks. And it will help make our tax system more fair and progressive.”
She added that all individuals currently pay the same amount, regardless of their income level, and MSP levels have more than doubled over the last 16 years.
But there is a catch, as the lost revenue will need to be regained somewhere through a new source. The provincial government anticipates the cancellation of the MSP will reduce revenues by $345 million in the 2019-20 fiscal year, and $1.394 billion in 2020-21.
Effective in 2018-19, the MSP will be replaced by a new 1.95% Employer Health Tax (EHT), with businesses with payrolls between $500,000 and $1.5 million paying a lower rate and businesses with a payroll over $1.5 million paying a full rate. Small businesses with payrolls less than $500,000 will not have to pay the new tax.
EHT will result in a significant net gain in revenue over the existing MSP, with $463 million expected for 2018-19, $1.85 billion for 2019-20, and $1.922 billion for 2020-21.
James says the EHT is similar to what already exists in other provinces, and will be the lowest rate among provinces.
MSP Premiums had already been cut by 50% on an interim basis last fall in the provincial government’s budget update.
BC’s healthcare budget will rise from $18.923 billion during the current fiscal year to $21.294 billion by 2020-21.
As well, the provincial government has budgeted $3.1 billion for new hospital facilities over the next three years.
Other initiatives include $150 million to reduce prescription drug costs particularly for low-income families and $150 million to connect those who do not have family doctors with team-based primary care.