Section 248(1) of the Income Tax Act defines a Private Health Services Plan (PHSP). It is an extended health and dental plan that is distinct from government plans. In essence, a PHSP is a written contract between an employer and an employee. The purpose of a PHSP is to enable an employer to provide health and dental benefits to their employees on a tax-free basis. The employer is entitled to a deduction for the full amount of expenses paid out to the employee.

A PHSP is a Health Plan and a Tax Plan.

The Plan maximizes the opportunity to fully utilize all health and dental services while merging this opportunity with existing Canadian tax laws. A business will purchase the Plan to achieve a wide and comprehensive range of health and dental services in the most cost effective route available.

A PHSP provides excellant financial benefits to you, your family, and your employees who may wish to participate in the plan.

 PHSP vs. Insurance Plans

A Private Health Services Plan (PHSP) effectively reduces health and dental expenses. Expenses are paid for with pre-tax business dollars instead of after-tax personal dollars. Since the plan is funded differently, a savings of up to 40% may be realized.

Most consumers are aware that there is no “fairy godmother” paying for their family’s care, but they also demand best value for their money. Traditional insurance plans rarely pay out more than 60% of the money paid into premiums. To ensure this happens, they put caps on all aspects of coverage. For example, if you are willing to pay the very high premiums involved in orthodontics coverage, the cap is a $1,500 lifetime maximum, but orthodontics usually is over $5,000. You the consumer pay the extra $3,500.

Thus, insurance may be a costly product to buy. Many small business owners are becoming aware of this and are implementing a cost plus plan to effectively cover employee medical and dental expenses.

Traditional medical and dental plans are not a good example of true insurance.  True insurance is valuable in that small premiums are paid to offset the chance that a large financial hardship may be avoided.  The Canada Health Act along with Provincial Governments provide Canadians with true health care insurance.  Canadians do not pay for hospital stays or doctor visits.  Each province has an effective plan that covers drugs at a very reasonable cost if and when needed.  Pre-existing conditions do not impact these plans.

*Insurance products provided through multiple insurance carriers.