The Ontario Government has proposed legislation to introduce an Ontario Health Premium. Revenue from the premium would be invested in improvements in health services. It would also enhance preventative health measures and expand mental health services, contributing to a healthier Ontario.

Over the next four years the Ontario Government intends to invest in and reform the health care system by  :

• Shortening wait times;
• Expanding primary and community-based care, including mental health services;
• Enhancing preventative healthcare
• Increasing the number of doctors and nurses;
• Delivering results in a more cost effective manner.

The premium is expected to generate $1.6 billion in 2004-05 to invest in health care.

Some examples of the cost of certain health procedures include  :

• Hip replacement ($11,846)
• Knee replacement ($10,551)
• Cataract surgery ($1,669)
• MRI ($290)

How the Premium Would Work

The premium would be based on taxable income for a taxation year. Taxable income is income after allowable deductions, such as childcare expenses, RRSP and pension contributions, union dues and non-taxable government benefits (e.g. Guaranteed Income Supplement, Ontario Disability Support Program, social assistance, workers' compensation).

Individuals with taxable income of $20,000 or less would pay nothing. This means 43 per cent of all Ontario tax filers and 48 per cent of Ontario senior tax filers would pay no premium at all.

The full-year premium would range from $60 to $900 per year for people with taxable income of $21,000 or more.

The legislation includes a provision for the legislature to review the premium within five years. There is also a provision that would require the Public Accounts process to report to the public on how the revenue has been used to invest in health in Ontario.

This table provides examples of how much individuals can expect to pay :

The first premium level of $300 per year would be phased in at six per cent of taxable income in excess of $20,000. For example, an individual with taxable income of $21,000 would pay a premium of $60 in 2005.

The second premium level of $450 per year would be phased in at six per cent of taxable income in excess of $36,000. For example, an individual with taxable income of $37,000 would pay a premium of $360 in 2005.

This six per cent transition rate for the second premium level is a technical change from the Budget announcement, which proposed a 25 per cent transition rate. Individuals affected by this change will realize the benefit when they file their 2004 tax returns.

Each subsequent increase in premium level would be phased in over the first $600 of taxable income in that range at a rate of 25 per cent.

Collection Through the Income Tax System

The Ontario Health Premium started being deducted from employee payrolls and pension cheques as part of income tax July 1, 2004.

Withholding tables and formulas for employers and pension administrators have been updated by the Canada Revenue Agency to include the premium in the tax deductions.

Instalment payers who calculate and remit their instalments based on the previous year's net tax owing will have the option of adding the premium to their remaining instalments for 2004 and the first two instalments of 2005. Instalment payers who calculate and remit instalments based on an estimate of net tax owing for the current year will need to adjust their September and December 2004 instalments by adding one half of their estimated 2004 premium to each instalment payment.

Other Provinces

Two other provinces currently have health premiums. In British Columbia, a single individual pays $648 per year. A family of two pays $1,152 and a family of three or more pays $1,296. In Alberta, a single individual pays $528 per year and a family of two or more pays $1,056. While these provinces offer limited premium assistance to residents with low incomes, Ontario would be the only province with a health premium based on income.

Tax Competitiveness

A single person in Ontario earning $25,000 a year with no dependants or other deductions would pay less this year in combined provincial and federal income taxes, including the health premium, than in any other province. Ontario's tax rate for the first income bracket - up to about $33,000 a year - remains the lowest in Canada.

In particular, for single individuals earning $20,000 to $60,000 a year, Ontario would continue to have the lowest combined income taxes and health premiums of any province.