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Yvonne Payne is a big supporter of having medical insurance in retirement.JENNIFER ROBERTS/THE GLOBE AND MAIL

When Yvonne Payne retired at the age of 63 she took a piece of her company with her. The Toronto-based former investment professional felt the group medical insurance package her company was offering was a great deal, providing her with a lower premium than she would pay individually – while offering peace of mind in the retirement years.

“I thought it was important to have in case there were drugs that wouldn’t be covered under OHIP,” she says, referring to the public Ontario Health Insurance Plan. “Most people don’t seem to realize that not everything is covered.”

Now 72, Ms. Payne has no regrets about her decision, paying $2,500 a year for top-tier private medical coverage and $650 for mid-tier dental coverage. She has used the physiotherapy benefit and the dental benefit repeatedly. Recently, a health condition required a new prescription. While her insurer would have covered the more costly injectable drug she needed, the provincial plan only paid for oral treatments. She is happy private insurance gave her a choice.

“There’s a comfort level there,” she says.

Private medical insurance can be a relief for retired Canadians worried about chronic conditions, expensive new medications and delisted provincial health services – especially if their former employer helps defray the costs of premiums by offering them group plan rates. But with many medications and therapies already covered under provincial health programs after 65, those retirees who face steep annual insurance premiums from private providers may question the benefits of purchasing the insurance. With many private health services capped or restricted, they wonder if their insurers will actually offer enough coverage to save them money in the long run.

There has been a big uptick in spending on private medical insurance in Canada. Two-thirds of Canadians now have private medical insurance that covers outpatient drug costs, dental services, vision aids, physical therapy, psychological counselling and private hospital rooms, says Statista, a company specializing in market and consumer data. Of those 24.6 million, 2.2 million Canadians over 65 have this coverage, according to the Canadian Life and Health Insurance Association Inc., or CLHIA.

While there are people who are fortunate to have retiree benefits through a group plan, “it’s less and less” common, says Jason Heath, managing director of Objective Financial Partners in Toronto. “Like those with a defined benefit pension plan, they are the minority.”

Mr. Heath says that in cases where an individual is retiring, has multiple health problems and an employer is offering group coverage at a reduced rate, private medical insurance could make financial sense. In these cases, the insurance isn’t underwritten, meaning that any pre-existing health issues are calculated in determining a premium.

But if someone is healthy, with few health conditions and is 65, they need to crunch the numbers to determine whether individual private insurance will be of any value, says Mr. Heath. And they should buy insurance at the youngest age possible. That’s because once you reach 65, a lot of prescription drugs are covered. And some insurers will only sell medical insurance until 69.

Plus, Mr. Heath cautions, unless you’re in a group plan, the premiums will go up as you get older, further potentially reducing your cost benefit. “On average, you’re going to get back less than you put into the policy.”

His advice? “Think twice.”

Provinces cover a lot, but have gaps

Provincial medical coverage for those over 65 is dependent on income, but is comprehensive, says Mr. Heath. And it’s affordable.

For example, in Ontario, a retired couple, where at least one person is 65 or older and together have a combined annual income above $37,100 after deductions, pays a $100-a-person deductible on all prescription costs each program year and up to $6.11 for each prescription that is filled or refilled.

OHIP covers optometrist visits every 12 months, podiatry services, physiotherapy with a doctor’s referral, home care services and 5,000 prescription drugs. There are also more than 1,000 drugs that may be covered by the Exceptional Access Program if specific clinical criteria are met, according to government guidelines.

Ontario also covers some diabetes monitoring and testing products, certain over-the counter medications, such as ibuprofen and ferrous sulphate, select nutrition products, drugs used in palliative care and smoking cessation medications.

Like Mr. Heath, Joan Weir, vice-president of group benefits at the CLHIA, believes retirees should look carefully at what they’ll be paying versus what they’ll be receiving when it comes to private medical benefits.

But she says that because public plans cover one-third of what private plans cover, private insurers may offer more coverage for medications. Each private plan caps these amounts, however, so it’s important to read the fine print when doing a cost-benefit analysis.

“There is little to no dental coverage for seniors in Canada,” adds Ms. Weir. Conversely, private plans offer dental benefits, albeit with annual maximums.

Some private plans may also cover additional services that public insurance doesn’t, depending on province. These may include out-of-country travel medical insurance, nursing care provided at home and medical equipment to assist with mobility, says Brian So, a Vancouver-based life insurance adviser.

“The private health insurance plans come in packages that include prescription drugs, dental, paramedical practitioners like massage therapists and vision,” he says. “So the more services you use, the more you benefit.”

For Ms. Payne, the decision to buy private medical insurance comes down to security and affordability. She plans to continue her coverage.

“If you can afford it, you can pay for it,” she says.


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