Written by Senior Planner, Brad Flecke
There is some controversy concerning US residents (US citizens and green card holders) accessing the Ontario Health Insurance Plan (OHIP). For years, US residents have accessed OHIP with impunity. Yet, some green card holders are warned to turn in their OHIP cards and stopping accessing the program when they exit Canada. What is the real story? The short answer is that under current OHIP rules, US residency and OHIP are usually incompatible, but with proper planning one can “double dip” or access the Canadian and US health care systems concurrently.
The Ontario Health Insurance Act regulations (Section 552), for which a link is provided below, now state that one must meet three requirements in order to qualify for OHIP coverage:
a) Possess Canadian citizenship or a specified Canadian immigration status,
b) Satisfy an Ontario physical presence requirement, and
c) Make Ontario one’s primary residence.
To learn more about these regulations, visit: http://www.health.gov.on.ca/english/public/pub/ohip/eligibility.html.
Anticipating questions, the Ontario regulations define “primary residence” in such a way that one can have only one “primary residence” in the world:
“Primary place of residence” means the place with which a person has the greatest connection in terms of present and anticipated future living arrangements, the activities of daily living, family connections, financial connections and social connections, and for greater certainty a person only has one primary place of residence, no matter how many dwelling places he or she may have, inside or outside Ontario;
Health Insurance Act, R.R.O. 1990, Regulation 552, Section 1 (“Definitions”). If one is a resident of the United States, one cannot also be a resident of Ontario, at least for purposes of OHIP eligibility.
The Ontario Ministry of Health now highlights this point by noting on its website that accessing OHIP as a nonresident is fraud. When more than $5,000 in products or services is involved, such fraud may be punishable by up to ten years’ imprisonment and an order of restitution may be imposed.
There are tax implications as well. Asserting Ontario residency may jeopardize the tax and immigration benefits associated with exiting Canada. A former Canadian taxpayer cannot assert a closer connection to the United States for tax purposes and at the same time assert a “greatest connection” to Ontario to qualify for OHIP. Therefore, a US resident taxpayer accessing OHIP runs the risk of an Ontario or Canada Revenue audit and, ultimately, a finding that he or she reacquired Canadian tax residency (or worse, never stopped being a Canadian tax resident). Such a finding, in turn, may trigger Canadian tax liabilities, interests, and penalties—and could very well cost the taxpayer the most important tax advantages associated with exiting Canada.
Claiming dual Ontario-US tax residency (and paying tax on the same income to both jurisdictions) might be a creative and cost effective solution if one’s medical costs were high enough. However, OHIP rules do not permit it: recall that OHIP’s definition of “primary place of residence” precludes multiple primary residences.
Opportunities for “double dipping” continue. Despite the OHIP residency requirement, there are opportunities for US citizens and green card holders to access both the US and Canadian health care systems with proper advance planning.
- Dual Citizens. A dual citizen who qualifies for US Medicare is in the best position to “double dip”. The dual citizen may reestablish Ontario residency and, thereafter, access OHIP while in Canada and Medicare while in the US. Reestablishing Ontario residency is likely to have costly tax consequences, however. A dual citizen returning to Ontario will face a higher annual tax burden compared to residence in most US states. Also, if the dual citizen only very recently exited Canada, Canada Revenue Agency may find that the taxpayer never stopped being a Canadian tax resident and the value of any Canadian exit tax strategy may be completely lost. Finally, dual citizens residing in Canada may have difficulty double dipping if they are too young to qualify for US Medicare: US private comprehensive health insurance policies typically cover residents only, regardless of citizenship.
- Green Card Holders. Though green card holders would typically lose their US immigration status by reestablishing Ontario tax residency that is not always the case. A green card holder may live abroad full-time for two years or even longer on a US Reentry Permit, as long as he or she annually files a 1040 form reporting worldwide income. It seems likely that a Reentry Permit holder, who reestablishes Ontario tax residency and pays income taxes to Ontario, having only limited ties to the US and no convenient access to US health care for the period of the Reentry Permit, should be eligible for OHIP.
This approach will not satisfy Canadian green card holders seeking unrestricted access to OHIP but it may be welcomed relief for those who require lengthy and expensive medical treatments.
Also Canada will impose departure tax on Reentry Permit holders returning to the US. So, cross-border financial planning before heading to Canada may be valuable.
Even where US citizens and green card holders lack the ability to “double dip” concurrently, Canadian residents of the US still enjoy an enormous privilege unavailable to other Canadians: the ability to access quality US health care and return to the Canadian provincial health care system at any time.
For US citizens and green card holders considering “double dipping”:
- Before reestablishing ties to Ontario, seek cross-border tax planning to identify tax exposure and opportunities for reducing it.
- After the tax exposure has been quantified and before making a final decision to reestablish Ontario residency, make a frank assessment of all immediate and longer-term costs and benefits associated with the tentative plan. The costs and benefits for citizens and green card holders will be different. A cross-border financial planner may be invaluable in making this assessment.
For US green card holders especially:
- Turn in the OHIP card within 30 days of the tax exit from Canada or within 30 days of acquiring US Lawful Permanent Resident status, whichever comes first.
- While residing in the US, maintain private US health insurance (or US Medicare, if eligible) as the primary source of coverage for major health care needs. For the few months that you spend in Canada, continue to see Canadian physicians for less costly services and short-term treatments and emergent needs for which Canadian service providers will accept cash. Avoid OHIP.
- If you decide to reestablish Ontario residency and OHIP eligibility, be prepared to forfeit the green card (or apply for a Reentry Permit before leaving the US), reestablish Ontario residency, apply for OHIP, and wait 90 days before gaining OHIP coverage.
- Have US travel insurance to cover the OHIP 90 day waiting period.
- If you are going to reestablish Ontario residency as a US Reentry Permit holder, factor your eventual return to the US in the initial cross-border planning.
For Canada-US dual citizens especially:
- Be eligible for US Medicare before reestablishing Ontario residency, or at least have US travel insurance to cover the OHIP 90 day waiting period. For those who will not qualify for Medicare for some time, confirm that reestablishing Ontario residency will not jeopardize private US comprehensive health insurance coverage—if US comprehensive coverage will not be available, there is no double dipping and the net advantage of requalifying for OHIP is in doubt.
All of the problems associated with accessing OHIP are grounded in our understanding of government rules rather than current government practice. We cannot cite a single case in which a green card holder has forfeited the card, triggered a tax audit, or faced criminal prosecution for accessing OHIP. Nevertheless, we encourage clients to make plans based on government rules rather than government practice.