Health insurers have urged the Government to review the changes in tax relief on private health policies announced in this week’s budget, which will raise costs for hundreds of thousands of people.
The insurance companies claimed the Government had made a “fundamental miscalculation” about the number of people affected.
While Minister for Finance Michael Noonan said changes would only hit people on "gold-plated" policies, the insurance industry last night estimated that as many as one million customers will face average increases of as much as 8 per cent, or €100 each.
However, the Government was last night standing firm, insisting that there would be no change in policy.
The move has caused confusion since it came into effect this week, with the four main insurers – VHI, Aviva, Laya and GloHealth – scrambling to change the prices of their policies overnight.
Downgrading policies
Some industry commentators claim the move will lead to an acceleration in numbers leaving health insurance or downgrading policies, placing increased strain on both public and private hospitals.
Mr Noonan said the Revenue Commissioners had estimated in the run-up to the budget that 577,000 people would be affected – a figure endorsed by the Health Insurance Authority, the market regulator.
Many of the policyholders, Mr Noonan added, would lose tax relief on only a small amount of their premiums.
On budget day, Mr Noonan capped the amount of premium on which tax relief is available to €1,000 per adult and €500 per child.
He said at the time this would “not affect the majority of individuals who avail of more standard levels of medical cover”.
A spokesman for Mr Noonan last night said the policy will not be changed, but officials were willing to meet representatives of the insurance industry to discuss technical aspects of how the rate change would be implemented.
In a statement, the Department of Finance said many policyholders will be only marginally affected and customers could "shop around" for cheaper cover, using the Health Insurance Authority's website.
But the authority yesterday said its website was still being updated and new premium costs would not be available for at least 24 hours.
The department’s statement said the “vast majority” of families with standard premiums would not be affected by the changes and would continue to receive tax relief towards the cost of their private health insurance.
It pointed out that, for example, a family of two adults and two children with a gross premium for their health insurance policy of €3,000 will continue to receive the tax relief at source of 20 per cent, which is worth €600.
'Progressive'
It said the measure was progressive in that those who pay the most for health insurance will bear the brunt of the impact. Health insurance tax relief last year cost the exchequer some €500 million.
“Introducing an upper ceiling on this relief is intended to ensure continuing support, via the tax system, for those who purchase standard but good policies, while reducing exchequer exposure to the more expensive policies,” the statement said.
