Health insurance companies will be asked to freeze the price of their policies for as much as two years in exchange for a Government commitment not to increase some taxes on the industry over the same period.
The proposal, which will be discussed by the Cabinet in the coming weeks, will form part of a drive to increase the take-up of health insurance, particularly among younger people, and to stem the relentless flow of consumers leaving the market since the start of the recession.
Minister for Health Leo Varadkar will also propose a sliding scale of discounts on insurance policies for people between 21 and 25 to incentivise them to take up health insurance.
The initiatives are part of a package of proposals to reverse the trend of people leaving the insurance market, with over 280,000 people dropping out since its peak in 2008.
Almost a third of those who left were in the 18-29 age group and the industry has been particularly concerned about the fall-off at the younger end of the spectrum.
Stamp duty is paid by the insurance companies to fund the risk equalisation scheme which underpins community rating, whereby people pay the same for the same policies, regardless of age.
Premium policies
The current stamp duty rates are €100 and €290 for children and adults respectively for basic policies and €135 and €399 for premium policies. Dr
James Reilly
, the former minister for health, increased the duty last November for premium polices, up from €120 for children and €350 for adults.
Insurance companies passed on the costs to policyholders when the new rates came into effect last March; while Mr Varadkar says the Government cannot interfere in the market, it is hoped the insurance companies would respond positively to the move.
Mr Varadkar said he hoped the deal could operate similarly to how airlines promised to increase traffic at Irish airports following a Government commitment to reduce the travel tax to zero in last year’s budget. The effect of the 9 per cent VAT rate in the hospitality sector is also cited as a similar example.
Stamp duty
Briefing documents prepared for the Minister by the
Department of Health
said the stamp duty rates to be applied next year would have to be decided in the coming months.
Representatives of the health insurance industry have been holding talks with the Department of Health in recent weeks; the three main elements of an emerging plan on health insurance are the stamp duty freeze in exchange for policy price freezes; the discounts for younger people and the signing into law by Mr Varadkar of the lifetime community rating introduced by Dr Reilly.
The discounts would apply from when younger people leave college or training at about the age of 21 for four years until they have established themselves in work.
Mr Varadkar told The Irish Times this would aim to tackle “a cliff”, whereby younger people availing of student rates drop off because they cannot afford the full adult rate.
“You could look at introducing a sliding scale of discounts,” he added, “for people between the ages of 21 and 25 to encourage them to take out insurance.”
At present in Ireland a concept of single-rate community rating applies, which means the age of entry of a person to the health insurance system does not determine the level of premium to be paid.
Under the proposed new system of lifetime community rating, those who take out insurance later in life will effectively face a loading on their premium.
