Lack of tax relief for BUPA's cash is a major drawback

THE only major cost downside for prospective BUPA members is the lack of tax relief on the cash plan part of the product. Tax relief of 27 per cent is available on the health insurance contract and this is worth £46.51 on the flat rate premium of £172.27. But the company has not yet secured the approval of the Revenue Commissioners for similar relief on the optional cash benefit premiums. BUPA claims it is hopeful of securing approval and cites the fact that the Revenue has already set a precedent by allowing tax relief a few years ago on premiums paid to the Hospital Saturday Fund, a cash benefit scheme.

The low basic premium of £172.27, the per night cash refund option and an improved benefits package will go some way in offsetting the lack of tax relief on BUPA's total package. This is especially the case for the lower cost cash plans. But the lack of tax relief becomes more glaring when the higher value BUPA packagers are compared to the higher value VHI plans, the latter of which attracts tax relief on the whole premium. The BUPA Gold Plan for a 55-year-old, for example will only enjoy tax relief of £46.51 on total premiums of £877.87 per annum bringing the net cost to £831.36. By comparison, VHI's Plan E attracts tax relief worth £200.92 on total premiums of £744.17 lowering the net cost to £543.00 a year.

Consumer dissatisfaction with VHI's escalating premiums, reduced benefits and its inability to settle its billing issue with a number of the private hospitals is sure to guarantee that interest in BUPA's new products will be high.

These new products are sure to appeal to younger people; to families with children approaching or already in third-level education; to women, who are being offered better health and maternity benefits; to people who may be worried about being struck down by a serious illness like heart disease or cancer may not be able to afford the total cost of treatment. Above all it will appeal to those increasing numbers of discerning consumers who simply want more control and flexibility in how and when to avail of product benefits.

Whether BUPA is able to attract the volume of customers it will need to maintain these early competitive prices and extra benefits is another matter. Health insurance customers in this country have seen enough price rises in recent years to know that there is nothing certain about the latest premium rates. Some consumers, who already believe VHI rates were too high a few years ago, may not be that impressed by BUPA's lower, but still substantial, premiums.

BUPA has set up a customer helpline - 1890 700 890 - for anyone interested in more information about its new health insurance scheme or who wishes to compare their current health insurance plan with the nearest BUPA equivalent.