Government raises health insurance stamp duty levy by 10%

The Government has introduced a 10 per cent increase in health insurance stamp duty levies – a move likely to lead to further price hikes for subscribers.

Under new legislation, stamp duty in respect of products providing “advanced” cover is to be set at €444 per adult – an increase of €41 – and €148 per child, a rise of €14. The increases come into effect in April.

However, Minister for Health Simon Harris said there was no obligation on insurers to pass on these increases to subscribers.

He said companies should “think carefully” before passing on these rises in stamp duty.

He said the increases were required to maintain stability in the health insurance market.

In essence, stamp duty levies paid by insurers on all health insurance plans go into a risk-equalisation fund which is used to compensate companies who have a larger proportion of older – and relatively less profitable – subscribers.

The Government has argued that this is necessary to underpin a community-rated health insurance market.

Solidarity

Mr Harris said health insurance in Ireland was based on solidarity between the young and the old.

“The Health Insurance Authority, as regulator of the private health-insurance market, is responsible for monitoring the market and advising Government on maintaining our system of community rating.

“I want to make it clear that this legislation is to implement the recommendation of the independent Health Insurance Authority regarding increased credits payable to insurers, necessary to maintain a stable and sustainable health insurance market, and the level of stamp duty required to fund them. This is the way in which we ensure that everyone pays the same for their particular plan, regardless of age, health status or gender. “

“It is important to note that increasing the stamp duty levies does not increase costs across the market. All money raised is paid back to insurers in the form of credits. Increasing the credits and stamp duties under the scheme is needed to continue to share costs across the market. The amount of any increase or decrease individual insurers pass on to consumers is a commercial decision for each of them. I do not accept the argument that blanket higher premiums should necessarily arise from making these recommended changes.”

Insurer Laya said it would be reviewing and assessing the Government move.

The country’s largest insurer, VHI, which has significant number of older subscribers, welcomed the initiative.

“This represents another step in the right direction and will help keep health insurance affordable for older and sicker people . Today’s announcement has increased the support required for older customers but more needs to be done to support sicker customers by strengthening the health-status aspect of the scheme,” it said.

“The Irish private health-insurance market is community rated – this means that everyone is charged the same price for the same health insurance product irrespective of their age or how sick they are. For community rating to operate, an effective risk-equalisation scheme is essential. Community-rated health insurance markets the world over are supported by very robust risk-sharing systems.”

The Department of Health said the new legislation also sought to clarify when an insurer could withdraw a product from the market. It said there were currently 352 health insurance products on the market.

“The large number of products, many of which offer similar benefits at different prices, makes it difficult for people to compare products and get the best deal.”