The European Commission today approved the Government’s health insurance levy which was introduced on January 1st to pay for the cost of insuring older people.
Health insurance companies are now obliged to pay €160 for each adult they have on their books and €53 for a child. The levy is designed to pay for a €300 million tax-relief scheme to subsidise health insurance costs for subscribers aged 50 and over.
Two of the three health insurance companies, VHI and Quinn Healthcare, increased the cost of their premiums in January to meet the cost of the levy.
The Government introduced the levy after the Supreme Court decision last July that struck down the risk-equalisation scheme that compensated insurers with a greater number of older people on their books.
In a statement today, the European Commission said it had approved the levy after the Government amended it to ensure no insurer would be overcompensated.
“The scheme decreases the incentive of insurers to avoid high risk older lives and cherry-pick low risk younger lives; furthermore it compensates insurers with a worse-than-average risk profile. Due to its worse risk profile the state-owned VHI will be a net beneficiary of the scheme, while its competitors will be net contributors,” it said.
The VHI and the Department of Health welcomed the decision.
VHI chief executive Jimmy Tolan said it recognised the need for a mechanism to support older customers in a community rated market.
“This is a necessary and important first step to maintaining a community rated market. Vhi Healthcare currently insures over 95 per cent of health customers over the age of 70,” he said.
However Hibernian Health described the decision as “anti-competitive” and “anti-consumer.”
Managing director Jim Dowdall said the levy was an “unnecessary tax designed to subsidise the VHI.”
“We are seeking ways of challenging this protectionist levy,” he added.