People with health insurance are likely to be hit with further hikes after the Government decided to increase the levy on policies by 40 per cent with immediate effect.
The surprise increase will mean a family of two adults and two children could pay as much as €220 more for health cover annually if insurance companies pass on the increases.
The blow for consumers come in the wake of claims made by the Minister for Health James Reilly before Christmas that health insurance companies would not have to impose substantial price hikes if they managed their business more effectively.
The State provides age-related tax credits for older people to help meet the expected higher cost of health insurance for this group in order to ensure they pay the same amount net of these tax credits for their health insurance as younger adults pay. These tax credits are funded by a levy paid by health insurers.
The increase will see the levy go from €205 to €285 for an adult and from €66 to €95 for a child.
Dr Reilly said the aim of the move was to make insurance more affordable for older people. He insisted the measures had been designed to result in no overall increase of premiums paid in the market and to spread the risk more evenly between the healthy and the less healthy, the old and the young.
“Health insurance is becoming harder to afford for older people as insurers increasingly tailor their insurance plans towards younger, healthier customers.” Dr Reilly said. “The Government is strongly committed to protecting community rating, whereby older and less healthy customers should pay the same amount for the same cover as younger and healthier people. The changes I am announcing will provide further necessary support to community rating.
He said the health insurance market had become increasingly segmented over recent years with insurers offering tailored packages to younger people that are designed to be unattractive to older people, while at the same time increasing the price of plans they offer to meet the needs of older people. "I am very unhappy about this trend, and I have raised the issue directly with the insurers. This measure I am announcing today is designed to support the protection of older, less healthy people," he said.
The Minister reiterated his claim that health insurers had the scope to reduce their costs significantly and said he was “happy to work with them to identify how this can be done”.
He claimed that costs in recent times have been allowed to increase unnecessarily, adding: "I want to see these brought back to more sustainable levels in order to keep health insurance affordable for as many people as possible.”
The news is just the latest in a long line of price increases that private health insurance policy holders have been asked to absorb.
At the end of November, Quinn Healthcare increase its premiums by an average of 12 per cent, although some policies went up by in excess of 20 per cent.
The company, which has more than 400,000 subscribers, blamed the health insurance levy, which it said had already cost it more than €100 since it was introduced in 2009.
In November the VHI announced a 2 per cent price rise earlier this month on top of price increases of up to 45 per cent announced it announced this time last year.
Aviva, the third-largest private health insurance provider in the market, increased its prices by 14 per cent in March and by a further 9 per cent in August. It then announced a 15 per cent increase effective from this year.