Budget to affect 53% of health policies

Many only ‘affected marginally’ by health insurance tax relief cap, says department

HARRY McGEE
More than half the people with health insurance policies will be hit by the Government's controversial decision to reduce tax relief on private health insurance subscriptions.

In a factfile published on its website yesterday, the Department of Finance said that some 577,000 of the approximately 1.09 million health insurance policyholders would be affected by the new measure, which caps the 20 per cent tax relief at €1,000. The change will hit 53 per cent of all policies.

The disclosure seems to contradict Minister for Finance Michael Noonan’s budget speech, that only those with “gold-plated” policies would feel the brunt of the changes.

Yesterday’s factsheet acknowledged that the majority of policyholders hold policies worth more than €1,000 and would lose out as a result of the changes.

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The department argued that many people would only be “affected marginally” by the decision to place a cap of €1,000 on the level of premium, which attracted tax relief for adults and €500 for children.

Up to now tax relief of 20 per cent was available for the full cost of health insurance policies. The department said a health insurance subscriber who renewed a policy costing €1,020 would see a €4 increase in their premium” .


'Big lie'
Fianna Fáil yesterday contended that Mr Noonan's reference to only gold-plated policies being affected was one of the "big lies of the budget".

Fianna Fáil health spokesman Billy Kelleher said the claim disintegrated when Richard Bruton admitted it would have a negative impact on the majority of policies.

“The full scale of the financial impact on hardworking families is only now becoming clear. The glaring contradiction between this decision and the desire to introduce universal health insurance is evidence of a lack of joined-up thinking. Health policy is in chaos,” he said.

Sinn Féin spokesman Caoimhghín Ó Caoláin said the fact that the majority of policy holders would lose some tax relief showed the budgetary figures were falling apart. “The gross mismanagement of health just gets worse,” he said.


Progressive
The Department of Finance maintained that individuals could opt for less expensive health insurance policies if they wanted to avoid the impact of the new measures.

The department argued that the move to reduce tax relief was a progressive one.

It said the impact of the cap was “more prevalent the higher the level of the premium, such that those able to afford higher private health insurance costs will, if they wish to continue with their current policies, bear the larger proportion of the impact”.

The Department of Finance maintained that the provision of tax relief on health insurance subscriptions would cost €500 million this year. It said it represented the second most costly tax expenditure for the exchequer after mortgage interest relief.

Private hospitals have warned that the Government's move to reduce the tax relief could jeopardise jobs in the sector. Catherine Whelan, chief executive of the Independent Hospital Association of Ireland, said it saw the measure as another Government initiative that could destabilise the private health insurance market.

She said the private hospital sector was concerned even more people would drop their cover. She said 170,000 people had already dropped their health insurance since the start of the economic downturn. There was a concern that this could jeopardise the private hospital sector, which currently employs about 8,400 people, she said.

Martin Wall

Martin Wall

Martin Wall is Washington Correspondent of The Irish Times. He was previously industry correspondent

Harry McGee

Harry McGee

Harry McGee is a Political Correspondent with The Irish Times