THE HEALTH insurance levy, which was introduced by the Government last year to pay for the cost of insuring older people, has been increased by €25, it has emerged.
The levy, described by private health insurers as a ‘‘stealth tax”, goes up from €160 to €185 per adult subscriber from January 1st, the Department of Health has informed insurers. The amount each company must pay in respect of child subscribers rises from €53 to €55. The increase in the levy is not expected to lead to an immediate increase in health insurance premiums, but is likely to feed into the general upward pressure on costs for consumers. Even before the levy was increased, Quinn Healthcare announced a 15 per cent rise in premiums to take effect from this month.
Hibernian Aviva Health criticised the increase, saying it would force 2.3 million health insurance customers to pay higher premiums than necessary to subsidise the State-owned VHI. Hibernian said it would not increase its premiums to compensate for the increase in the levy but claimed it could cut premiums by up to 30 per cent if the levy were removed altogether.
A rise in the levy was signalled in December’s budget but the amount was not specified. Hibernian said it learned only on New Year’s Day, in a letter from the department, of the increase that was to take effect the following day.
The Government introduced the levy after the Supreme Court in 2008 struck down a risk equalisation scheme designed to compensate insurers with a greater number of older people on their books.
Under the levy scheme, health insurers are obliged to pay the levy for each subscriber on their books. The money goes into a €300 million tax-relief scheme to subsidise health insurance costs for subscribers aged 50 and over.
VHI, because it has the highest proportion of older subscribers, is a net beneficiary of the scheme while Hibernian and Quinn are net contributors. Last year, both Hibernian and Quinn increased their premiums to meet the cost of the levy when it was introduced in January 2009. The past 18 months has seen premiums rise by 20-30 per cent.
Hibernian chief executive Jim Dowdall said he was extremely disappointed that the department has decided not only to maintain but also to further increase the levy.
‘‘This levy is exchequer neutral and serves no purpose other than to provide additional finance to the VHI.”
He pointed out that the VHI had this month missed a fourth annual deadline to become regulated by the Financial Regulator.