THE GOVERNMENT has significantly increased the annual levy imposed on health insurance companies for everyone covered by private insurance.
The Department of Health has increased the levy from €185 to €205 for adults and from €55 to €66 for children with effect from January.
Revenue from the levy is used to pay for a tax relief scheme, costing more than €300 million, which is aimed at subsidising health insurance costs for people over the age of 50. The scheme was introduced as an interim measure after the Supreme Court struck down a controversial risk equalisation scheme in the sector.
Critics of the scheme have argued that it has unnecessarily increased the cost of private health insurance.
The country’s largest health insurer, the VHI – which has the largest number of older subscribers and is the main beneficiary of the current arrangements – has argued that the measures do not go far enough.
VHI chief executive Jimmy Tolan said the recently announced increases of 21 per cent for private beds within public hospitals and the amendments to the levy/tax relief scheme had only reduced the prospective annual losses on the company’s older customers from €170 million to €147 million.
“Currently VHI Healthcare is facing average losses of €850 on its 129,000 customers over the age of 70 and VHI will not be able to fund this level of losses in 2011.”
VHI said yesterday that to fund this level of tax reliefs it believes are necessary to sustain the concept of community rating – where all subscribers pay the same for identical products regardless of age – the proposed annual levy would have to be increased from €205 per adult customer to €295 per adult customer
Quinn-healthcare strongly criticised the increase in the levy as completely unwarranted and said it would make health insurance even more unaffordable for many people who are already struggling financially.
Quinn-healthcare general manager Donal Clancy said: “Effectively, this is a stealth tax which is used to support the loss making and unregulated VHI”.
Aviva said that if the levy was not in place it would reduce the cost of health insurance by up to 30 per cent on typical plans.
Vanessa Hartley, customer management and marketing director of Aviva said: “Aviva has committed to not passing on this increase to its health insurance customers who buy or renew their policy in January 2011, however Aviva will need to review the situation with respect to levy later in the year”.
