Warning of 15% increase in the cost of health cover

Health insurance customers have been warned to expect premium hikes of up to 15 per cent as a result of rule changes announced by Minister for Health James Reilly and budget reductions in tax relief on premiums.

Dr Reilly announced yesterday that the stamp duty on most health insurance products is to rise by 14 per cent from March.

An average family with two children will pay an extra €328 in premiums next year as a result of yesterday’s change and the budget cuts in tax relief, insurer GloHealth estimated.

The duty, which is used to fund credits to the various insurers according to the age profile of their customers, is being increased from €350 to €399 per adult with advanced cover, and €120 to €135 per child. The change will affect more than 80 per cent of customers who have advanced cover for private and public hospitals.

VHI to benefit most
The VHI will benefit most from the changes to credits because it has the highest proportion of older customers. The three privately owned insurers will be hardest hit because their customer base is younger.

Dr Reilly said he was reluctant to recommend increases in stamp duty, given the pressures many households face. “However, my priority is to direct support where it is most needed and these revised risk equalisation credits will subsidise health insurance for our most vulnerable patients,” he said.

GloHealth chief executive Jim Dowdall said: "It is farcical, bizarre and absurd that the Minister continually calls on health insurers to drive down costs when Government policies have been the overwhelming driver of rising premiums in recent years."

Risk equalisation is the system whereby companies with older customers with higher claims costs are compensated by rivals with a younger client case.

Inflationary effect
Dermot Goode of Cornmarket Healthcare Division said the changes announced by the Minister would have an inflationary effect even though the stamp duty was not levied on consumers, because insurers were likely to pass on the increases.

“Consumers are going to get clobbered. Between this and the cuts in tax relief announced in last month’s budget, it’s likely that premium increases of between 10 and 15 per cent are coming down the line,” he said.

Insurances companies are also under pressure to fund an extra €30 million a year being demanded by the Department of Health from next year in respect of the use by private patients of public beds in the public health system, he said.

Mr Goode estimated that the budget changes added up to €270 a year to the cost of the VHI's Plan B Options policy, and €170 to Plan B. Customers on "gold-plated" plans, as they were called by Minister for Finance Michael Noonan in his budget-day speech, will have to pay an extra €470-€780 a year.