FAMILIES will be hit with hikes of up to €360 in the annual cost of health insurance after a move in the Budget to change the tax treatment of premiums.
The health insurance market has been thrown into chaos by Finance Minister Michael Noonan's surprise announcement.
And VHI Healthcare, the largest insurer in the market, was forced to shut down its website and was unable to provide customers with prices for its plans.
The move to restrict the tax relief on health insurance policies will mean hikes of between 4pc and 20pc for customers who have already endured a series of sharp price rises.
It will mean at least an extra €150 a year on the health policies of a family of two adults and two children, with some polices now set to go up by €360 a year.
Health insurers are supposed by law to give 30 days' notice before changing the price and
benefits of plans, but the sudden implementation of the tax change has forced a mass re-pricing of plans.
They warned that older and sicker people would be affected by the Budget move to restrict tax reliefs on health insurance policies.
Mr Noonan has insisted that his move to cap the tax relief for health insurance policies will only affect 'gold-plated' plans.
But this was disputed by insurance experts, who insisted that the change would affect nine out of 10 plans.
The Budget measure has a serious financial impact, because up to earlier this week families and individuals effectively got tax relief at source of 20pc off the cost of a health insurance policy. This meant that an adult's premiums of €1,200 would have been sold at a net cost of €960.
But Mr Noonan has decided to restrict the effective 20pc tax relief to the first €1,000 of an adult's policy.
This will mean that a policy of €1,500, which was being sold at a net cost of €1,200 earlier this week, now costs €1,300.
The new restriction came in at midnight on the night after the Budget, but this meant that most polices now have to be re-priced upwards.
Health insurance is already being jettisoned by tens of thousands of families who can no longer afford it. This forces them back into the public health system, so increasing the financial burden on the State.
Close to 240,000 people have given up health insurance since the downturn in 2008, after increases of up to 150pc in the price of family policies.
The Government is also heaping higher charges on insurers for using private beds in public hospitals. These costs are likely to be passed on to consumers
The body that represents the four insurers, Insurance Ireland, said Mr Noonan's most recent change in the tax reliefs would affect 90pc of policies.
And it utterly dismissed his claim that only 'gold-plated' plans would be affected.
Mr Noonan had said: "In relation to medical insurance relief, I have decided to cap the amount of premium on which tax relief will be available to €1,000 per adult and €500 per child.
"This will restrict the exposure of the Exchequer in relation to premiums paid for 'gold-plated' medical insurance policies, while not affecting the majority of individuals who avail of more standard levels of medical cover."
The Finance Minister said a family of two adults and four children would still receive tax relief on premiums of up to €4,000 a year. The move is expected to bring in €127m.
But Michael Horan of Insurance Ireland said the average premium was now €1,048 for both adults and children. The average premium for adults alone was €1,500.
"Because of this announcement, customers will end up paying more. Effectively, the Government has introduced an extra tax on those who have struggled to keep their health insurance," Mr Horan said, adding that VHI, Laya, Aviva and Glo were not increasing premiums, but the re-pricing was due to a government move.
Dermot Goode, of Healthinsurancesavings.ie, said that people who had arranged to take out a new plan, or were switching, and had agreed a price before Tuesday would now be sent a demand for more money.
"This is one of the most disorganised and poorly thought- out changes I have ever seen," Mr Goode said as he predicted price rises of between 4pc and 20pc.
Mr Goode said the VHI's Healthplus Extra plan would rise in price by €259 a year for an adult, Aviva's Level 2 Hospital would rise by €137 and Laya's Essential Plus with Excess would rise by €166 to €1,631.
VHI's most expensive plan, HealthPlus Platinum (the old Plan E), will go up by €784 a year for an adult to €4,720. This is a 20pc rise.