Families subsidise 'gold-plated' health plans with levies
Published 11/09/2015 | 02:30
Families with health insurance are subsidising those on "gold-plated" plans.
The levy is a set amount, which means it accounts for a tiny proportion of the cost of a high-end plan - but up to 60pc of an ordinary family's cover.
Changing how the levy on health insurance policies is operated could save families more than €300 a year.
The levy is currently €399 on an adult plan and is used to compensate the VHI for the fact it has more older customers.
The levy is the same for anyone with a plan that gives them access to private health facilities, whether the premium is €1,000 or €5,000 a year.
A lower levy applies to plans that mainly cover treatment in public hospitals.
GloHealth has now appealed to the Department of Health to make the levy a percentage of the cost of a premium, rather than a flat rate. It claims the current flat-rate levy means ordinary families are subsidising those on "gold-plated" plans.
In a submission to Health Minister Leo Varadkar, GloHealth claimed the way the levy operates has driven some 300,000 young and healthy people out of the market.
"The levy has failed for a variety of reasons, not least because it has been implemented as a flat rate levy rather than a percentage of premium - meaning those on the cheaper, more affordable plans are paying substantially more than those who take out more expensive plans," it said.
The insurer says a levy of €399 on a health plan that costs an adult €600 a year is unfair.
It means the levy makes up 66pc of the cost of the plan.
But a person on a high-end plan that costs €6,300 a year is also paying €399 in the levy.
This means that the levy makes up just 6pc of the premium.
The levy was put in place to preserve community rating - the concept where everyone pays the same for the same level of cover, irrespective of their age and health status.
Moving to a system where the levy is a percentage would spread it more evenly, GloHealth's Jim Dowdall told the department.
It would raise the same amount of money, he added.
"The new levy model should, therefore, make health insurance more affordable both for those on lower-based plans and for those on the average premium in the market."
The Department of Health said it keeps all options under review.