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Saturday 20 September 2014

Families face stealth tax for students' health cover

Extra €140 a year for those on basic plan

Charlie Weston Personal Finance Editor

Published 19/10/2013 | 05:00

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FAMILIES who pay for the health insurance of students are set to be hit with another Budget stealth tax change that could cost an extra €140 a year for those on a basic plan.

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It is estimated that up to 80,000 students have their health insurance paid for by their parents.

Those families are set to be stung by Budget moves to restrict tax relief on private medical policies.

The Department of Finance is to limit the tax relief for students to the same level as children.

This is despite the fact that most health insurers charge students a full adult rate when they hit 22, even if they are fully dependent on their parents.

This means that parents will have to pay an adult rate for students' health insurance but only get half the tax relief that adults now get since the Budget.

From Tuesday night, the amount of tax relief has been limited to €200 for an adult, but a child will get just €100 in tax relief.

Up to now, tax relief at 20pc was given to the entire cost of a health insurance policy.

But now. the first €1,000 only of an adult policy and the first €500 only of a child policy will attract tax relief at 20pc.

Insurance expert Dermot Goode of HealthInsuranceSavings.ie said health insurance companies had been told by Department of Finance officials that students would get the same tax relief as children.

CLARIFIED

The four health insurers – VHI, Laya, Aviva and Glo – met Department of Finance officials yesterday seeking changes.

A spokesman for the Department of Finance said the student issue would be clarified in the Finance Bill, the legislation that gives effect to the Budget changes.

There are around 170,000 full-time undergraduate and post-graduate students. It is estimated that up to 80,000 of these have health cover.

Up to the start of this week, students between the ages of 18 and 23 got a full 20pc in tax relief on their health policy.

This would mean that a 22-year-old could get a basic plan, such as VHI's One Plus plan, at a net cost of €957.

But since the Budget they will end up paying an extra €140, as the cost of that plan jumps to €1,096.

Mr Goode revealed that most insurers start charging the full adult rate for any student over the age of 21.

It comes as nine out of 10 polices are to see prices rises because of the Budget move.

The Department of Finance said 577,000 health insurance policy holders would be impacted, but health insurers said this translated into 1.4 million people.

The state regulator, the Health Insurance Authority, confirmed that 1.4 million people would be affected by the change to tax reliefs on policies.

Insurance Ireland, which represents the four health insurers, insisted that average adult premiums would cost an extra €100 a year for those renewing from now on.

A spokesman for Finance Minister Michael Noonan said consumers had the option to switch to cheaper policies.

He said the cost to the State for health insurance tax reliefs would be €500m this year. The limiting of the relief would save €94m next year, and €127m in a full year.

It was the second most expensive tax relief after pensions, he said.

Irish Independent

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