Saturday 18 November 2017

Charlie Weston: This mad health insurance proposal will see those who pay for everything being forced to shell out more

Roisin Shortall Photo: Niall Carson/PA Wire
Roisin Shortall Photo: Niall Carson/PA Wire
Charlie Weston

Charlie Weston

The people who pay for everything are expected to pay even more for everything. It is hard to escape that conclusion when considering the proposal from an influential Oireachtas Committee that the tax reliefs for health insurance should be abolished.

More than two million people would be impacted by such a move, the very people who have chosen not to make themselves a burden on the health service by arranging their own private cover.

The hardest hit would be older people, who desperately need top-quality cover at a time in their life when they require medical interventions regularly.

The new Oireachtas Committee on the Future of Healthcare, under the chairmanship of Róisín Shortall, recommends that public money should only be spent in the public interest for public good.

But that is to entirely miss the point.

Families pay around €2,500 a year for private health insurance precisely to keep themselves away from the public system, as they do not trust it to treat them on time and fear they will end up in an overcrowded ward.

The Oireachtas report is full of good and sensible suggestions, but suggesting the removal of tax reliefs for health insurance is barmy.

If it is implemented it will cost the average family of two adults and two children around €600 a year.

That is the current value of the relief to a family after the tax measure was eviscerated by Finance Minister Michael Noonan in Budget 2014.

Now the Oireachtas committee proposes it be removed altogether.

The committee argues the relief is an effective subsidy to private companies offering healthcare for those with insurance. Nothing could be further from the truth, and it is a real pity such a half-cocked idea has emerged from the committee.

The tax break is not a financial prop to insurers. It is a subsidy to over-burdened taxpayers, the people who pay for everything, to help them defray the huge cost of health cover and keep them away from barely functioning public hospitals.

These are the people bearing the tax burden, contributing the extra €7bn a year in income taxes and universal social charge contributions since the downturn.

The health insurance tax relief works in the background, and you never see it. Many people who buy health insurance will not even be aware they have this tax relief.

It is officially a tax credit - and a tax credit is an amount of money you do not have to pay.

The health insurance tax credit is generally granted directly by the insurance company. If you buy health insurance, the cost of your premium will be reduced by the amount of the tax credit.

This is why you may not even realise you get this tax benefit.

It is known as a tax relief at source (TRS), something similar to mortgage interest tax relief.

What the tax relief means is that the net cost of a health policy is reduced by 20pc on €1,000 per adult. This means you pay €800 for a €1,000 policy, and the Revenue Commissioners pay the other €200 to the insurance company on your behalf. For a family buying cover at a gross cost of €3,000, the tax relief means the net cost is reduced to €2,400.

If your employer pays the medical insurance premiums on behalf of an employee, it is treated as a benefit in kind and tax is due on the cost of the premium.

But employees whose cover is paid for by their employer can claim the tax relief at source on the health insurance premium by making a claim directly to Revenue.

Proposals to scrap the tax relief come in the same month that the levy on private health policies jumped by €40 per adult to €443 per policy.

And it comes soon after this newspaper exposed the extent of double charging of private patients in public hospitals.

This double charging is where people with health insurance are having their insurer billed for their stay in a public hospital even though they are only receiving public hospital treatment, which they paid for in taxes. They may only be on a trolley in a corridor, but if they sign the waiver form that is being pushed on them relentlessly by public hospital administrators the insurer will have to pay €800 a night, rather than €80.

This cost is having a knock-on impact on premium rates.

All of this comes at a time when we have already seen double-digit premium hikes this year. Laya and Irish Life (what was Aviva and GloHealth) are blaming the double charging for this.

VHI has increased its premiums already this year, but it has shied away from complaining about the double charging. That is hardly surprising, as it is State owned and eager not to upset its main shareholder.

Those seeking quality healthcare are reluctant to rely on the public system with its long waiting lists and patchy standards of treatment.

The committee's proposal would penalise those people providing for themselves.

Removing the health cover tax relief is similar to the penalty on the prudent that was the levy on private pensions, and high savings tax.

It will also mean many of the 100,000 younger members who took out health policies in the past two years, to avoid late-entry levies, will drop out of the system.

Pushing more costs on middle-income and retired people is one sure way to put even more pressure on a barely functioning public health system.

The people who pay for everything will have to pay again.

It's crackers.

Irish Independent

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