New hike by Reilly hits families for €130
Families are facing yet another rise in the cost of their health insurance thanks to a new hike imposed by Health Minister James Reilly.
The increase will amount to €130 for the average family and will affect the majority of the two million people who have medical cover.
The latest financial blow comes just weeks after Budget changes hit tax relief for almost all private health policies.
The minister yesterday announced an increase in the levy imposed on all policies to ensure older people don't have to pay more for health insurance than young people with the same level of cover.
Embattled families are now struggling to find the funds to keep up their health insurance premiums, with the double whammy expected to put an extra €330 on the annual cost for two adults and two children.
The so-called risk equalisation levy is paid directly by the insurers, but experts said that the latest hike was sure to be passed on to customers by the four firms in Ireland.
The levy on each policy where there is access to a private hospital – which is 80pc of policies – will rise by €49 per adult and €15 per child.
No change is planned in the levy imposed on policies for those who have very basic cover.
The total levy on an individual policy has now risen by 14pc to a sizeable €399. A child with a policy that covers treatment in a private hospital will see the levy on their policy rise from €120 a year to €135.
Health insurer Laya admitted that the increased levy will affect "almost all our members, and families in particular will be the hardest hit".
A spokesman said: "The levy is currently costing Laya Healthcare €60m in 2013 alone, which is €14m more than in 2012. We are expecting today's announcement to further significantly impact on the cost of providing affordable healthcare."
It comes just weeks after changes in the Budget to the tax reliefs on health insurance policies meant annual rises of between €50 and up to €800 per policy.
This is because Finance Minister Michael Noonan restricted the tax relief that applies to health insurance policies to €200 per person.
These Budget changes mean that the cost to consumers of health policies have jumped by between 3pc and 20pc.
The combination of the higher levy and the Budget changes to the tax relief for all polices will mean an extra €330 in the annual cost of policies for a family of two adults and two children, according to GloHealth's Jim Dowdall.
The net price which subscribers have to pay for top-level plans will increase by about 20pc because of the government tax relief move alone.
This has seen the VHI's Healthplus Platinum (the former Plan E) rise by almost €800 per adult.
Even reasonably priced plans, like VHI's One Plus Plan, have risen by €40 because of the capping of tax reliefs.
And additional higher costs are set to be passed on to consumers as the Government is imposing €30m in extra charges on insurers for using public hospital beds.
Health insurance expert Dermot Goode said the four players – VHI, Laya, Aviva and GloHealth – had been planning hikes before the announcement on the higher levy.
"Have no doubt that this increase in the levies will be passed on by the health insurers," Mr Goode, of Healthinsurancesavings.ie, said.
He expects premiums to rise by 5pc almost immediately – to allow companies to capture the large numbers who renew their cover in January.
Another rise of between 10pc and 15pc is then likely in the first three months of next year to make up for the higher levies, he predicted. It comes after hikes averaging between 10pc and 20pc a year since 2008. Some health insurance policies have more than doubled in price, during a period when the economy has been taken a nosedive.
In the past five years more than 250,000 people have left the health insurance market. The majority of those are between the ages of 25 and 34.
"This latest rise in the levies and the rises already planned will push more young people out of the market," Mr Goode said.
He said that the VHI is expected to welcome the higher levy as it has the majority of older people, who make the most claims.
But if more people leave the health insurance market, it will mean the age profile of those left rises. This will have a knock-on effect on claims.
With more claims, premiums will have to keep increasing, Mr Goode said.
Mr Dowdall said the levy has now shot up by 250pc since it was introduced in 2009.
The Health Minister said the higher levies were necessary to protect community rating – a mechanism to ensure that everyone pays the same price if they have the same level of cover.
"I am determined to protect community-rated health insurance as a vital part of our health system. We need community rating now, and we will need it in the future as we move to universal health insurance," he said.
He was aware of the cost pressures on households, but he insisted it was necessary to subsidise health insurance for what he called vulnerable patients.