Brian Turner: Pushing up insurance costs ignores 'do no harm' mantra
The Budget created many headlines in the health area. However, two items that have not generated as much publicity relate to the health insurance market, both of which will increase people's premiums.
The first is the charging of insurers for the use of all beds in public hospitals. Up to now, insurers have paid for the use of private beds in public hospitals, but a 2009 report from the Comptroller and Auditor General suggested that around half of private patients in public hospitals were in public or non-designated beds.
Therefore, while their consultants were being paid for treating private patients, the hospitals were not getting paid for accommodating those same private patients.
In Budget 2012, it was proposed to remove this state subsidy of private patients and begin charging insurers for the use of public beds by their members. This is in addition to increases in recent years in private bed charges in public hospitals in a bid by successive governments to move towards charging the full economic cost of these beds.
However, the charging for public beds was postponed from 2012 to 2013, and now to 2014. Yesterday's announcement anticipates raising €30m from this measure next year.
The second measure is a capping of private health insurance premiums subject to tax relief at €1,000 per adult and €500 per child. Currently, tax relief (at the standard rate of 20pc) is given at source on health insurance premiums, irrespective of the premium paid. Therefore, if someone is paying, say, €1,600 for a policy, the gross premium would be €2,000, the tax relief is deducted at source (hence the person is charged €1,600) and the insurer claims back the €400 tax relief from the Revenue Commissioners.
When he announced this measure, Finance Minister Michael Noonan said that it was aimed at those with "gold-plated" policies, "while not affecting the majority of individuals who avail of more standard levels of medical cover".
However, the vast majority of health insurance consumers – even at the standard levels of cover – will be affected. Any adult whose premium (net of tax relief) is more than €800 and any child whose net premium is more than €400 will see those premiums increase as a result of this move.
For example, the current premiums for Vhi Healthcare's Parents and Kids plan are €1,291.25 for an adult and €279 for a child (for the first three children). Although the child premiums will be unaffected by the tax relief cap, the adult premium will increase by €122.81. Therefore, a family of two adults and two children on this plan will face an increase in premiums of €245.63.
A similar family on Laya Healthcare's Essential Plus No Excess scheme would face an increase of €497.26, with both adult and child premiums increasing.
Although the moves announced in the Budget are well-intentioned and designed to reduce inequities in the Irish health system, they will lead to additional premium increases and further discontinuation of health insurance at a time when the market is already contracting and premium inflation is already in double-digits.
In the context of the Government's proposal to introduce universal health insurance in a second term, a stable voluntary health insurance market would be desirable, if not essential. Perhaps the relevant ministers need to take heed of the medics' mantra: first, do no harm.
Brian Turner is a lecturer in the Health Group, School of Economics, UCC.