Simon Harris (Wicklow, Fine Gael) | Oireachtas source

I thank the Deputy for the amendment which I did consider following our discussion on Second Stage. Since there has been a lot of misinformation in the public commentary on the linkage between stamp duty and affordability, although not from the Deputy, there is a point worth making in this regard.

It must be recognised that any changes to the operation of the scheme which result in lower stamp duty on some policies do not necessarily increase affordability for individual consumers. For example, last year, my predecessor reduced the stamp duty on non-advanced plans by €38 from €240 to €202 and no insurer announced price reductions on such plans as a result of this measure. While some of the insurance companies and their communications people are putting out information about this, it is important that they reflect on the reality that when my predecessor reduced the stamp duty on non-advanced plans, the benefit was not passed on to a single consumer. That is an important point in terms of how this has been described.

I acknowledge what the Deputy is trying to do and he is making an important point. I will elaborate on a few facts about how we arrive at this point annually. Each year, the HIA holds discussions with insurers before it makes a recommendation to the Minister about the credits and stamp duty rates under the risk equalisation scheme. In both 2016 and 2015, one of the insurers indicated a preference for switching to a percentage-based stamp duty. This view has been taken into account by the authority but it still has not recommended changing from the current system of fixed amounts of stamp duty. The stamp duty applied under the scheme is on a fixed amount basis for a number of reasons, which relate to both the practical administration of the scheme and the key objective of the scheme, which is to share costs in a fair way across the market to support community rating. An important feature of our risk equalisation scheme is that the total amount collected in stamp duty from insurers equals the total amount of credits paid to them. If the stamp duty collected was higher than the credits paid, the scheme would be inflationary for the market at least in the short term, and if the stamp duty collected was lower, temporary funding would be required from the Exchequer, which would impact on Government current expenditure.

The scheme is also based on fixed amounts of stamp duty with reduced rates for those with non-advanced products and for children. Taking into account market trends each year, the HIA is able to accurately predict the total cost of credits and the stamp duty rates required to fund them. Switching to stamp duties as a percentage of premium would pose a number of difficulties for the operation of the scheme. Insurers regularly increase and decrease the prices of their products and, therefore, there is no price control in the market. The health insurance Acts permit them to vary the premiums of health insurance plans once they provide at least 30 days notice to the HIA. With a percentage-based stamp duty, it would be more difficult to ensure the total amount of credits paid matched the total amount of stamp duty collected. The authority has calculated that the percentage-based stamp duty required to fund the credits proposed from 1 April 2017 would be 29% of the premium. This would mean that the stamp duty would be higher than €444, which is the proposed fixed amount for all advanced policies costing more than €1,531 and the stamp duty would be lower for all policies costing less than that. In the case of non-advanced policies, the percentage-based stamp duty would be higher for policies costing in excess of €765 and lower for policies under that price. However, changing from a fixed amount of stamp duty to a percentage-based stamp duty would affect the overall financial impact of the scheme. The authority must take into account the net impact of both stamp duty and credits when considering the support required for groups of people under the scheme. Older people, in general, require more support under the scheme because they have higher claims costs. That is at the core of the scheme. However, older people on average pay more for health insurance and, therefore, the authority's recommendation in respect of credits would have to take this into account. There could be an unintended consequence for older people were we to move on that.

I accept the bona fides of what the Deputy is trying to do. If it was useful for committee members to be briefed by the HIA and to further explore its views, I would be open to asking the authority to do any further body of work that the committee or individual members feel should be done. It might be useful to further explore this but there is no benefit to legislating for this. I have available to me the opportunity to ask the authority to conduct a review if members feel that is necessary. It would be worth further engaging with the HIA in this respect.