Pat Rabbitte (Dublin South West, Labour) | Oireachtas source

The resolution provides for the introduction of a limit in respect of the relievable amount of medical insurance premiums on which tax relief will be granted. The provision is effective in respect of policies entered into, or renewed, on or after 16 October 2013. The resolution provides that a maximum relievable amount of €1,000 per adult and €500 for each child covered by the policy will apply. Where the premium for a particular beneficiary under the policy is less than the relevant limit, relief will be restricted to the actual premium paid.

A child for the purposes of this particular provision includes a student over 18 years and under 23 years who is in full-time education. These ceilings are being introduced as the cost of the tax relief has increased significantly in recent years, from €404 million in 2011 to €448 million in 2012 and €500 million in 2013.

In the absence of the measures here today, the cost to the Exchequer could be expected to continue to grow as premiums increase further. Given the ongoing expenditure cuts to the health budget to meet overall expenditure targets, the continuing increase in the cost to the Exchequer of this particular relief cannot be sustained.

The Commission on Taxation in 2009 recommended that while tax relief for medical insurance premiums should be continued, it should be on a more limited basis. The commission did acknowledge that medical insurance is expensive, and that medical insurance relief plays a part in attracting and retaining individuals within the medical insurance system. However, it also considered the relief consisted of a large element of deadweight.

There are a wide variety of policies available in the market, offering different levels of cover at different premiums. The introduction of a maximum ceiling per person, which will qualify for tax relief, will impact on the most expensive of these policies and given that the pricing structure of such policies reflects superior levels of cover, it is not likely that the tax relief is a critical element in an individual’s decision to purchase one. In fact, the introduction of such an upper ceiling acts to retain tax relief for policies which offer good levels of cover, while limiting Exchequer exposure to policies with significant premiums. Therefore I am today introducing a limit on the amount of relief available for premiums. This is expected to yield €94 million in 2014 and €127 million in a full year.

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