Brian Hayes (Dublin South West, Fine Gael) | Oireachtas source

Amendment No. 15, tabled by Deputy Broughan, opposes the section. Amendment No. 16, as tabled by Deputy Naughten, opposes the section with the exception of the amendments to this section which we introduced on Committee Stage. Amendments Nos. 17 and 18, tabled by Deputy Boyd Barrett, seek to increase the ceilings for qualification for tax relief in respect of private medical insurance premiums, specifically an increase in the adult ceiling from €1,000 to €1,500 and in the child ceiling from €500 to €750. Amendment No. 19, tabled by Deputy Michael McGrath, seeks to ensure ceilings are increased annually in line with medical inflation as measured by the consumer price index published by the Central Statistics Office.

On amendments Nos. 15 and 16, the cost of income tax relief in respect of medical insurance has increased significantly in recent years. These costs were estimated at €404 million in 2011, €448 million in 2012 and €500 million in 2013. Despite the increasing cost of the relief, the numbers insured are estimated to have decreased by approximately 170,000 over the same period while, at the same time, the level of medical cover has decreased on some policies. Against this background, the increase in costs is unsustainable. In addition, if the relief were to remain unchanged and the trend were to continue, we could be facing a tax liability of approximately €1 billion by 2020. Anyone who is being logical must ask whether that is sustainable.

The tax system is supporting those who can afford private medical insurance to the tune of €500 million per annum. Effectively, that means those taxpayers who could never afford private health insurance, or who have had to give up their policies due to personal circumstances, are providing financial support via the tax system to those individuals who can afford such insurance.

The cap on the amount of the premium for which tax relief will be provided will restrict the exposure of the Exchequer in respect of more expensive insurance policies while not affecting individuals with insurance policies that provide more standard levels of cover.

If amendments Nos. 17 and 18, tabled by Deputy Boyd Barrett, were to be accepted, the Revenue Commissioners estimate they would reduce the expected full-year yield of €127 million to €61 million. In other words, the expected yield would be more than halved. The maximum gain from these amendments to an adult individual would be €100 per annum, or roughly €8 per month.

The Commission on Taxation acknowledged in 2009 that medical insurance is expensive and that tax relief plays a role in attracting and retaining individuals in the medical insurance system. However, it also stated that there is a sizeable deadweight element to this relief, as many individuals would pay these premiums in the absence of the income tax relief. On that basis, the commission recommended that the relief should be continued, but on a more limited basis. The Government is satisfied that the introduction of the new ceilings will achieve such an outcome.

The Government cannot accept amendment No. 19 as it seeks to impose indexation on the qualifying ceilings for tax relief in respect of medical insurance premiums. Such a proposal would not act to curtail the price increases imposed by insurers and would merely restart the process of increasing the cost to the Exchequer of this relief. The Government believes the new ceilings are reasonable and justifiable, given that the Revenue Commissioners has estimated that 47% of policyholders will be unaffected, and of the 53% of policyholders that will be affected, many will only be affected marginally. These figures are very different from the more bloated comments the industry makes, which people seem to accept without any question. It is envisaged that the new ceilings will ensure continuing support via the tax system for those who purchase medical insurance policies, while reducing Exchequer exposure to more expensive policies. In addition, individuals can of course opt for less expensive policies and therefore avoid the impact of this measure entirely.

The medical insurance companies are continuing to post significant profits. However, despite these profits, insurers continue to increase the prices they charge to consumers. Both Aviva and Laya have indicated that they will increase premiums by approximately 5% from the start of next year. Against this background, customers must take their financial affairs into their own hands. The peak renewal period will occur this month. Accordingly, I urge consumers to shop around before renewing their policies. The principal insurers continue to generate significant profits and, therefore, could be more active in reducing any increases in premiums for their customers. For the reasons outlined above, I cannot accept these amendments.

Deputies Broughan and Shortall mentioned the Minister’s comment about gold-plated policies, which is a selective quotation made for people's own political reasons. I will repeat what the Minister for Finance actually said in his Budget Statement:

This will restrict the exposure of the Exchequer on premiums paid for gold-plated medical insurance policies, while not affecting the majority of individuals who avail of more standard levels of medical cover[.]

This is the important bit that everyone ignores for the purpose of their own agenda. The rationale for this, which Deputy Shortall asked me to explain, was based on the assessment given by the Revenue Commissioners of the level of relief drawn down by individuals. That information, which dates back to 2002, shows that 47% of policyholders will be unaffected. Of the 53% of policyholders that will be affected, many will be affected only marginally. The Minister’s comment on gold-plated policies, which has been deliberately twisted and turned for all sorts of agendas, must be read in its entirety.

He said "while not affecting the majority of individuals who avail of more standard levels of medical cover". That is the statement he made on budget day, and if people choose to play politics with that for their own ends, then that is a matter for them.

Deputy McGrath spoke about inelasticity and mentioned the issue of families and individuals not retaining their medical insurance. People have a tendency to stay with one insurer. It is true that since the crash we have seen a pretty significant group of people not continuing with medical insurance policies. As I said in my initial reply, over a four-year period the level of increase in the medical insurance CPI was in excess of 86%. I do not think we can compare general CPI across the economy with medical insurance, but there have been very significant rises in medical insurance over that period of time, and we must ask whether things can be done differently with regard to the unit costs involved. These are very profitable companies which continue to record quite substantial profits in their operations in this country. I do not think that people who cannot afford medical insurance and who do not obtain the benefits of it through the tax code should be continuously subsidising other people who can afford it and who still have it in spite of these very difficult times.

The risk equalisation system is designed to keep prices the same for all categories of consumer, regardless of age. It is difficult to see how greater tax relief could be provided to younger individuals without breaching the principles of risk equalisation.

This is a very significant relief, and it is important that it remains as it is. We believe the decision we have taken is broadly in line with the recommendation that came from the 2009 report of the Commission on Taxation. If we did not take this action, we could have faced a much greater exposure because the level of tax forgone over the course of the last three years has exponentially increased from €400 million to nearly half a billion euro. The great majority of people will be unaffected by the action that we have proposed, and even those that are affected will only be affected marginally. That is backed up by the evidence of the Revenue Commissioners.

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