Thursday, 22 March 2012
Finance Bill 2012 (Certified Money Bill): Committee and Remaining Stages
Michael Noonan (Minister, Department of Finance; Limerick City, Fine Gael)
I will deal first with the recommendations at face value even though I gather from Senator Barrett’s remarks that they have been tabled for the purpose of debate on wider issues.
Recommendation No. 21 would reduce the health insurance levy payable by health insurers in respect of health insurance policies for individuals aged 60 and over from €285 to €95. I presume the intention is to support community rating which, in principle, provides that everybody is charged the same premium for a particular health insurance plan, irrespective of age, gender and the current or likely future state of their health. This is also the intention behind the interim scheme of age-related tax credits and community rating levy, otherwise known as the tax-based health insurance risk equalisation scheme. This is made up of the health insurance levy, provided for in section 105 of this Bill, and the age-related income tax credits, provided for in section 6 of the Bill, which reduce the premium that older persons would otherwise have to pay. The rates of income tax credits for 2012, which range from €600 to €2,700, were set so that the tax credit for each age group over the age of 60 would be the greater of the amount necessary to compensate for 65% of the higher claims cost of the age group, based on market claims data, and the amount necessary so that the net claims cost for the age group does not exceed 150% of the market average claims cost, again based on market data. In particular, the application of this 150% criterion brings the average compensation levels under the scheme up to 75% approximately for 2012 while providing substantially increased support for those over 70.
The current interim tax-based scheme of risk equalisation will be replaced from 2013 with a permanent scheme under which the levy will continue to be collected as a stamp duty but the income tax credits will be replaced with “health credits”. When fully implemented, the new scheme will permit the credits to be targeted more closely to reflect the level of risk attaching to particular health conditions. It would not be possible to provide for all the possible health risk combinations under an income tax credit system. The interim scheme is designed to be Exchequer-neutral, in that the revenue from the levy pays for the income tax credits. I set the rates of the levy and credits based on a recommendation from the Minister for Health. The Minister in turn relies on projections from the Health Insurance Authority, and the authority projects the likely size of the health insurance market in the coming year, the likely additional cost of providing health insurance to older persons, and accordingly proposes appropriate rates of tax credits and levy charges.
The Minister for Health had expressed concern that insurers were increasingly tailoring their insurance plans towards younger, healthier customers and therefore making it harder for older customers to afford the type of private health insurance cover they require to meet their needs. It was for these reasons that he proposed the additional support for community rating in the form of higher levels of tax credit in 2012 for insured persons aged 60 years and over.
Senator Barrett’s recommendation would clearly reduce the yield from the levy, in that the levy in respect of each person aged 60 and over would be reduced by €190. The HIA has projected that up to 375,000 persons aged 60 years and over will have health insurance in 2012. This means that the cost of his recommendation could be in the region of €71 million. The Exchequer-neutral intention behind the scheme could only be restored by either increasing the levy on people aged under 60 or by reducing the tax credits for the over 60s. The levy rates for 2012 are already significantly higher than the rates for 2011, with the levy payable by health insurers in respect of a family of two adults and two children under 18 years rising from €542 in 2011 to €740 in 2012, an increase of 40%. I do not propose to further increase the levy rates for people under 60. Equally, I do not propose to reduce the tax credits, as this would have the effect of reducing the compensation for the additional cost of cover for those aged 60 and over, which I assume is contrary to the Senator’s intent.
Senator Barrett’s second recommendation is related to the first recommendation and would provide that a health insurance company would have to provide a statement showing the number of persons aged 60 years and over with health insurance on the books in an accounting period. The companies currently provide such information for individuals aged under 18 years and those aged 18 years and over. This recommendation is consequential on the first recommendation. I therefore do not propose to accept the recommendations.
On the general issue raised by Senators Bradford and Barrett, the policy is driven by the Department of Health rather than the Department of Finance. Consequent to a Government decision we are incorporating measures proposed by the Minister for Health in the Finance Bill. This is apparently the last year in which the Department of Health will approach the matter in this manner, and it does provide an opportunity to address some of the issues that Senators Barrett and Bradford have raised. The manner in which health insurance operates in this country is not satisfactory and could be improved, so this gives us an opportunity to review the position.
I will personally bring the views of both Senators to the attention of the Minister for Health.