New figures provided to Fianna Fáil Finance spokesperson Michael McGrath indicate that the restriction of tax relief on private medical insurance introduced in Budget 2014 yielded €151 million in the first year in which it was in operation. This is substantially more than the €94 million yield for 2014 which was predicted by Minister for Finance Michael Noonan.
Deputy McGrath commented, “At the time the measure was announced, the government tried to claim that restricting tax relief to the first €1,000 for adults and €500 for children would only impact “gold plated” health insurance policies. We can now see that this measure was in fact a massive financial hit for tens of thousands of ordinary taxpayers who provide for their families well-being by taking out medical insurance. Older people were especially hard hit by this change. In fact the financial loss to policyholders, as a result of this measure, was 60 per cent higher in 2014 than originally indicated in the budget documentation. Even basic policies, which provide far less cover than those referred to by the Minister, have seen their tax relief slashed. It is now clear that the government was completely disingenuous when it made the announcement in relation to medical insurance tax relief.
“The raid on private medical insurance policies was one of a series of very sneaky tax increases introduced by this government including the staggering €2.4 billion levy on private pensions, the abolition of the PRSI allowance for every worker and the massive increase in DIRT tax. The overriding concern at all times was what they thought they could get away with politically. Raiding people’s pension savings or deposit interest and slashing tax relief on private medical insurance were considered acceptable on the basis that the full extent of the damage from these policies would not be fully exposed for many years.
“The reduction in tax relief for medical insurance was another example of seriously flawed policy formulation. The government said that this change would affect “gold-plated” policies but predictions by industry experts at the time that up to 90% of all private health insurance products would be impacted have now been borne out.
“Customers have ended up paying more for their health insurance. Thousands of people have been driven out of the private health insurance market directly as a result of government policy despite their stated intention of creating a system of universal health insurance. This exodus has been halted in 2015 by the introduction of lifetime community rating. However this may only prove to be a short term reprieve given the announcement last year that the government has abandoned the idea of universal health insurance. After pursuing the policy for five years, this highlights once again the reality of a government that lacks any coherent strategy for delivery of improvements in health service.”