Department of Health statement on the Private Health Insurance Levy
An article on private health insurance published recently incorrectly claims that “revenues collected under the private health insurance levy, used by the Government to prop up the ailing public health system…” This is simply not true.
The levy referred to does not contribute to the public health system and is not a revenue raising mechanism for the Government. The collection of the levy is neither a cost nor a benefit to the State so the suggestion of a €12m shortfall in the levy does not arise.
While appreciating the complexities of the private health insurance system in Ireland, there is nonetheless an onus to ensure that the public are not misinformed. The annual levy collected from health insurers is in respect of the number of lives insured by them and is not placed on individual policy holders. The money collected is used to fund tax credits for older people with private health insurance, who if under a risk rated model of insurance would be charged a higher premium for health insurance than younger people, given their higher risk profile. This can be seen in the reverse in car insurance, for example, where younger policy holders are often charged higher premia than older customers.
Funding the tax credit for older people ensures 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. The levy subsidises the cost of health care for older and sicker people across the market of health insurers, where one or more companies have a greater share of older or sicker customers. Otherwise, companies would have a clear incentive to attract and retain only healthy customers who were less likely to make claims.
In addition, all three private health insurers are beneficiaries under the scheme, depending on how many older customers they hold policies for.
The Department of Health website clearly outlines the principles, mechanisms and scheme in operation should you wish to research this matter further, you can access information here