Written Answers – Department of Finance: Budget Measures (18 Feb 2014)
Séamus Healy (Tipperary South, Independent)
205. To ask the Minister for Finance if he will reverse the budget 2014 measure regarding health insurance due to the fact that as a result health insurance premiums have been increased excessively; and if he will make a statement on the matter. [8154/14]
Michael Noonan (Minister, Department of Finance; Limerick City, Fine Gael)
In the first instance, decisions taken to increase the cost of health insurance premiums are made by health insurance providers and are beyond my control. However, it is the case that in Budget 2014 tax relief for medical insurance premiums was restricted to the first €1,000 per adult and the first €500 per child insured. Any portion of premium paid in excess of these ceilings no longer qualifies for tax relief.
The cost of Income Tax relief in respect of medical insurance has increased significantly in recent years, estimated at €404 million in 2011, €448 million in 2012 and €500 million in 2013. Despite the increasing cost of the relief, the number of individuals insured has reduced 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. If the relief were to remain unchanged and the trend was to continue, the cost would increase to approximately €1 billion by 2020.
Prior to this reform the State was effectively paying 20% of the cost of all private medical insurance premiums via the system of income tax relief. In effect this means that 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.
Although it is true that the restriction of the tax relief may have in some cases, led to a net increase in medical insurance premiums payable by individuals, it should be noted that many would only be affected marginally, depending on the cost of the policies that individuals choose to purchase.
The measure to restrict tax relief in respect of medical insurance premiums was approved by the Dáil via Financial Resolution on Budget night and confirmed by the Oireachtas via the enactment of Section 8 of Finance (No. 2) Act 2013, which was signed into law by the President on 18 December 2013. I have no plans to review the restriction in the short term.