Ironically, cancelled policies could actually end up costing the government a lot more than the revenue generated by IPT on medical insurance. Without cover, these individuals would have to fall back on to the NHS for treatment at a cost to the government.
AMII is currently working with its insurer members to determine the financial implications of this additional cost burden on the NHS. In addition, it has launched a parliamentary petition to make healthcare insurance exempt from IPT. This was set to run for six months until October, but was closed when parliament was dissolved in May. Although it had gained more than 1,000 signatures, AMII will need to start the petition again when the service reopens.
EU comparison
This is frustrating, but even without figures on the savings medical insurance brings to the NHS, the campaign has some good ammunition. Although the government points to higher rates of IPT in the EU as an excuse to increase rates in the UK, health insurance products are actually exempt from the tax in many countries.
Of the 28 EU countries, only 14 charge IPT on medical insurance, with only five imposing a rate above nine per cent. These are Belgium (9.25 per cent), France (9 per cent), Greece (10 per cent), Slovakia (9.5 per cent) and, with the highest rate of all, the UK (12 per cent).
Whether or not AMII is successful in arguing for an IPT exemption on health insurances, the increases in this tax mean policyholders face significant price rises. Using the variety of cost control mechanisms can help to make premiums more sustainable, but it may require creativity on benefit design to keep cover affordable.
