Why are we taxing people for taking out health insurance?

15 November 2017

Alex Perry, CEO of Bupa Insurance

This time next week, the Chancellor will deliver the Autumn Budget. We’ll be listening intently to the Government’s forthcoming spending and tax plans, but why is this so important for the health sector?

On behalf of our customers, we’ll be looking out for any announcement relating to Insurance Premium Tax. The government has slowly but surely increased the standard rate of Insurance Premium Tax over the last 3 years. The tax has doubled since 2015 and it currently stands at 12 per cent.

Some types of insurance are exempt from Insurance Premium Tax, for example Life or Critical Illness Insurance. There are strong arguments for health insurance to be treated similarly to these, and clear evidence that the recent rises in tax are going to add even more pressure onto an already over-stretched NHS.

Recent research into this comes from the Centre for Business and Research (Cebr), who we have been collaborating with on this topic. The research reveals that the most recent tax hikes have contributed to nearly 200,000 health insurance customers giving up their insurance. This means longer waiting times for everyone else for treatments such as cancer care, joint surgeries and cataracts; areas of care that are already under pressure.

Some are often very quick to ignore the benefits and choice that health insurance can bring, but as people fund different parts of their healthcare, not only does demand on NHS services reduce but it brings extra funding into the system too. It’s only logical that a shrinking health insurance market, with people cancelling or reducing their cover, adds further pressure onto the NHS.

The taxes on health insurance are unfair and counter-productive. Increasing IPT again isn’t a responsible decision for the Chancellor to make, and polling of the general public backs this up. Our research from October 2017 found that two thirds (63 per cent) of people say that health insurance allows others to access NHS treatment earlier and over half (55 per cent) view it as important in relieving pressure on the NHS.

To encourage more funding to come into healthcare in the UK, we think the government should review how it taxes health insurance. A commitment to freeze the current rate of tax on health insurance during the course of this Parliament will halt any future damage.

With the knock-on repercussions on the NHS, another increase in Insurance Premium Tax on Health Insurance is something that everyone should be concerned about.

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