Budget’s tax rebate on health insurance will be industry boon

The private sector has welcomed health parliamentary secretary Chris Fearne’s announcement that the government is considering introducing tax refunds for people who pay for private health insurance.

Insurers who spoke to MaltaToday agreed that such a move would benefit both insurers and private hospitals by encouraging more people to take up private insurance.

Fearne made the announcement on Monday’s edition of the current affairs programme Reporter, when he said that the new scheme will be included in the 2015 Budget and is intended to encourage more people to start paying for private healthcare, with the added incentive of tax refunds.

If put into effect, the controversial decision would see a seismic shift from public to private healthcare that is part-financed by taxpayers’ money.

In 2012, around 20% of the population, or 90,000, were covered by a private health insurance. In 2012, the number of people insured under individual contracts accounted for 11,202 while 79,954 lives were insured under group policies.

Currently the parliamentary secretary is in talks with the Malta Insurance Association over the scheme and although negotiations are ongoing, a deal is expected to be concluded in the coming weeks.

While welcoming the initiative, opposition MP Claudio Grech warned against using taxpayer money to finance “ineffective and inappropriate” health insurances.

In comments to MaltaToday the PN’s spokesperson on health said the move would be a step in the right direction, however he said that before implementing such a scheme “we feel it is necessary to ensure that insurance policies offer a baseline level of universal coverage in a way that patients are not short-changed due to the small print in the policy.”

He added that the opposition believes that state-sponsored health insurance should be preceded by the removal of limitations arising out of exclusions which most local policies tend to entrench.

“It is unthinkable to use taxpayer money to sponsor health insurances which are ineffective and inappropriate for the patient’s requirements. The introduction of such concepts should not be driven by exclusively financial arguments but should be primarily based on fairness, equity and access to care whilst ensuring that public health services will remain a free choice of health service at the point of care.”

Finance Minister Edward Scicluna was unavailable for comment as he was on his way to Washington where he is expected to participate in an IMF meeting.

Representatives of three main insurers who spoke to MaltaToday converged on the fact that the announced scheme would be a catalyst for people to buy or upgrade their private medical health insurance policies.

According to the Malta Insurance Association, the gross written premium for private health insurance reached €22.1million in 2013 compared with €21.3 million in 2012, and €20.6 million in 2011. In 2013, claims incurred amounted to €13.4 million, compared to €13.1 million the previous year.

Catherine Calleja, Director at Atlas Group, said “we are of course in favour of stimulating demand for health insurance.  As an industry we have been lobbying for incentives for some time.  We would of course strongly advocate incentivising carefully so that we move people to higher level schemes which would move people away from using state care, as well as incentivising older people who again use the public service much more.”

She noted that the scheme should ensure that tax rebates are only given “where the country is likely to save money,” adding that the industry has offered to collaborate with the government in this regard.

While pointing out that the majority of schemes are paid for by employers, Calleja also underlined the fact that well over half of insured people have relatively basic levels of cover with very limited benefits, meaning that only a small fraction of major operations would be paid.

Asked whether such a move would lead to higher health insurance premiums, Calleja said that a tax incentive cannot lead to higher health insurance premiums in itself.

She however warned that “if the incentive is tied to other issues such as charging insurers for certain state care, this will lead to higher premiums and we have to be careful that the client’s increase in premium does not outweigh any tax savings.” 

This, Calleja said, is a threat especially for older clients who are currently most likely to lapse their cover due to cost increases. 

“Of course without understanding what the government is proposing, it is difficult for us to comment. We are however keen to enter into discussions with the government to increase the participation of the private health sector in this important area of the economy.”

Simon Anastasi, Chief Officer in charge of Group Life & Health at Middlesea Insurance agreed that tax rebates would lead to a greater demand which would also have a domino effect on private hospitals.

“The demand for health polices would increase and this would in turn lead to more people making use of private hospitals,” he said.

Asked whether such a scheme could spell the end of free health services, Anastasi said “private health polices are not a substitute for public health services, but they are complementary to each other.”

On his part, Bupa branch manager Charles Zarb told MaltaToday “we are not yet informed as to the magnitude of the proposed tax refunds as this is still a matter which the government needs to quantify,” adding that the government has not concluded whether the scheme will apply solely to privately funded schemes or also include company funded policies.

“Also one would need to see if there are any tied conditions pertaining to policies qualifying for such tax rebates. So it is a bit premature at this stage to form a considered opinion,” Zarb added.