Life InsuranceMay 17 2017

Labour's medical insurance tax grab under fire

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Labour's medical insurance tax grab under fire

Labour's manifesto proposal to fund free parking in NHS England by increasing the tax on private medical insurance premiums has met fierce opposition.

Kevin O’Neill, head of workplace health at Barnett Waddingham, said the insurance premium tax (IPT) increase for private medical insurance (PMI) schemes will effectively be 12 per cent from 1 June, but it now appears following the publication of their general election manifesto that Labour are looking at a “European” 20 per cent in the future.

He said PMI may seem like a ‘soft target’, but 19 per cent of employers according to an 2017 online survey of 145 employers of more than 250,000 employees are looking to cease their PMI schemes because of affordability, with a further 36 per cent citing cost as an issue.

Without private provision the cost of treatment will fall on the NHS, he noted.

Mr O'Neill said: “Rather than imposing a blanket increase on IPT perhaps a better solution would be to band types of insurance contracts each with their own level of IPT, with PMI retaining a favourable level to ensure the continued viability of the product and removing any potential additional burden on the NHS.”

Stuart Scullion, chairman of the Association of Medical Insurers and Intermediaries (AMII), said: “PMI is not some executive perk for the wealthy. It is purchased by almost four million working and middle class people who want to take a responsibility for their own health and wellbeing.

"Increasing IPT will simply force those who are willing and able to buy PMI back into an already overstretched NHS.

“There are just under one million consumer purchasers of PMI, including many older citizens, who are going to be forced back into using NHS services if the cost of their PMI becomes unsustainable. How does that benefit the NHS?

"I would be keen to see how the Labour Party has costed its plans whereby they can be confident of a net benefit to the NHS and its users through the removal of hospital parking charges.

 “A more creative approach would be to look at how the capability of the private sector could be harnessed to reduce the strain on the NHS, operationally, financially and by reducing waiting lists.

 “The approach by the Labour party only goes to show the importance of the AMII led IPT petition which will be re-launched immediately after the re-opening of Parliament following the general election.

"We are not going to stand back and watch any political party wreak havoc with the healthcare industry by the unreasonable increase in IPT in the interests of the consumer. Healthcare spend should be tax exempt as it is across much of Europe.”

stephanie.hawthorne@ft.com