Tax reform pushes 200,000 patients off private healthcare and back onto the NHS

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The cost of treating 200,000 extra NHS patients equates to more than £126million per year


The bosses of the country’s biggest health insurers have warned Philip Hammond against further insurance tax reform, following a damning report which has revealed a £126million knock-on cost to the NHS.     

In a letter seen exclusively by This is Money, the chief executives of Bupa, Vitality, Axa Healthcare and Global Health Aviva have urged the Chancellor to freeze insurance premium tax.

IPT, a tax on insurance premiums, has doubled over the past three years to 12 per cent, causing the average health insurance customer to pay £117 more per year than they did in 2015.

According to analysis from the Centre for Economics and Business Research, this has resulted in 200,000 private medical insurance customers leaving their policies and going back to the NHS.

The cost of treating 200,000 extra NHS patients equates to more than £126million per year

The cost of treating 200,000 extra NHS patients equates to more than £126million per year

The cost of treating this influx equates to more than £126million annually – money that could be spent paying for 5,400 extra nurses.

And while the Government raises around £37million a year for every 1 per cent increase to the tax, it suffers a £21million knock-on cost to the NHS as a result of patients leaving private care, according to Cebr.

Experts are concerned that the Chancellor will further hike IPT in this month’s budget to 20 per cent, to help fund the £20billion injection for the NHS promised by the Prime Minister in June.

Bupa estimates this would cause a further 250,000 people to move from private health into public care, doubling the existing cost to the NHS of caring for formerly private patients to nearly £300million a year.

And in a letter to the Chancellor the chief executives of Bupa, Vitality, Axa Healthcare and Global Health Aviva have strongly warned against any further rise.

The letter reads: ‘As the four principal health insurers in the UK, we represent over six million customers who choose to take responsibility for funding some of their own healthcare.

‘When businesses or individuals stop or downgrade their health insurance policies, they become more reliant on the NHS for their healthcare needs, including costly care and treatment for conditions which their health insurance would have covered.

The impact of IPT hikes on the number of UK private health insurance customers. Source: Cebr

The impact of IPT hikes on the number of UK private health insurance customers. Source: Cebr

The impact of IPT hikes on the number of UK private health insurance customers. Source: Cebr

‘With the knock-on repercussions for the NHS, and the wider impact of IPT on households and businesses across the UK, any increase in IPT is something that everyone should be concerned about.

‘We are therefore calling on the Government to commit, at a minimum, to freeze the standard rate of IPT for the rest of this parliament.’ 

Labour has also proposed to increase IPT on health insurance to 20 per cent to fund NHS car parks.

Alex Perry, chief executive of Bupa Insurance, said: ‘We want to highlight to the Chancellor that raising this tax is unfair, and a case of robbing Peter to pay Paul, as it drives consumers away from health insurance straight onto the NHS at a time when the service would struggle to increase capacity.’

What is IPT, and what does it pay for?  

IPT is a tax on insurance policies, which was introduced in 1994. The amount of tax you pay on most types of insurance is now set at 12 per cent – things like car, pet and home cover all fall under this bracket.

There’s also a higher rate of tax, at 20 per cent, which covers things like travel insurance and certain specialist types of motor insurance, such as for vehicles designed for people with disabilities.

Raising IPT to 20 per cent could push 250,000 people off private health and onto public care

Raising IPT to 20 per cent could push 250,000 people off private health and onto public care

Raising IPT to 20 per cent could push 250,000 people off private health and onto public care

A small portion of the income raised is ring-fenced to pay for flood defences, but the majority goes straight into the Treasury’s coffers.

And IPT is extremely lucrative for the Treasury – it raises more than beer and cider duties, betting and gambling duties, and air passenger duties. Roughly half of this is paid for by consumers, with the rest paid for by businesses. 

Despite this, an Opinium survey found that half the population is unaware that IPT exists – far more than any other tax. 



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