IPT hikes driving thousands of policyholders into the NHS

Recent hikes in insurance premium tax (IPT) are driving thousands of policyholders to cancel or downgrade their PMI cover at a cost of £126m a year to the NHS, according to new research by Bupa and economics consultancy Cebr.

Cebr estimates that every 1% rise in IPT results in 31,500 PMI subscribers cancelling their cover, adding £21.46m in additional costs to the NHS. It said an extra 200,000 patients have been pushed back into the NHS since 2015 following an increase in IPT of almost 100% from 6.5% to 12%.

Bupa warned that if this tax were to be set at the same level as VAT, as has been mooted, a further 250,000 people could move from private health into public care, doubling the existing cost to the NHS of caring for formerly private patients, to nearly £300m a year.

Bupa Insurance CEO Alex Perry said: ‘On behalf of consumers, 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.

‘The danger is that when businesses or individuals stop or downgrade their health insurance policies, they are solely reliant on the NHS for their healthcare needs, including costly care and treatment for conditions such as cancer, heart and joint surgery which their health insurance policy would have covered.’

According to Bupa, cost remains the main factor for the public when choosing to buy health insurance, which explains the high attrition rates for individual policies. Research commissioned by the insurer found that one in three (33%) policyholders would consider cancelling their policy if their premium went up. What is more, a third of the wider public say they would consider taking out PMI if costs were lower.

Perry added: ‘Ahead of the Budget Statement we’re calling on government to commit to freezing the standard rate. If the decision is made to increase the rate of tax on health insurance again, the NHS and all those using it will be impacted.’

Commenting on the findings, Stuart Scullion, executive chairman at The Association of Medical Insurers & Intermediaries (AMII), said: ‘This report shows us that the government is not considering the wider implications of generating revenue from IPT, particularly in relation to the costs to the NHS and health sector. We’re expressing our concerns about this with the aim of asking the industry, the government and the public to wake up to what’s going on and the consequences of it. There are many 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? The government should be encouraging the purchase of PMI as a means of reducing the strain on an already overstretched NHS, not pushing thousands of people back onto it.’