The 58 per cent increase in the rate insurance premium tax unveiled in today’s Budget will reduce SME’s ability to tackle health-related productivity and increase pressure on the NHS say insurers and advisers.
Sanlam UK says the increase in IPT from 6 per cent to 9.5 per cent announced today will present challenges to employers already grappling with steep medical inflation, potentially leading to restrictions in the numbers of employees covered and increased excesses.
Axa PPP Healthcare called the step ‘unwelcome’ and warned productivity and profitability could be hit, with a greater burden placed on the NHS. It added the move would make heathcare trusts more attractive to larger employers.
Axa PPP Healthcare distribution director Chris Horlick says: “Increasing the rate of Insurance Premium Tax from 6 per cent to 9.5 per cent will potentially make the provision of private medical insurance less affordable to many larger employers – at a time when many such employers need their people to be healthier and more engaged and productive than ever, and when pressures on the NHS are increasing.
“Medical insurance is a valuable tool to many SMEs seeking to recruit and retain the very best talent in their sector and then keep them fit, healthy, engaged and in the workplace. Increasing the rate of Insurance Premium Tax potentially makes this business critical health tool less affordable to many SME employers with a consequent impact on productivity, profitability and, ultimately, an increased burden for care that the NHS may be asked to pick up.
“We will work closely with all our SME clients and advisers to ensure that we continue to offer them the very best value, yet most relevant, private medical benefits for both their business and their people to ensure we can help them alleviate the impact of the increase in IPT wherever possible.
“The increase in IPT is also unwelcome for individual subscribers and, again, we will be working closely with their advisers to safeguard their healthcare cover. While we fully appreciate the need to balance the Country’s books, imposing a higher cost is a retrograde measure that will do nothing to encourage individuals and employers to protect their health and wellbeing.
“Healthcare trusts need not be intimidating to employers or their advisers. They are relatively straightforward to establish and we welcome the opportunity to work with all employers and their advisers in this area when seeking to make medical benefit provision more sustainable in the medium term.”
Sanlam UK head of employee benefits Elliott Silk says: “A 3.5 per cent increase in IPT will signal a big leap for employers who are used to paying 6 per cent. As a result, we may see companies increase excesses or limit the number of employees who are eligible for private medical insurance in order to keep costs under control. Employers have been struggling to cope with medical inflation causing premium rates to increase by 10 per cent year on year let alone with a rise in IPT. This increase in IPT may restrict the number of people who will opt in to private medical insurance and this may well encourage a move away from private care offered by the employer and subsequently add even more pressure on to the NHS.”