Raising IPT is a "soft option" - AMII

Any rise in insurance premium tax (IPT) will severely hit an NHS already under pressure, the Association of Medical Insurance Intermediaries (AMII) has claimed.

It added that whilst the Government may think raising IPT from its existing rate of 5% will help towards raising the extra £6bn for HM Treasury, the actual implications regarding medical insurance would be somewhat different.

“Raising the rate of IPT is a soft option for the Government but there is a real downside for Government if medical insurance is included,” said AMII chairman Andrew Tripp.

“It may make people give up on taking out their own private medical insurance (PMI). Rather than decreasing the burden on the NHS, those individuals will be back reliant totally on the state system.

“It is short-sighted to be threatening this at a time when we are talking about reducing Government spending and calling on those individuals with the resources to do it to be more responsible for their health and wellbeing.”

Tripp also said there are implications for the corporate healthcare sector and insurers.

“The whole dynamic of the market could change as employers looks to switch from insured health schemes to self funded schemes.

"There has always been a trade off between insured schemes where the employers pay 5% IPT on member premiums and self funded schemes for which the employer hires a third party administrator and just pays VAT at 17.5% on that administration cost.

"For certain schemes, paying IPT has been a better option but if the rate rises significantly why would companies pay that on the whole cost when VAT is only payable on the administration charge under a self funded scheme?”