Health insurance tax hike pushes 200,000 people from private cover to NHS, research finds

Insurance Premium Tax which is levied on some types of policies, including health insurance, has doubled to 12 per cent since 2015

The report, commissioned by Bupa, warned that the situation will worsen further if the Chancellor raises the tax once again in next week’s Budget (Getty)

A tax hike on health insurance could be putting more strain on the NHS by causing almost 200,000 people to ditch their private cover in the last three years, new research has suggested.

Insurance Premium Tax (IPT), which is levied on some types of policies, including health insurance, has doubled to 12 per cent since 2015.

According to the study by the Centre for Economics and Business Research (Cebr), which was commissioned by private healthcare provider Bupa, the rises have contributed to thousands of people giving up policies which covered treatment for conditions including cancer, heart and joint surgery.

The Cebr study analysed monthly data from 2003 to 2017 on Bupa customers' behaviour in response to changes in IPT and extrapolated the findings to the whole market.

It estimated that every 1 per cent increase led to around 31,000 private health insurance customers to depend solely on the NHS for their healthcare.

The report warned that the situation will worsen further if Chancellor Philip Hammond raises the tax once again in next week’s Budget, a move the reports' authors suggest will cause more people to cancel their policies or reduce their level of cover

Increasing IPT rates further may cause revenue collected from the tax to fall over time by discouraging people from taking out health insurance, the report claimed. A spokesperson for Bupa said that the money collected from the tax was not ring-fenced for the NHS.

The company said IPT hits people in most need the hardest because older people or other groups perceived as higher risk pay higher premiums and therefore more tax.

Oliver Hogan, chief economist at Cebr said: “The impact of the tax has not been considered by the Government and we hope this research will make for interesting reading for the industry, the government and the public.

“As this is a tax that has increased successively over the last 3 years, and may increase further in the future, research into the financial implications for the NHS and the welfare impact on patients and society is needed.“