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Risk Equalisation Fund deficit does not ‘necessarily’ mean stamp duty increase

In the minutes of the August meeting of the HIA, seen by this newspaper under a Freedom of Information request, the balance sheet deficit was discussed.

In the minutes, it was noted that the deficit on the fund, “slowly increasing from year-to-year from the current level of circa €20 million would not necessarily indicate that the stamp duty needs to be higher to cover the cost of risk equalisation credits”.

“Rather, such a deficit would be expected to result from timing issues, given the current patterns of renewals by age, whereby older people renew earlier in the year, on average. Accordingly, it is projected that the Fund will continue to have a balance sheet deficit for as long as the Risk Equalisation scheme is in operation and this pattern of renewals exists.”

A HIA spokesperson told the Medical Independent: “This fund has annual income/expenditure of circa €500 million. The fund pays risk equalisation credits in respect of insured persons with higher expected claims costs.

“The credits vary by age, gender, level of cover and hospital utilisation. The credits are funded by stamp duties payable by all insurers in respect of insured persons. These stamp duties vary by level of cover and between adults and children. Each autumn, the Authority advises on the levels of risk equalisation credits that it considers would be appropriate and on the level of stamp duty that it considers would be necessary to fund those credits in respect of policies commencing in the following calendar year.

“As the projections underlying the calculation of the credits will never correspond exactly with what develops, the fund will always have either a deficit or a surplus.

“The Authority’s advice is based on running the fund, over time, as break-even. Accordingly, it is equally as likely the fund will be in deficit or in surplus each year.”

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