The Commission has authorised the Irish scheme of levies and tax relief in the health insurance sector. The objective of the scheme is to promote intergenerational solidarity by decreasing the risk differentials for health insurers between old and young customers. The Commission concluded that the measure was in line with the EU Framework for state aid in the form of public service compensation and as such compatible with the EC Treaty.

Health Insurance (Miscellaneous Provisions) Act 2008 introduced an age-related tax credit for policyholders aged over fifty. This relief is available in addition to the existing tax relief for insurance premiums. The additional relief is given through the TRS (i.e. tax relief at source).

The scheme is a temporary replacement for, and very similar to, the previous Risk Equalisation Scheme, which was annulled by the Irish Supreme Court.

According to the Commission press release, Insurers are obliged to accept a customer who wishes to conclude an insurance contract, cannot terminate the policy against the will of the insured and must apply the same premium for a given insurance policy regardless of the risk (age, health status) represented by the insured. Policies must offer a minimum benefit level prescribed by law. It follows from these obligations that insurers cannot risk-rate their policies, which in turn can result in imbalances on the market if their risk profiles are different. To address this problem, the scheme introduces tax relief for individuals, the amount of which increases with age.

The Commission considered that although the tax relief is directed at individuals, it clearly has an effect on health insurers, i.e. that insurers with a bad risk profile benefit from it at the expense of those with a better one. Therefore the EU state aid rules were applicable.

According to the press release, the Commission concluded that the measure constitutes state aid. Such aid can be compatible with the Single Market; provided it satisfies the conditions laid down in the EU Framework on state aid in the form of public service compensation. In the course of the investigation, the Commission found that the scheme was designed in way so as not to lead in principle to overcompensation of the insurers. Furthermore the Irish Authorities committed to introduce a mechanism to avoid the overcompensation of the net beneficiary of the scheme, the VHI. In light of the design of the scheme and this commitment, the Commission found that the measure was in line with the EU Framework and as such compatible with Article 86 (2) of the EC Treaty as compensation for public services.

A press release on the Commission authorisation is available http://europa.eu/rapid/pressReleasesAction.do?reference=IP/09/961&format=HTML&aged=0&language=en&guiLanguage=en.