Minister for Health James Reilly has called on insurers to absorb the cost of stamp duty increases and not add them to the health cover premiums of younger people.

Yesterday Dr Reilly announced a number of rule changes announced which, coupled with budget reductions in tax relief on premiums, are expected to see premiums increase by approximately 15 per cent.

An average family with two children will pay an extra €328 in premiums next year as a result of yesterday’s change and the budget cuts in tax relief, insurer GloHealth estimated.

Laya healthcare added that the move would drive more people out of private health insurance.

Speaking today Dr Reilly said an average of 60,000 people per annum had abandoned their private health insurance and admitted that in the longer term this was unsustainable.

He called on insurers to accept a lower profit margin on their younger, healthier customers and not to pass on the increases to this age group in a bid to prevent them surrendering their policies.

Dr Reilly suggested that some insurers were “cherry-picking” customers and as a result had a far lower proportion of older customers than their market share.

Dr Reilly said VHI had only 55 per cent of the private health insurance market but 80 per cent of the payouts, largely because it had a disproportionally high proportion of elderly customers, and that this was unsustainable.

He said the changes were being introduced to protect older people and keep health insurance affordable for them.

Fianna Fáil leader Micheal Martin told the Dáil today up to 6,000 people are cancelling their private health insurance each month.

“By the end of this year, in two years alone, we estimate that about 140,000 people will have cancelled health insurance,’’ he added.

He claimed that Government policies were driving people out of private health insurance.

Laya managing director Dónal Clancy said “rather than protect the most vulnerable patients as outlined by the Minister, the levy hike will only increase the burden on an already struggling public health system”.

He said the health levy has risen by 149 per cent for an adult since its introduction in 2009 with the rate for children rising 155 per cent.

The duty, which is used to fund credits to the various insurers according to the age profile of their customers, is being increased from €350 to €399 per adult with advanced cover, and €120 to €135 per child. The change will affect more than 80 per cent of customers who have advanced cover for private and public hospitals.

The VHI will benefit most from the changes to credits because it has the highest proportion of older customers. The three privately owned insurers will be hardest hit because their customer base is younger.

Dr Reilly said he was reluctant to recommend increases in stamp duty, given the pressures many households face. “However, my priority is to direct support where it is most needed and these revised risk equalisation credits will subsidise health insurance for our most vulnerable patients,” he said.

GloHealth chief executive Jim Dowdall said: “It is farcical, bizarre and absurd that the Minister continually calls on health insurers to drive down costs when Government policies have been the overwhelming driver of rising premiums in recent years.”

Risk equalisation is the system whereby companies with older customers with higher claims costs are compensated by rivals with a younger client case.

Dermot Goode of Cornmarket Healthcare Division said the changes announced by the Minister would have an inflationary effect even though the stamp duty was not levied on consumers, because insurers were likely to pass on the increases.

“Consumers are going to get clobbered. Between this and the cuts in tax relief announced in last month’s budget, it’s likely that premium increases of between 10 and 15 per cent are coming down the line,” he said.

Insurances companies are also under pressure to fund an extra €30 million a year being demanded by the Department of Health from next year in respect of the use by private patients of public beds in the public health system, he said.

Mr Goode estimated that the budget changes added up to €270 a year to the cost of the VHI’s Plan B Options policy, and €170 to Plan B.

Customers on “gold-plated” plans, as they were called by Minister for Finance Michael Noonan in his budget-day speech, will have to pay an extra €470-€780 a year.