Tax Increase on French Healthcare Policies Affects Mutuals

Wednesday, 28 September 2011

The French government recently announced a tax increase on healthcare policies as one method they plan to implement towards reducing the country’s deficit. This tax increase will affect supplementary health insurance policies, many of which are provided by French mutual organisations.

Supplementary health insurance is purchased by many French citizens in order to top up the state-sponsored health insurance system. The government is raising the tax rate on these policies from 3.5% to 7%. Before 2011, those policies were not taxed at all.

According to Mutualité Française [FNMF], the federation of mutual health insurers and an ICMIF member, the tax move will be damaging to mutual health insurers and they will have no option but to raise their rates. The resulting effect will be that their members may be forced to cut back on their supplemental coverage to avoid having to pay the higher policy charges.

FNMF Chairman, Etienne Caniard, said "What shocks us deeply is that the government knew very well that this taxation on the mutual insurance companies would be immediately reflected in the [insurance] contracts”.

French mutual insurers have always played a big role in the insurance market and the FNMF claims its members cover six out of 10 French citizens -- about 38 million people.

Earlier this year there was a plan in France to exempt the "socially responsible contracts", such as provided by mutuals, from French corporate taxation. However, the European Commission decided that this plan could not proceed and this is what has led to the French health insurance mutuals now seeing a doubling of previously nonexistent taxes.

At that time Caniard said that the EC's decision would put a further health care cost burden on middle-class French families and would prevent mutuals from offering competitive products in the health care market.

French mutuals, including many ICMIF members are now calling on their members to register their disapproval with their government ministers before the next review of the finance act in 2012. The FNMF web site asks the public to write to their ministers and offers letter templates and direct email links to the relevant authorities to encourage members to register their disapproval of the new tax increase.