Irish health insurance market is in crisis

The Irish health insurance market is in crisis – over 100,000 people (the vast majority between 25 and 34) have cancelled their insurance policies over the last 21 months, there have been huge increases in the cost of claims and we have no idea how much the government will increase public hospital charges or the insurance levy in the December budget, Mr. Dermot Goode of Cornmarket Group Financial Services told the HMI Conference. Maureen Browne reports.

He said that in 2008, a total of 52 per cent of the Irish population had private health insurance but by June of this year, this had fallen to 46 per cent.  Last year 66,000 people cancelled their health insurance and, there had been 40,000 further cancellations so far this year. The vast majority of those who were cancelling their health insurance were aged between 25 and 34, the age group which would be expected to make less claims, leaving the older people who would make higher claims.

Mr. Dermot Goode, General Manager, Healthcare Division, Cornmarket Group Financial Services addresses the HMI Annual Conference 2012
Mr. Dermot Goode, General Manager, Healthcare Division, Cornmarket Group Financial Services addresses the HMI Annual Conference 2012

The cost of claims was also increasing, with VHI claims having increased by 70 per cent over the last five years.

Last December the Minister for Health announced plans to re designate public beds in public hospitals as private beds for the purpose of charging health insured patients.  This had not yet been implemented, but when it was it could potentially mean that insured people admitted through the ED would be charged €1,000 rather than €75 a night.  The VHI had stated that if this was done it could push up premia by 50 per cent and that they might not cover all public hospitals.

Since there would be no idea about how much the government would increase public hospital charges or the insurance levy until the December budget, the health insurance companies are unable to plan for this in advance.

The vast majority of those who were cancelling their health insurance were aged between 25 and 34, the age group which would be expected to make less claims, leaving the older people who would make higher claims.

Mr.  Goode said we did not have a level playing field in the health insurance market – the VHI, through no fault of its own, was subject to a completely different set of rules to the other three insurers, which were regulated by the Central Bank.  By December 2013 the Government would have to implement an EU ruling under which the VHI would have to be brought under the regulation of the Central Bank. The VHI wanted this, as it meant they could sell other forms of insurance. However, it would also mean the VHI would have to meet new solvency rules, which would require it to find €250 million.  So far there was no indication as to where this money would be found.

At present under our tax based risk equalisation, €285 of every premium paid went to the risk equalisation scheme which is used to compensate the insurer with the higher risk profile members, which is now the VHI.  On the morning of the Conference, reports in the media suggested that this levy would be increased by a further €200 per annum which in turn would mean a €200 increase in everybody’s premium.

Mr. Goode said that 50 per cent of people take out health insurance because of fear of waiting lists and many were now hanging on by their finger nails because of price increases .The |Minister hoped to move to Universal Health Insurance by 2016 but he wondered how many people would have health insurance by then and who would fund those who did not.

He said it was very important that we had properly funded public and private systems – people want access to both.  The private system relieves pressure on the public system and private health insurance was a revenue generator for the public system. If people were forced out of private care because of the cost they would fall on to the public system.

Since there would be no idea about how much the government would increase public hospital charges or the insurance levy until the December budget, the health insurance companies were unable to plan for this in advance.

Mr. Goode said that all insurance companies had deals for corporate clients, which were also available to private clients, but would not be offered unless they were requested. It was possible for a couple to save up to €600 with a corporate plan and each company had “best buys”  However, because there were approximately 200 health insurance plans on the market, it was difficult for people to navigate their way through them to find the best deals.

Looking forward he said it was likely that insurers would try and lock people into annual contracts, introduce restricted illnesses, where members would pay part of the fees for procedures in private hospitals and place time restrictions on upgrades.

He said that he believed that in 12 months time there would be further market contraction, which would impose additional pressure on the public system, and there would be private hospital closures.

There were interventions which the government could make – it could introduce age related community rating (where you would be charged higher rates the older you were when you initially took out health insurance), it could increase tax relief on premia or introduce a fair risk equalisation scheme.

He said that the Dutch UHI model provided a basic level of cover for everybody and was rated as the best health service in the OECD.  However, it had been five to ten years in the making and before its introduction most people in Holland already had health insurance compared to about 60 per cent in Ireland. The service was also expensive.  People paid about €1,200 a year per adult (children under the age of 18 were free) for compulsory minimum cover, plus seven per cent which was deducted by their employer from the first €45,000 – €50,000 of their salary, plus a further 12 per cent of their salary, again up to €45,000 – €50,000 which went towards long term care.