Health Insurance Update December 2014

Health Insurance Developments –

Good or Bad News for the Consumer?

The Minister for Health, Leo Varadkar recently announced a number of measures to help stabilise health insurance pricing for the benefit of Irish consumers.  So what are these measures and how will they impact consumers, if at all?

Firstly, there will be no further increase in the health insurance levy which is welcome news.  This has been systematically increased each year since its introduction in 2009 and now stands at €399 per adult and €135 per child on all public / private hospital plans.  Any further increase would have pushed more out of private healthcare and back onto the public system.  He has announced a reduction of approximately 20% in the levy charged on public hospitals plans only (non-advanced plans) which is welcome but this will only benefit a small percentage of the overall membership and will only come into effect from 1^st March 2015.  Already one insurer, GloHealth has indicated that they will pass this saving onto members but as 45% of the market are due to renew their cover in January and February next year, the saving is likely to be missed by most consumers.

The Minister has also announced plans to allow the health insurers charge discounted rates for adult dependents.  Whilst the full details are unclear, discounts of up to 50% may be available for those aged 21 – 25.  Whilst this is good news for all those families who are struggling to pay the full adult rates for their dependents, many of whom are still living at home or still in college, it doesn’t go far enough.  Firstly, this measure may not be introduced in time for the key renewal period in January and February.  Secondly, it may be discretionary which means there is no guarantee that the insurers will pass this on, and finally they should really extend the age band to age 29 if they want to attract young people to stay in the market.

Unfortunately, tax relief on health insurance which was slashed in budget 2013 remains unchanged.  This measure affected 90% of all policy-holders especially older members on the traditional mid-range plans many of whom have to downgrade their cover to remain insured.  At the very time when they most need health insurance, they now have to contend with potential co-payments and excesses on their cover which is regrettable.

The Minister also announced a freeze on public hospital bed charges which is to be welcomed as any increase in these rates would be passed onto consumers immediately.  However, the issue of charging private rates for health insurance members who end up in a public hospital on a bed, recliner chair or trolley has yet to be resolved.  If this measure results in additional costs for health insurers, this will surely be passed onto consumers.

Finally, the Minister plans to introduce a new system of Lifetime Community Rating from 1^st May 2015.  This will introduce age-related loadings on new members aged 34 and over joining health insurance for the first time.  Its purpose is to encourage consumers to join early and therefore the claims burden is spread more equally across all members.  Presently, someone who joins at 20 years old and who pays into the system for the next 30 years will be treated the same as the 50 year old who joins today and has never paid a penny into the system.  Under this new system, there will be a 2% permanent loading onto your premium for every year over age 34, e.g. a 39 will pay an additional 10% per annum on their premium.  For those already insured or those who join before May 2015, this measure will have no impact on them.  For those who had health insurance previously, or those who have to cancel their cover due to unemployment, there will be credits available to reduce the age loading.  In essence, this means that all those consumers who have been ‘sitting on the fence’ regarding health insurance, they need to get in before May next year to avoid these loadings.  From an advisor perspective, expect to be very busy on health insurance up to next May.

Overall, there is a lot of positive news from the Minister for Health which has been missing from the health insurance landscape for some time.  However, these measures in themselves will not cap price increases or lead to cost reductions.  Health insurance rates are a function of Government policy, medical inflation and claims costs.  The latter two are outside the control of the Minister and if they continue on their upward curve, there will still be cost pressures in the system leading to some level of increase in 2015.  However, with the cap on levies and public bed charges, the health insurers have a greater degree of certainty over key cost drivers which hopefully will mean moderate rates increases of up to 5%.  Let’s up we’re not disappointed!.

 

Dermot Goode: Health Analyst with www.totalhealthcover.ie

All prices quoted are net of tax relief at source and are correct as of 01/11/14 as per www.hia.ie (Health Insurance Authority).However, prices and benefits are subject to change and consumers should confirm all details directly with the insurer in question.
PHI Consulting (Ireland) Ltd trading as Total Health Cover is regulated by the Central Bank of Ireland.