Monday 21 January 2019

Health policy move is no cure-all but it will stop the bleed

The Irish health insurance market is on the brink of collapse. Since the end of 2008 280,000 people, almost one in eight of all customers, have given up their cover.

Even more serious is the fact that most of those who have chosen to let their health insurance lapse have been young people, with about a third of the leavers being in the 18 to 29-year-old category.

This is critical to the viability of a health insurance market such as Ireland's, which operates on the basis of community rating where everyone pays the same price for the same health insurance policy regardless of their age or previous medical condition.

Under community rating, younger, healthier customers effectively subsidise older, sicker customers.

What is now happening is that an ever-decreasing proportion of younger health insurance customers are being forced to subsidise an ever-increasing proportion of older health insurance customers.

As a result, the price of health insurance has more than doubled over the past six years.

The health insurance market is now caught in a Catch-22 situation. Higher premiums are forcing younger cash-strapped families to dump their cover which in turn drives up prices even further.

And what was the Government doing while the health insurance market was going to hell in a handbasket?

What indeed. Former Health Minister James Reilly devoted most of his time to the introduction of universal health insurance, which was due to come into force in 2019 at the earliest.


It never seems to have occurred to Dr Reilly that, with so many customers fleeing, we mightn't even have a health insurance market in 2019.

Fortunately his successor Leo Varadkar (left) seems to get this and has moved quickly to long-finger the introduction of universal health insurance, preferring to concentrate on sorting out the health insurance market first.

Last July, in the dying days of Dr Reilly's tenure as Health Minister, plans were wheeled out to incentivise more under-35s to take out health insurance cover.

From next May anyone aged over 35 who doesn't already have cover will pay a loading of 2pc a year when they first purchase health insurance.

This will stop someone who has "freeloaded" on the public health system for most of their life from taking out health insurance for the first time in their fifties or sixties and paying the same price as someone who has had health insurance cover since their twenties or thirties.

Now Dr Varadkar is going even further. He is trying to get the health insurance companies to promise not to raise their prices for two years.

If they agree, the Government will in return guarantee not to increase the stamp duty levied on every health insurance customer to compensate those companies, mainly the VHI, who have a disproportionate number of older, sicker customers on their books.

This stamp duty forms a significant proportion of the cost of health insurance for most people. Each adult currently pays €290-a-year on a basic policy and €399 on a premium policy with either €100 or €135 being added to children's cover, depending on the policy.

Will the health insurance companies sign up for Dr Varadkar's deal? Somehow I can't help feeling that, by first agreeing to a loading for over-35s taking out health insurance for the first time, the Government has surrendered considerable leverage in its dealings with the health insurers.


If the Government had held back on approving the loading until the health insurance companies had first agreed to a price freeze, Dr Varadkar would now be in a much stronger negotiating position.

That, however, is a minor quibble.

By seeking a two-year price freeze Dr Varadkar has shown that he has grasped the severity of the crisis facing the Irish health insurance market: it can't go on haemorrhaging younger, healthier customers for much longer.

A price freeze won't solve all of the ills afflicting the Irish health insurance market but will at least stop things getting even worse. Full recovery will take much longer.

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