The crisis-hit health insurance market risks being damaged beyond repair by youth unemployment and emigration, according to a new report.
Economist Colm McCarthy warned the entire community-rated system could be destabilised if the number of young policyholders continues to fall and forces companies to heap higher premiums on older members.
“Once a concerted shift in the age-distribution of members away from the younger age groups becomes established, rising average premiums can make a community-rated system dynamically unstable,” Mr McCarthy said.
A community-rated system requires a sizeable portion of young, and therefore healthy, policyholders to offset the high costs incurred by older members.
With fewer young and low-claiming members, insurance companies are forced to pass on higher rates to balance their books.
The report, commissioned by Aviva Health, showed a rapid decline in the number of people aged 20 to 29 taking up a policy.
It found overall membership had fallen to 45.7% in December 2012 from 50.9% four years beforehand.
Mr McCarthy said there had been a sharp change in the age composition of the market over the last five years.
He said a “destabilising shrinkage” in the 18 to 39 age groups – by 194,000 customers – had been accompanied by a rise in the over-60s group, which now accounts for 18.5% of total enrolment.
Aviva Health chief executive Alison Burns said this was the main problem of the health insurance market.
“The fact is the claims cost of a customer over 70 years is almost ten times that of a customer aged 20,” Ms Burns said.
“This problem must be addressed by all of us working in the health sector today, both public and private. The two sectors are inextricably linked.”
Aviva predicts health insurance premiums will rise by up to 30% by 2015 if Government plans to charge private patients for occupying public beds go ahead.
“Inevitably, more hard-pressed younger customers will drop out of the market and the full burden for healthcare provision falls back on the State and ultimately, the taxpayer,” Ms Burns added.
The report claimed the cost of health insurance has more than doubled in real terms from 2007.
Latest figures from the Central Statistics Office at the start of May revealed the unemployment rate was 14%.
The review of the labour market found a total of 417,593 people signed on for benefits in April – 186,063 of those were out of work for more than a year.
Meanwhile, a recent poll for the National Youth Council of Ireland revealed that half of all young people aged between 18 and 24, and four out of 10 aged 25 to 34 have considered emigrating.
Some 41% of those considering moving abroad said they would leave because they were unemployed.