Over-35 health cover penalty plan ‘will fall short’

Health insurance reforms designed to get more people to sign up for private health cover and to do so at an earlier age may fall short of expectations.

Experts have warned that changes next May that will see insurers charge people more for joining at the age of 35 plus will not address the fact that most people cannot afford health insurance, regardless of their age.

Charles Normand, professor of health policy at Trinity College Dublin, said: “I think there will be some young people who join, but not a huge rush, simply because they are under such financial pressure.

“Paradoxically, the people who are likely to have their hand forced by this are older people who are not currently members of the system because if they join within the next year, they get in under the wire. If they don’t, they will have very heavy loading against them.”

Professor Ray Kinsella, finance lecturer at UCD, also questioned the impact of the move. “The real problems have to do with affordability and this measure does not begin to address the affordability issue.”

The Society of St Vincent de Paul had similar doubts, saying the thousands of families it assisted every day were unlikely to be affected.

“The people who come to us are in the main people on low pay or on social welfare, and for them private health insurance may never be an option, regardless of the incentives or penalties,” said spokesman Jim Walsh.

Age Action said it welcomed the move if it protected community rating — the principle whereby all ages pay the same — for those who had maintained policies all their lives, but that would not help people pushed out of the market. Head of advocacy Eamon Timmins said: “Many of our members have been priced out of the market. We have people who have been with VHI for 30 or 40 years and now when they need it most, they can’t afford it. I’m not sure this measure is going to do anything for them.”

Those opinions contrast with that of Health Minister James Reilly, who said he expected the new ‘lifetime community rating’ system would spark a rush of new and returning customers between now and next May with people of all ages wanting to avoid the penalties, followed by a steady rise in young people joining before the age of 35 after that.

An expectation has also been created that insurers will reverse some of the price increases of recent years, but Prof Kinsella poured cold water on that. “I don’t think it can lead to a price war for the reason that, if you look at the small insurers particularly, there is no evidence at all of any excessive profits. In fact profitability is marginal. I would say all of the insurers are pricing to the bone.”

None of the main insurers would speculate on price reductions. Aviva said it would have to see what impact the changes had and it would become clearer in September and January, traditionally the busy time for renewals.

Laya Healthcare said: “In theory, lifetime community rating should create a fairer health insurance model for all.” But it said that depended on how the regulations applied in practice. Glohealth said the changes “will do nothing to improve the current affordability crisis”. It called for a cut in the health insurance levy, a hike in tax relief on premiums and the lowering of costs in public hospitals.

Q. How are health insurance premiums currently set?

, A. They’re based on the level of cover and range of services a customer wants regardless of their age, gender or state of health. So whether I take out a given policy at age 21 or age 91, or renew that policy at 21 or 91, the price must, by law, be the same.

Q. And what’s wrong/right with that?

A. It’s good from an ideological viewpoint in that it doesn’t discriminate. But it does annoy a lot of people that they can pay their policy for 40 years without fail and someone joining for the first time aged 60 gets the exact same cover for the same price.

Also it doesn’t make much business sense because older people generally suffer more ill-health, make more claims, and cost more for insurers to have on their books, so younger people are subsidising them.

With the economic downturn, there has been an exodus of younger people from the market and insurers have been pushing up prices to compensate which, in turn, means more younger people leave or don’t join up in the first place. Technically known as a vicious circle.

Q. What changes are coming in?

A. From May 1, 2015, insurers will penalise customers who take out a policy, or return to insurance after lapsing for a period, at the age of 35 or older.

The penalty, or loading, is an additional 2% on the price for each year from age 35 onwards. So someone taking out a policy at age 50 will pay 32% more than someone taking it out at 34.

Q. What’s the significance of the May 1 date?

A. It’s simply a grace period to allow people of all ages join up any time over the next nine-and-a-half months and avoid a loading for life — and to enable the insurers get their IT systems ready for the extra data collection and processing involved.

Q. What if I’m 50 now and I already have cover?

Will I be penalised each time I renew my policy after May 1? A. Not if you maintain your cover. You will remain forever 34 in the minds of the health insurance industry.

Q. But what if I’m 50, had insurance for 10 years, and only dropped it five years ago? Will I still face the full penalty if I rejoin?

A. No, you get credit for those 10 years in the form of a new age. Your insurable age will be 40 so you will only be loaded by 12%.

Q. What about the fact that I dropped my cover of 10 years because I lost my job, not because I’m reckless/disorganised/ wanted to spend more on cigarettes and buns? Will I be cut any slack?

A. Yes, you will get credit for up to three years of unemployment when you rejoin so if you sign up again at age 50, you’ll get the 10-year credit for your previous period of cover plus the three-year unemployment credit so your insurable age will be 37 and your loading will be 6%.

Q. I’m 40 and moving to Ireland for the first time at the end of next year. Is this how you red carpet new arrivals?

A. Don’t worry — this is still the Ireland of the welcomes. You’ll have nine months from the time you move here to join up without incurring any penalties.

Q. I’m 40 and a returning emigrant at the end of next year. Will I get the same concession?

A. You will — and you’ll also get credit for any period of time that you were insured here before you emigrated.

Q.I’ll be 100 next June and think I’ll treat myself to some health insurance then. Will I have to pay 132% more than my 34-year-old grandson?

A. No, the loading is capped at 70% which you hit at age 69. Join then or at any time afterwards and it remains at 70%.


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