Harney urged to bring in risk equalisation

FAILURE by Tánaiste Mary Harney to introduce risk equalisation before the end of the year could have a catastrophic effect on the health insurance market, experts warned yesterday.

The scheme, in which insurers with low claims costs transfer cash to companies insuring higher risk clients, is designed to maintain fairer premiums which do not penalise the old or unwell.

Without it, employees could be faced with prohibitive price rises, with increases of as much as 600% to 700% for older people, the head of Farrell Grant Sparks (FGS) Consulting Tom Murray warned.

Mr Murray said that the Minister was playing 'Russian roulette' with the health insurance market and that the employees, their dependants and those retired from employment would be the big losers.

Mr Murray was presenting research commissioned by trade union Amicus at a seminar in Dublin yesterday.

"Government policy for the Irish health insurance market is based on the concept of community rating, which means that everyone has the same premium, irrespective of their age or health status," he said.

According to Government policy and the law, community rating is supposed to be underpinned by risk equalisation, which essentially involves a cash transfer from insurers with a lower cost of claims to those with a higher risk base due to the fact that they cater for older and/or less healthy subscribers.

"This year alone, the Tánaiste has on two occasions declined to introduce risk equalisation in the Irish market, following strong recommendations to do so from the Health Insurance Authority.

"The Tánaiste is required to make a decision on this issue before December 26and the effects of her deciding not to introduce the measure will have a catastrophic effect on the stability of the health insurance market and the viability of the VHI which is budgeting for a loss for the first time in its long history," Mr Murray said.

"Market failure and the collapse of the VHI would be catastrophic and would put older workers and the retired most at risk."

Mr Murray warned the introduction of risk equalisation was a must for an affordable and fair regime of health insurance.

John Tierney, national secretary of Amicus, said insurers such as Bupa were cherry-picking low-risk customers, leaving VHI with the high-risk burden.

He called for the Tánaiste to introduce risk equalisation because the financial instability of the health insurance market was a real issue for Irish workers.

"We would be concerned that significant price increases, even if they are lower than the 600-700% suggested by FGS, would lead many employers to decide to discontinue their contributions to their staff's health insurance scheme," Mr Tierney said.

"In such an eventuality, the likelihood is that thousands of current and retired Irish workers would end up having to rely on the already greatly over-stretched public health system.

"While the Government claims to be committed to the maintenance of community rating, in practical terms they are undermining the principal by failing to implement risk equalisation.

"We believe that the minister is making decisions based on ideology and private sector greed, masquerading as market competition," he said.

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