Health insurance pay outs to be cut

HEALTH reforms, including a 20% reduction in payments by health insurance companies under the risk equalisation scheme, are being sought by the Government.

Thu, 26 Apr, 2007 - 01:00

Dan Collins

The derogation the VHI had from meeting minimum solvency requirements has been brought back from 2012 to 2008 and the Department of Health will appoint legal and corporate advisers to assist the VHI in finding enough reserves to meet the new target.

“The fundamental issue of creating a level playing field in the market is being brought forward to the earliest possible date,” Ms Harney said in a statement.

Risk equalisation is designed to compensate the VHI for the fact that it has an older client base and likely to have higher claims on health insurance premiums than those companies with a younger customer age profile.

“To encourage competition and new entrants, and having regard to proportionality, risk equalisation payments will be discounted by 20%. These changes should encourage more competition in the market,” the Minister stated.

The changes before Government come in the wake of reports by the Competition Authority, the Health Insurance Authority and the Barrington report.

The VHI said the removal of its derogation from normal solvency requirements by the end of 2008 could be hampered by the dilution of the risk equalisation formula.

Fine Gael’s health spokesman Liam Twomey called for a debate on the proposals, which he said should not be rushed through the Dáil.

Meanwhile, private health insurance group schemes are to be put out to tender on a regular basis, as part of the reform measures which have been approved by the Government.

Companies with payroll deduction schemes will be required to offer at least two companies’ products to employees in accordance with the pro-consumer changes being introduced by the Minister for Health and Children, Mary Harney.

“In recent years the market has been subjected to uncertainty because of legal challenges to the regulatory framework and threats to leave the market”, Ms Harney said.