Hikes ‘will force young people to cancel coverage’
Dermot Goode, who runs consumer advice website healthinsurancesavings.ie, said a new government insurance levy of 40% would undoubtedly lead to further premium increases.
Mr Goode said tens of thousands of people had already cancelled their health insurance, and as premiums continued to rise so would the level of cancellations, putting even more pressure on the public system.
“The challenge for the industry is that those cancelling tend to be the younger and healthier,” he said.
“The impact of this trend is that the insurers are left with higher claims costs which causes more upward pressure on premiums and thus the cycle of increased cancellations continues.”
The VHI welcomed news that the health insurance levy was to increase by almost 40% for adults and almost 44% for under 18s.
Declan Moran, chief executive of VHI Healthcare, said it was a step in the right direction to safeguarding the future of community rating and keeping health insurance affordable for all.
VHI Healthcare’s market share has consistently fallen and this has been mainly in the younger age groups. Quinn Healthcare and Aviva Health Insurance combined have 47% of market share in the 30 to 39 years age group but only 9% of over-80s.
VHI Healthcare now has eight times the proportion of members in the over 80 years age group than Quinn Healthcare and six times the proportion in this age group of Aviva Health Insurance.
“In order to have a truly competitive marketplace you need to regulate the market in such a way that it is equally attractive to insure an 80-year-old as it is to ensure a 30-year-old,” said Mr Moran.
“It is only then that you will see the market function correctly. As it stands new entrants to the market basically cherrypick younger customers leading to market segmentation and ultimately older customers paying more.”
Quinn Healthcare expressed disappointment at the announcement.
Managing director Dónal Clancy said: “This increase is bad news for consumers, as health insurance customers continue to subsidise the inefficiencies of the unregulated VHI and those customers on the lowest level schemes continue to carry a disproportionate burden of the health levy.
“There appears to be a lack of understanding in terms of what’s required to create an efficient and competitive market and, critically, what the consumer can genuinely afford to pay for private health insurance.
“Ultimately the impact of this measure will be to put even more pressure on the public system as consumers are forced to opt out of private health insurance.
“Undoubtedly even more people will be forced into a public health system which is already buckling under intense pressure. It is difficult to understand the Government’s rationale behind such a significant increase.
“We have sought open consultation over successive governments in order to ensure the fundamentals of a community-rated market, but to no avail. We need to have genuine engagement in order to agree a path forward which can benefit both the healthcare system and, most importantly, the Irish consumer.”
Health insurance levy 2012:
* Applicable to health insurance contracts taken out or renewed in 2012
* Insurance companies must pay the Government €285 in respect of each insured person aged 18 or over (2011 rate €205), and €95 in respect of each insured person aged less than 18 (2011 rate €66)
* The money generated is redistributed in the industry to offset the cost of insuring older people
* It is not yet clear how much of this will be passed on to customers
* Health Minister James Reilly said the health insurance levy should not lead to an increase in premiums.
* VHI Healthcare, which is set to benefit, said the cost would not be passed on to customers.
* Aviva said it would absorb the cost “for the moment”.
* Quinn said it was “bad news” for consum-ers and costs like this were “difficult to absorb”.
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