Health insurance cover may be cut to avoid levy

Consumers with the most basic levels of private health insurance face further reductions in cover if they are to avoid the knock-on effect of an imminent €65 hike in the government health levy.

New risk equalisation legislation requires that an additional €65 be levied on adults who are regarded as “advanced” policy holders and an extra €25 on children.

The substantial hikes were not intended to be applied to those with the most basic insurance packages. A two-tier system was envisaged, with those with more advanced plans paying the higher levy.

However, a Health Insurance Authority audit of the market found none of the available plans conform with the legislation’s definition of basic, meaning all policy holders face forking out the extra cash unless their plans are downgraded. The cut-off point to decide what is basic and what is advanced has been set at 66% of cover for a private hospital.

In a statement yesterday, the authority said insurers would be able to introduce new and amended plans both before and after Mar 31, the point at which the new health levy kicks in.

Plans that stay below the 66% threshold will be subject to a lower levy of €5.

However GloHealth, the most recent entrant to the Irish market, has called on the Government to amend the legislation to protect those on basic policies and to prevent any further exodus from the private health insurance market, where cover has dropped from a peak of 54% to 46%.

GloHealth chief executive Jim Dowdall said Health Minister James Reilly had promised to insulate those on low levels of cover but had not done so.

“An individual with an existing basic policy costing €520 will see an increase in premium of approximately 10%. After March, the government levy will constitute over 55% of their premium cost. It is a potentially crushing blow to those who want to retain their health insurance.”

Dónal Clancy, managing director of Laya Healthcare, said the new levies would inflict “additional pain on already cash-strapped customers”.

Health economics expert and UCC lecturer Brian Turner said he believed the legislation had been pushed through the Oireachtas too quickly, in less than three months.

“James Reilly has been trying to push through a huge amount of legislation on health reform in a short period of time. He needs to slow down, and get it right,” he said.

A spokesperson for the minister said the changes being introduced “are intended to be of benefit to consumers and to the insurance companies as well”.

“There is now real clarity as to the level of benefits that attract a lower level of stamp duty (health levy) so the companies can design products to better suit their customers,” the spokesman said.

The health levy does not go to government but is redistributed among the insurance companies to offset the risk of having an older, more infirm, customer base under a system of risk equalisation. This means that the lion’s share goes to the Vhi, which has an older customer base.

All health insurance policy holders currently pay a government levy of €285 (adults) or €95 (child) as part of the risk equalisation scheme. This will change to €350 for adults and €120 for children who hold “advanced” policies after Mar 31. The hike will be €5 if insurers come up with more basic packages.