Q&A: No huge jump in numbers taking out health insurance

Health insurance companies are experiencing a surge in callers ahead of the imposition of new membership rules but the anticipated massive jump in numbers signing up has not happened yet.

Q&A: No huge jump in numbers taking out health insurance

New penalties will apply to those over the age of 34 taking out cover for the first time with the introduction of lifetime community rating from Friday.

Anyone over the age of 34 who waits until after the deadline to purchase in-patient private health insurance will have to pay a loaded premium, up to a maximum of 70%, for the rest of their life.

Health insurance analyst and founder of Lyons Financial Services, Roisín Lyons, said the number of calls had increased but there had not been the expected “massive jump” in people signing up.

“More people are signing up because they know there is a deadline but they are not coming out in droves as the market expected them to do,” said Ms Lyons.

She believes people are not rushing to sign up because they are tired of additional taxation and see health insurance as just another charge. “I am concerned that people do not realise that health insurance is really a necessity these days. It is no longer free to attend a public hospital anymore because there is a statutory charge of €75 per day for overnight and day in-patient services,” she says. The charge is capped at €750 in any 12 consecutive months and does not apply to medical card holders and other groups.

“Even if you had a minimum health insurance plan you are going to save money if you have a significant stay in hospital,” said Ms Lyons.

There are 380 plans on the market but some people may be opting for cheaper ones without considering the excesses that will apply.

“We had an elderly couple who had gone online and chosen what they thought was the best plan for them.

“However, we were able to save them around €600 as an in-patient. The cost of the premium was a bit dearer but the whole point is to avoid a big hospital bill,” she says.

General manager of the health section of Cornmarket Group Financial Services Dermot Wells said there had been a doubling in the number of calls received this week, compared to the same week last year.

The average age was 44, with 40% of all callers just wanting to beat the loading by signing up for cheaper plans. However, Mr Wells pointed out that some of the cheaper plans had no private hospital access and very restricted public hospital access.

VHI’s customer service will stay open until midnight from today until Thursday. Laya’s lines will stay open to 10pm until Thursday. Aviva has also extended its opening hours.

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Health Insurance Q&A

By Dermot Goode

What is LCR?

This is a change to the existing community rating system. At present, everyone is charged the same regardless of age, gender or medical history. From May 1, anyone aged 35 or over taking out health insurance as a new member will have to pay a permanent age loading that will be dependent on their age, that is, the older you are, the more you pay.

Why is it being introduced?

There are three possible reasons behind this. Firstly, community rating is only sustainable long-term if you have a steady stream of young people joining as they subsidise the older members who claim more often. As 300,000 mostly younger people have exited the system over the past six years, the community rating system is under serious pressure. LCR will give a much-needed boost to the market as you should have a larger base over which to spread the claims burden which should mean lower annual price increases for everyone. Secondly, it eases the burden on the public system. Finally, there is an inequity in the current system which sees a newly- joined 54-year-old treated the same in terms of price and waiting periods as a similarly aged individual who joined 30 years ago when they were 24 and possibly funded the system without ever claiming. With LCR, those who join earlier will be rewarded by avoiding the age loadings.

How will it affect me?

First of all, if you already have health insurance or if you are under 35, this will have no affect on you. If you are 35 or over and you take out health insurance as a new member on or after May 1, then a 2% loading will apply to your premium for every year from age 35 onwards, that is, a 39-year-old will be charged 10% extra for their health cover whilst a 44-year-old will be charged 20% extra and so on. This is a permanent loading that will apply to your cover each year, not just in year one.

Will I get credit for previous health insurance cover held?

Yes, the legislation allows you to get full credit for cover already held as an adult either on someone else’s policy or on a policy in your own name. For example, if you are 50 joining on June 1, you should be liable for a loading of 32% (50 minus 34 multiplied by 2). However, if you had cover some years back for 10 years, then your loading will be 12%. The onus will be on the customer to prove to the insurer that you actually had this cover in place previously.

What if I had to drop my cover previously due to redundancy?

The legislation allows for some credit towards the loadings for this. For example, if you had to drop your insurance cover since 1 January 2008 by virtue of redundancy, the insurers are allowed to give you up to three years’ credit off the age loading. It’s not clear yet how the insurers will validate this, but you will have to provide some evidence of having lost your job.

How will the loading be calculated?

On the gross premium cost. For example, imagine a plan costing €1,000 gross per adult for the year. With tax relief at source, you will receive €200 tax relief and will therefore only have to pay the insurer the net cost of €800. However, if you are 44 and you join this plan as a new member on July 1, you will be liable for a 20% age loading (44 minus 34 multiplied by two). This will be calculated on the gross premium which will increase the cost to €1,200 gross. When you deduct your €200 tax relief, this leaves a net cost of €1,000 per annum going forward. If you join before May 1, you will avoid these loadings completely.

If I take out the cheapest plan possible prior to May 1, will I get caught if I upgrade to a much higher plan in the future?

No, once you have a health insurance plan in place prior to May 1, 2015, the age loadings will not apply.

If I have a medical card, will I be exempt from these age loadings?

No.

For those looking for the lowest cost cover to avoid the loadings, what are the best deals?

For an individual:

  • VHI Start Plan €449 per adult — covers most public hospitals;
  • Laya Assure First €395 per adult — covers all public hospitals;
  • Aviva Select Starter €425 per adult — covers most public hospitals;
  • GloHealth Base Lite €394 per adult — covers most public hospitals. This plan operates on a pay and claim basis for all claims;
  • For a family; two adults and two children:
  • VHI Start Plan €1,096 per family — covers most public hospitals;
  • Laya Assure First €990 per family— covers all public hospitals;
  • Aviva Select Starter €1,050 per family — covers most public hospitals;
  • GloHealth Base Plan €988 per family — covers most public hospitals.

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