VHI’s self-defeating system a bad deal from the start

HEALTH insurance risk equalisation is a typical example of what happens when politicians want other people to pay for what is in effect social engineering.

If the Government had been prepared to pay for risk equalisation, there would have been no problem.

This idea does not apply to the same extent in other forms of insurance. Owners of small properties are not expected to subsidise owners of large ones. Safe drivers pay less than unsafe ones and individuals who start pension schemes late in life are not ‘risk equalised’ by those who start early.

Is it right that someone who waited until they were 60-plus before joining should pay no more than someone who joined at 30?

Can the VHI show just what proportion of BUPA’s customers would have joined them had BUPA not come into the market — and say what difference they would have made?

People can recognise a bad deal when it is offered to them. The system that was imposed on the VHI was poor value for anyone who went into it when they were young. Most realised this and avoided it.

The result is that the VHI’s customer base is unbalanced towards the elderly and the charges have to take account of this. This system is self-defeating. That did not matter until it was open to competition, when the VHI appear to have gone back to Government saying, ‘you got us into this mess — now get us out of it’.

Risk equalisation was their answer. If you want people who are young to take out health insurance so that payments are spread across a wide age range, then it must be made attractive to them. 1. Set standard rates which are economic for those who only join the scheme when they are aged 60 or over.

2. Anyone who joins earlier is rebated 1% for every year under 60 down to a minimum age of 25 (rebate 35%). So a person who joined at 30 would pay 70% of the standard fee and retain that advantage provided they remained in the scheme.

At 60 they would pay 70% of what would be expected from someone who delayed joining until that age.

Obviously, I cannot say 1% a year is the right figure — I just give it as an example.

Allen Crosbie

Merville

Cobh

Co Cork