Health insurance - Equalising risk is still achievable

The Supreme Court ruled that the Government’s scheme for risk equalisation in the health insurance market should be set aside. The ruling was not that community rating — whereby people of various ages are entitled to insurance at the same rate as younger people — was unconstitutional, but that Health Minister Mary Harney had exceeded her authority under the Health Insurance Act of 1994 in how which she sought to enforce risk equalisation.

The essential difference of interpretation revolved around the concept of community rating.

The Government held that the community to be rated was the entire population with health insurance, whereas the Supreme Court ruled that the rating process should apply to each particular policy or plan.

In the unanimous opinion of the court the Government exceeded its powers by misinterpreting the meaning of risk equalisation. The Health Minister had acted outside her powers and risk equalisation, in the limited form in which it was introduced, should therefore be quashed.

The Government had been insisting that all the other health insurers had to pay the Voluntary Health Insurance (VHI) compensation because the age profile of its members is much higher. It has been coming from a virtually dominant position in the market, so it already has a greater proportion of older people. The VHI has 20 times more people over 60 years of age than its competitors. This inevitably includes a greater proportion of chronically ill people.

The impact of the court decision does not necessarily mean that younger, healthier people should get insurance at a cheaper rate than older people. The Supreme Court did not rule that risk equalisation must be scrapped. It is still open for the Government to insist there should be risk equalisation within each of the plans or schemes offered by the insurance companies.

Risk equalisation had been adopted by many European countries. The Supreme Court only ruled against the selective way in which it was being enforced by requiring other companies to give money to the VHI.

Instead of giving money to VHI, the other companies can use that money to ensure that their various schemes or plans are available to all at a rate regardless of age.

Spokesmen for rival insurance companies Quinn Healthcare and Hibernian Health acknowledged this yesterday, but whether there is effective risk equalisation will depend on the amending legislation that the Government will have to introduce to replace that struck down by the Supreme Court.

The decision has introduced a high degree of instability in the health insurance market, involving 1.6 million Irish people. The Government must act to rectify its mistake.

Community rating and risk equalisation are worthy concepts, but they were being applied in a discriminatory manner that was undermining real competition.

In the interest of equity, the government should insist that — regardless of age or risk profile — people should be charged the same premium for any plan.