Thursday 19 October 2017

Late-entry levies are cruel, but system would collapse without younger people

Younger people are subsidising older people’s treatment through their health insurance premiums (Stock picture)
Younger people are subsidising older people’s treatment through their health insurance premiums (Stock picture)
Charlie Weston

Charlie Weston

In many ways it was a cruel thing to do. Two years ago the rules were changed to penalise younger people who delayed taking out health insurance.

The changes meant that after a set date those who waited until they were over the age of 35 would have to pay more for their premium than those already in the system.

And the trick seems to have worked.

May 2015 was set as the cut-off point, and people of all ages who did not previously have health insurance could take out a policy up to that date without incurring a late-entry penalty.

Known as 'lifetime community rating', this late-entry loading adds 2pc to the cost of premiums for those aged 35 or more who are taking out health insurance for the first time. The loading is designed to encourage consumers to take out insurance early in life.

There was plenty of warning about this, and it is now clear many people responded by taking out a policy for the first time.

Now close to a quarter-of-a-million people between the ages of 25 and 35 have a health insurance policy.

This is up almost 14,000 on the number at the end of 2015, before lifetime community rating came into operation.

Community rating is important. It is a system of ensuring that everyone with the same level of cover pays the same price, irrespective of how healthy they are and their age.

What happens is that a levy, which is currently €444 per adult, is applied to policies. This money goes into a fund. Health credits are then paid to insurers for people over 60 to meet their higher claims costs.

What it effectively means is that younger, healthier policyholders are subsidising older, less healthy subscribers.

But without younger people the private health insurance system would collapse. This is because health insurance would be prohibitively expensive for older people, precisely the time in their life when they need high-grade health cover the most.

Irish Independent

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