Health insurance penalties could cut premium prices
Published 14/07/2014 | 02:30
THE head of the largest health insurer said the move to penalise people who wait until later in life to take out cover opens up the prospect of price cuts.
Chief executive of VHI Healthcare, John O'Dwyer, said more young people were now likely to enter the market, "which would help the VHI and all insurers on pricing".
Health insurers are coming under pressure to cut premiums after the government brought in new rules to penalise people who delay taking out cover.
Thousands of consumers are now expected to take out insurance for the first time, after former health minister, James Reilly, last week signed an order to impose loadings on the premiums of those buying a policy late in life. VHI, Laya, Aviva and Glo are set to benefit from a surge in new customers, prompting calls for them to cut premiums.
Now the VHI boss has admitted the move to bring in life community rating would help the four players ease up on premium rises.
Community rating is the system where everyone pays the same for a similar level of cover, irrespective of their age and the condition of their health. Lifetime community rating means that there are penalties imposed on those who wait until they are in their late 30s and beyond to take out cover.
Mr O'Dwyer said: "Young people are lower risk. If you get a good proportion of young people into the market I would see that this would help the VHI and all insurers on pricing."
He said the introduction of lifetime community rating was a progressive measure and would help stabilise the market.
Health insurance has more than doubled in cost since the downturn started in 2008, pushing around 266,000 people to drop their cover. Most of those giving it up are in their 30s and 40s.
Asked if the move would lead to price rises, Mr O'Dwyer said: "This ultimately will stabilise the market. Ageing is one of the key reasons for pricing in health insurance. So anything that slows down the ageing of the community in health insurance will definitely slow down price increases."
From May 1, 2015, people over the age of 35 who buy health insurance for the first time are to have a loading imposed on their premiums. And those who have left the market will only get credit for those years they had a policy. However, there will be a grace period of nine months, to next May, to allow all new entrants and those returning to the insurance market to now join without any penalties.
This week the Irish Independent will have special reports on health insurance. Tomorrow, we look at how the over-50s can reduce the cost of their cover, and on Wednesday, we focus on the best value plans for families.