Health insurers told to slash premiums after years of hikes
Surge in customers expected as new penalties are unveiled
Published 08/07/2014 | 02:30
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 the Health Minister signed an order to impose loadings on the premiums of those buying a policy late in life.
A similar move in Australia led to a wave of new entrants into the market there. Householders here have suffered from years of premium price spirals. The cost of private medical insurance has doubled in the last six years, with an average family now having to shell out at least €2,500 a year.
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.
The rule change is expected to be a massive boom to insurers as thousands are set to re-enter the market, with others joining for the first time, health expert Dermot Goode said.
But those who hold off until after the age of 35 face penalties of 2pc a year for every year they are over that age.
This will mean a 40-year-old who takes out a €1,000 health policy for the first time after May faces a €120 loading if they join after that date, taking the total annual cost to €1,120.
And a family of two adults nearing their 50s will have to pay €500-plus in loadings on their policies if they wait until after May to take out cover for the first time.
The new rules will be mandatory for all insurers.
Allowance will be made for previous periods the individual held health insurance and for periods where they were unemployed and could not afford health insurance.
Liam Sloyan, head of the Health Insurance Authority (HIA) regulator, said similar rules in Australia led to a surge of new entrants.
Mr Sloyan said he expected the same to happen here.
This so-called late-entry loading was recommended in the 1999 Government White Paper on private health insurance.
Existing health insurance customers who retain their cover will not be affected, but could benefit from more entrants joining the two million who have policies.
Vice-chairman of the Consumers Association Michael Kilcoyne called on insurers to reduce their premiums.
"There has been a crisis around the cost of health insurance.
"This move should mean that insurers cut their premiums for everyone because they are set to be the big winners by getting thousands of new customers," he said.
And health insurance expert Dermot Goode of Healthinsurancesavings.ie said the four firms should lower their premiums.
"The insurers are set to see thousands of extra entrants forced into the system, and paying new premiums. They should respond by cutting premiums."
Health insurers welcomed the move, but when asked about price cuts said they were considering the implications of the new rules.
The new rule is known as lifetime community rating and is an attempt by Health Minister James Reilly to encourage more young people to join the market.
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.
Younger people make fewer claims than older people, so they are needed in the market to keep premiums down.
Dr Reilly said it was "inherently unfair" that someone could take out a health policy for the first time at the age of 55 and pay the same as someone who has been paying into a scheme for 30 years.
"It is very important that we try to encourage as many young people as possible to stay in the health insurance market, or get into the market," Dr Reilly said.
Some 250,000 people have dropped out of the health insurance market since the savage downturn struck in 2008.
Most of those leaving have been in their 30s and 40s, while there has been a net increase in those over the age of 50 joining the market.
In 2012 alone an extra 10,000 people over the age of 60 took out a health policy for the first time, but 71,000 under the age of 60 dropped their cover.
Many of those are now expected to take out some of the cheaper policies, which start at around €500 a year, in a bid to avoid being forced to pay higher premiums.
People who had insurance but opted out for a few years, will get credits for those years they held a policy. And people coming into the country for the first time, and returning emigrants will have nine months from the time they settle in the State to take out health cover without being penalised for being a late entrants to the health market.