Over-50s will get health subsidy in new Harney plan
Younger customers to foot insurance bill
Sunday November 16 2008
THE Government is planning to introduce new measures to shield older people from massive hikes in private health insurance premiums by making younger customers subsidise the over-50s.
Health Minister Mary Harney said yesterday that the dramatic proposals are aimed at protecting older people who could see their insurance premiums soar by at least €600 a year from January, following a landmark Supreme Court judgment earlier this year.
The ruling was described as a "nightmare scenario" by an informed source, as it paves the way for insurers to hike premiums for older and sicker customers who are more likely to make claims.
"The bottom line is that doing nothing is not an option. We have to be sure that the young support the old among the two million people who have health insurance. That will mean that policies for under 50-year-olds will have to support those people over 50. It's only fair. There's no other way," Ms Harney told the Sunday Independent yesterday.
Her proposals will come before Cabinet on Tuesday and legislation will then be required to enact the measures. Informed sources said the new mechanism will "fundamentally ensure there is a subsidy for over 50-year-olds that is funded by the under-50s. It is likely to be administered through the tax system."
While the new mechanism is aimed at keeping health insurance affordable for the over-50s, the costs of premiums for younger customers will almost certainly increase, although it is unclear by how much.
Ms Harney came up with proposals after the collapse of the risk equalisation scheme caused chaos in the health insurance market.
Irish insurers traditionally charged everyone the same price for same products.
To keep the market level, this risk equalisation scheme required companies with younger customers to compensate rivals with a disproportionate number of older customers -- such as the VHI, which has 250,000 customers over 60.
In July, the Supreme Court ruled that risk equalisation was unlawful, throwing the insurance market into chaos by undermining the practice of community rating, or one charge for all.
It is understood insurers signalled they had no option but to start 'risk-adjusting' pricing. That meant older people who are likely to make more claims will be charged more than their younger, healthier counterparts.
Informed sources said many of those over 50 would face massive hikes that would see the cost of their premiums increase by between 60 and 100 per cent from January, bringing the cost of an average plan from €650 to as much as €1,300.
The Government was under pressure to act before the end of the month, when the policies of more than 800,000 customers come up for renewal, with potential increases due to take effect in January.
"It's a nightmare scenario", said an informed source. "In reality, health insurance could become like motor insurance. If you're a higher risk, you'll end up paying more. Everyone knows young men pay much more for car insurance. The opposite is going to happen for health -- the old will pay more. Much more.
"We could quickly get a to a point where older people simply could not afford to have health insurance at all. It would be like the UK, where only the wealthiest 10 per cent buy health insurance."
- MAEVE SHEEHAN
