Charlie Weston: Levies will test our love of health insurance
Published 02/10/2012 | 17:00
Some 2.12 million people subscribe to a private healthcare insurance policy -- an extraordinarily high number for such a small country of just 4.5 million souls.
Granted, 174,000 people have been forced to give up on private healthcare since the boom days back in 2008.
However, that number is small given the severity of the downturn.
The total who have given up on health cover roughly equates to the numbers in trouble meeting their mortgage repayments, but is far less than the numbers who are behind on their electricity and gas bills.
When money is tight people will prioritise two bills -- the mortgage and their health cover.
But the latest moves by the Department of Health to introduce a raft of new levies on private healthcare may mean that more people may be forced to give up healthcare insurance.
The new levies are being brought in by the Government to ensure older people don't have to pay more for health coverage.
As I write this, I have just put the phone down to an elderly lady who wanted it to be known that she and others in her age group are not responsible for health insurance going up.
So, is she right?
It is official policy that people with the same level of health cover pay the same premium, irrespective of their age and how healthy, or otherwise, they happen to be.
This is known as community rating.
To make community rating work a system of subsidies has to be put in place. This is in the form of a levy on every health policy sold.
This subsidy system is known as risk equalisation.
The VHI has most of the older people on its books.
Some 90pc of the 80-plus age group who have health insurance are with it. Just 5pc are with Aviva and another 5pc with Laya. New player Glo Health only got going this summer, so is not included in these figures from the Health Insurance Authority.
There is currently a temporary levy of €285 on every adult's health policy, with a €95 charge for children.
Most of the money collected from the existing temporary levy ends up going to the VHI to subsidise it for having the lion's share of the older and more expensive customers.
Now the Department of Health is introducing a new set of levies on health cover from January.
It is part of a formal risk-equalisation scheme to replace the current one. The State has promised the EU it will put a such a scheme in place by the start of next year.
In a letter sent by Health Minister James Reilly's department, it is explained that there will be four separate rates for the new levy.
In addition to the two rates for adults and children, there will be separate ones for those whose health insurance covers them for treatment in public hospitals only.
Another rate will apply for those with private hospital plans.
Health insurance experts said this would make it more expensive for insured people to get medical procedures done in private hospitals. Semi-private rooms in public hospitals will also get dearer.
The new levies could push up health insurance premiums by as much as €200 for a typical family.
All of this is coming at a time when the health premiums are rising anyway, due to high medical inflation and people making more claims.
Health cover costs have gone up five times in two years.
But go back over the last four years and you find that the average mid-level plan -- the ones favoured by families -- have doubled in price.
An analysis carried out by Dermot Goode of www.healthinsurancesavings.ie shows that an adult could have bought a mid-level plan for €665 in January 2008. This year a similar plan will set an adult back €1,240, a rise of an eye-watering 86pc.
This means that health cover is quickly becoming a luxury.
A new batch of four levies is set to make it even more expensive for families to afford private health insurance.
The new levies could push the cost of cover for a family of two adults and two children up considerably. Industry experts fear it could be as much as €200 for a family of two adults and two children.
We don't know for sure how much the new levies are going to be because the Department of Health won't say at this stage. But the omens are not good. Last year the temporary levy rose by close to 40pc.
The fact that the temporary levy is already €285 for an adult means that the levy accounts for half the cost of some of the cheapest plans on the market.
The net result of higher levies will be that more people will end up ditching their cover, with more pressure coming on public hospitals.
That seems to me to be community rating in reverse.