'Carrot and stick' plan to get the young covered
Published 26/12/2013 | 02:30
COMMUNITY rating has protected older people from having to pay higher private health insurance premiums.
Although older people are more likely to make a claim, it means the level of risk a consumer poses to an insurer does not directly affect the premium.
Younger people end up compensating by paying a higher rate than their expected level of claims would necessitate, given their generally healthier wellbeing. Older people typically pay premiums lower than the risk associated with their cover would require.
At the moment, there is no real incentive for younger people to take out insurance.
Why pay over the odds for a product you're unlikely to need?
But now Health Minister James Reilly is planning to change that perception. The minister will reward people who take out private health insurance at a young age with cheaper premiums than latecomers to the market.
In a market shake-up, Dr Reilly will employ a 'carrot and stick' approach to encourage more young people into the health insurance pool.
The minister will introduce lifetime community rating where premiums will rise depending on the age a person first took out health insurance.
The move is part of a plan for driving down the cost of insurance. Discounts will also be offered to young people up to the age of 30 to get them to take out cover. The minister will allow for a higher premium for those that take out insurance for the first time later on in life.
The development means there will be a bonus for young people who take out health insurance policies that don't quite represent value for money.
Over time, they will reap some benefit in the form of a loyalty bonus. The proposal has been there in the background for more than a decade, but has never been formally acted upon.
Dr Reilly confirmed to the Irish Independent that he will proceed with the change.
The initiative is also an effort to rebalance the market, which needs more young people.
The market is currently top-heavy with older people, which is driving prices up. Bringing more young people into the health insurance pool should, technically, bring prices down.
The cost of private health insurance has continued to rise and the economic downturn has resulted in 250,000 dropping their health insurance, placing even greater pressure on the public health system.
Government initiatives have hardly helped the situation.
Finance Minister Michael Noonan's move to change the tax treatment of premiums in Budget 2014 will result in families being hit with increases of up to €360 in the annual cost of health insurance.
Mr Noonan insisted his move to cap the tax relief for health insurance policies would only affect 'gold-plated' plans.
But this was disputed by insurance experts, who insisted that the change would affect nine out of 10 plans.
The insurance companies were thrown into chaos with a mass repricing of plans.
Making the private health insurance market fit for purpose and bringing prices down is an integral part of the Government's plans to bring in universal health insurance.
Dr Reilly admits this process is going to take longer than just one term of government.
Universal health insurance is intended to support a single-tier health service, providing equal access based on need rather than ability to pay.
Under the scheme, everybody will be insured for a standard package of primary and hospital care services, with no distinction between 'public' and 'private' patients.
The goal is still some distance away. In the meantime, the minister is aiming at bringing about a mindset change among younger people that health insurance is a necessity even in their carefree lives.