Health insurance 'hit by age swing'
The crisis-hit health insurance market risks being damaged beyond repair by youth unemployment and emigration, according to a new report.
The entire community-rated system could be destabilised if the number of young policyholders continues to fall and forces companies to heap higher premiums on older members, warned economist Colm McCarthy.
Mr McCarthy said: "Once a concerted shift in the age-distribution of members away from the younger age groups becomes established, rising average premiums can make a community-rated system dynamically unstable."
A community-rated system requires a sizeable portion of young, and therefore healthy, policyholders to offset the high costs incurred by older members. With fewer young and low-claiming members, insurance companies are forced to pass on higher rates to balance their books.
The report, commissioned by Aviva Health, showed a rapid decline in the number of people aged 20 to 29 taking up a policy. It found overall membership had fallen to 45.7% in December 2012 from 50.9% four years beforehand.
Mr McCarthy said there had been a sharp change in the age composition of the market over the last five years. He said a "destabilising shrinkage" in the 18 to 39 age groups - by 194,000 customers - had been accompanied by a rise in the over-60s group, which now accounts for 18.5% of total enrolment.
Aviva Health chief executive Alison Burns said this was the main problem of the health insurance market.
Ms Burns said: "The fact is the claims cost of a customer over 70 years is almost ten times that of a customer aged 20. This problem must be addressed by all of us working in the health sector today, both public and private. The two sectors are inextricably linked."
Aviva predicts health insurance premiums will rise by up to 30% by 2015 if Government plans to charge private patients for occupying public beds go ahead.
"Inevitably, more hard-pressed younger customers will drop out of the market and the full burden for healthcare provision falls back on the State and ultimately, the taxpayer," Ms Burns added.