Tuesday 22 October 2019

Insurance market is showing the symptoms of 'death spiral'

Charlie Weston

Charlie Weston

THE health insurance market in this country is displaying the classic symptoms of a "death spiral".

That is where the cost of an insurance plan rapidly increases due to changes in the type of person taking out the cover.

What typically happens is that the least risky ditch their insurance or drop to a lower level of cover. This death spiral is happening before our eyes in the private health insurance market. The young, and least risky, are deserting the market in their droves.

Some 194,000 of those under the age of 40 bailed out in the last five years. Over the same period, 52,000 people over 60 took out a health insurance policy for the first time.

This is despite the fact that a healthy young 30 year old will pay the same premium, for the same level of cover, as a sickly 70 year old. This is what is known as community rating and is a central plank of Irish health policy.

But a community-rated system needs a large number of younger people coming into the system to offset the massive cost of older subscribers.

The high numbers of older people with health cover is set to push up premiums by 15pc.

Also destabilising the market is the move by Health Minister James Reilly to charge anyone with insurance for using a public hospital, whether they get a private, semi-private or public bed.

The Government seems to see those with health insurance as some sort of cash cow to be repeatedly hit. All of this will send an average family's policy up by €600 a year.

Few families will be able to absorb that sort of price hike. So more will leave the market. This will typically be younger people with mortgage difficulties and those suffering from unemployment.

That is why we are in the throes of a death spiral.

Irish Independent

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