Saturday 14 December 2019

Richard Curran: People can't be left behind in the health insurers' race for profits

Some health insurers in the US offer people discounts if they do a certain amount of exercise each day – but what happens when you can’t reach the targets? Stock image
Some health insurers in the US offer people discounts if they do a certain amount of exercise each day – but what happens when you can’t reach the targets? Stock image
Richard Curran

Richard Curran

I remember the first time I saw an American newspaper advertisement for cheaper health insurance based on lifestyle. The ad asked the question: "Can you run a mile in eight minutes." If you could then, basically, you would get a discount on your health insurance premium.

I could run a mile in eight minutes. Yet, I felt the ad portrayed a crude and uncaring system of healthcare provision. Under that kind of system, how much would I have to pay when I could no longer run it in eight minutes?

For example, many of us feel we are reasonably decent drivers. We often wonder why we can't get a better deal on our motor insurance than some of those "crazy muppets" we encounter speeding recklessly around the place.

The bottom line with motor insurance is that we are priced on our risk, which is based on a relatively crude set of facts about our profile, such as our age, our experience, where we live and our track record, etc.

There are benefits to finding a better way of pricing risk for drivers - and some insurers are doing that now. However, never for a split-second would I consider an entitlement to cheaper health insurance because of my lifestyle.

That is because health insurance is different. No matter how fit or healthy we are in our younger years, we all get older. That inevitably means that a risk-priced health insurance system will lead to massive premiums in our later years.

I might be a conscientious driver now. Chances are I will continue to be conscientious when I get older. But irrespective of how conscientious I am about my health, I will need more medical care as I age.

Ireland is one of a number of countries that applies community rating to the health insurance market. It prevents health insurers from charging premiums based solely on risk profile. Just because you are older, doesn't mean you can be charged more.

Yet, the long-established and, I believe, fair system of community rating in Ireland has once again been questioned from within the health insurance industry.

Jim Dowdall, managing director of Irish Life Health, was reported in the Sunday Times as advocating a new approach that could undermine the community-rating principle. He is in favour of health insurance being offered as a multi-year policy tied into health and wellness programmes.

"Changing the regulatory environment to support an increased focus on initiatives and programmes that will keep people healthier would help," he was quoted as saying.

We are all in favour of keeping people healthier but achieving that through a health insurance incentive simply opens the floodgates for a premium free-for-all on older clients. It also raises privacy issues around proving ones ongoing health.

In the US, for example, insurer John Hancock offers a 15pc discount on your life insurance if you do 15 minutes of exercise a day. But you only get the discount if you use a health-monitoring wristband that enables exercise tracking. You have to make your wristband data available to the company.

Abandoning community rating doesn't mean going to that extreme, but it opens up the principle.

Even if I disagree with Mr Dowdall on the issue of abandoning community rating, he is right about several other things.

He has said that an ageing Irish population is going to cost us all more and it will push up health insurance premiums. Mr Dowdall believes Ireland will need to build three new hospitals the size of Beaumont over the next 10 years to cater for its ageing population.

He is right that seriously responding to the pending health care crisis will require a political change of mindset.

The only way we could abandon community rating and retain some kind of fairness in the system, would be if the entire public health system was completely re-invented or a new workable universal health insurance system was introduced.

The former is unlikely to ever happen. The latter is Fine Gael policy, but as a plan it has had to be abandoned because it would cost too much money.

In the meantime, the dysfunctionality of our current system continues. Health insurance premiums continue to rise. Dumping community rating would not solve the problem but simply allow the three health insurers in the market (and there are only three) to cut prices for the young, explode prices for the old and make a shed load of money.

Laya Healthcare made pre-tax profits of €15.7m in 2015, an increase of 22pc, in a market with community rating. Not bad money. With 300 different health insurance plans in the market, there is already a "confusopoly" where companies with similar products confuse customers instead of competing on price.

In Ireland, close to 50pc of people have health insurance cover. The number is so high for two reasons. Firstly, the public system is a shambles which drives more and more people into paying for private care. Secondly, because of community rating the cost for older people is not as prohibitive as it would be without such a government policy.

In the UK, for example, around 11pc of the population have private health insurance. In theory, our public system is supposed to be similar to and built on theirs. But theirs works much better and that is why they see health insurance as a luxury rather than a necessity.

Furthermore, they don't have community rating. Health insurance cover for a 70-year-old can be three times the price paid by a 35-year-old.

Many insurers won't take you if you have illnesses or health problems. They tend to provide care in private hospitals rather than in public ones.

Depending on your postcode, you could end up paying £130 more a year based on one survey.

In countries that have community rating, take-up rates for private health insurance among those aged 65 and over is similar to the market average. In the UK, where risk rating applies, it is just over half of the market average. Older people stay away from health insurance.

People in their 20s in the UK cost the NHS an average of around £300 (€341) per year. For those aged 45-49, it is still only around £500 (€569). But once they hit 70+ it goes to £1,250 (€1,423), right up to £2,700 (€3,074) for those aged over 85.

This gives some indication of the economics involved and how they would apply in Ireland without community rating. Health insurers could make a killing by focusing on younger customers and lots of them, or by hitting the more expensive older ones with multiples of what they pay now.

The company that focuses on younger healthier consumers, might not even be around in years to come but could build up a customer base and then sell it on, as has already happened with new entrants to the Irish market.

At least Mr Dowdall is right to raise the issue of the wider structural problems with the system once again. The government hasn't so much buried its head in the sand as buried the problem in a special cross-party Oireachtas committee.

This committee was tasked with coming up with a future vision for the health services when it was set up last summer. It has taken submissions, had public sessions and is due to produce its final report later this month.

The terms of reference were too vague and the timeframe too short to examine anything in detail. For example, its terms of reference refer to devising "cross-party agreement on a single long-term vision for health care and direction of health policy in Ireland".

There are two problems here. It talks about a "vision" and a "direction." It doesn't refer to a strategy, a plan or an actual policy.

Its terms of reference are so woolly that one of its submissions came from a group seeking to have more art included in the provision of health care. I am all for art, but should it sit in the same report as an analysis of the future role of community rating, or universal health insurance?

There is confusion about the status of what it will come up with. Various submissions and even the committee's own literature refer at different times to how it will devise a "plan", "a strategy" and "a vision" interchangeably. They are not the same thing.

The vaguer it is, the better the chances of reaching a relatively meaningless cross-party agreement. Actually putting its conclusions into concrete government policies would be very different and isn't what is on offer.

Even Fine Gael's "commitment" to universal health insurance, which was an actual policy, was abandoned with ease.

In the absence of a genuine political sea change, we have to hang on to what remains of the social contract between us all in the health system.

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