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Health system at tipping point

The 6pc price increase announced by Quinn Healthcare yesterday piles further pressure on an already stressed private health insurance market. Following last November's average 12pc price increase, Quinn Healthcare customers are facing a near 20pc increase in premiums in the space of just two months.

Rival health insurance company Aviva has already announced a 15pc price increase, which will take effect next month. This follows a 9pc increase last August.

VHI, still by far the largest health insurance company with almost 60pc of the market, has also warned that it will be increasing its prices following changes in the way private patients pay for public hospital beds that were announced by Health Minister James Reilly at the time of last month's Budget.

Health insurance prices have been rising much faster than either overall inflation or wages for many years. This is due to a combination of factors. As the population ages, demand for health care increases. Advances in medical knowledge are leading to the introduction of expensive new treatments and procedures. Throw in the fact that the Department of Health is squeezing the health insurance companies hard for extra cash when their customers use public hospital beds and it's not difficult to figure out why premiums are soaring.

Despite this the number of people choosing to pay for private health insurance continued to rise during the Celtic Tiger years. Not anymore.

With more than 300,000 people having lost their jobs since 2008 and most of those who remain in employment having seen their disposable incomes decimated by wage cuts and tax increases, 123,000 people have given up their private health insurance since the end of 2008.

The latest price increases will almost certainly force even more people to let their private health insurance cover lapse. While over 2.17 million people still have private health insurance, about 47pc of the entire population, the steady erosion of customer numbers is rapidly destabilising the entire market.

The health insurance market relies upon economies of scale. If, as is now happening, large numbers of people give up their private health insurance, an ever heavier financial burden falls on an ever-decreasing number of customers. If this continues for any length of time then health insurance rapidly becomes an unaffordable luxury for all but a tiny number of people.

While we haven't reached this tipping point yet, we're close, very close. If another 123,000 people were to give up their health insurance would the health insurance market be capable of surviving in anything resembling its current form? It might not be a good idea to bet on it.

This must not be allowed to happen. The budgetary implications of hundreds of thousands of private health insurance customers being forced back into the public system would far exceed any extra revenue Dr Reilly could hope to collect from the health insurance companies and their customers.

Irish Independent