The recent developments regarding the future ownership of the VHI, the country’s largest health insurance company, have important consequences for everyone who has a private health policy.
Soon, everyone who is not a member of either the state owned VHI or its two private rivals, Quinn Healthcare and Aviva Health will have to decide whether or not to take out private health insurance if they have not already done so.
Delaying that decision will inevitably result in a lifetime of higher payments.
This is because sometime later this year the government intends to bring in a new regulation regarding ‘lifetime’ community rating.
Currently, everyone is charged the same premium for a health insurance plan, regardless of age.
This form of ‘community rating’ means that younger, healthier people subsidise older, less healthy ones and in turn, when they become older, are subsidised by the young.
The problem with this pyramid payment system is that if the young can no longer afford to pay – like during a deep recession – or not enough of them keep joining up every year, the pyramid topples.
This is point we have nearly reached because of the disproportionately high number of older members of the VHI (they have 90 per cent of all the sector’s members over age 60) and the fact that the economic downturn as resulted in a sharp loss of mainly younger members in the past year.
In an effort to stop the erosion, the government will announce a new set of age-related premiums that may range from an extra 10 to 80 per cent more.
Anyone joining a private health insurer for the first time in say, their 20s or early 30s, will pay the lowest annual premiums; those premiums will automatically rise if you join in your 40s, 50s, 60s or later.
Nevertheless, as figures produced by the Health Insurance Authority have shown, private health insurance remain one of the most resilient discretionary consumer products in Ireland.
Figures out this week from the Health Insurance Authority, shows that membership is down, but there are still approximately two million subscribers.
The reason for this huge coverage is the continuing long waiting lists for many treatments and referrals, the high level of hospital acquired infections and the €1 billion that must be cut out of the HSE budget in the next year.
The experience of the majority of people with private health insurance, as shown by independent HIA surveys, is mostly a positive one.
The delivery of treatments and benefits from the private insurers and private hospitals, happens efficiently, and up to recent years, at an affordable cost.
Nevertheless we have now hit a tipping point in the survival of community rating in particular.
This is because the Government abrogated its original responsibility to fully end the VHI monopoly and sort out their legacy issue of so many older members.
And of course, because the community rating system was always going to fail once the ideal economic and demographic circumstances ended, as they have now.
So what should you do, aside from joining a plan before the new restrictions?
Dermot Goode, a well-know health insurance advisor, (www.healthinsurancesavings.ie) has passed on the following advice to readers. We’ve added some suggestions of our own:
* Get your policy reviewed by a knowledgeable advisor/broker or compare the cost of plans at www.hia.ie
* Cancelling your cover may be unavoidable for some people, but you should first try to reduce your costs
* Consider plans that offer student rates, split cover, foregoing day-to-day cover, plan reductions, changing renewal dates and corporate plans
* If you opt out of health insurance, consider taking a one-premium per family health cash than from the likes of HSF (www.hsf.ie)
* For the long term, invest in your health and that of your family by giving up smoking, drinking less, losing weight, eating more healthily and exercising more. Go for regular checkups and screenings.
* Consider starting an ‘emergency’ health savings account or investment fund specifically to help pay for ever higher health insurance premiums or to pay for treatments/operations that may not be covered by your insurance in the future. A good financial advisor can help you find the right account or fund for this health.
* Review your wider accident, income and life insurance policies, some of which may cover hospitalisation costs or pay lump sum payments (i.e. a serious illness policy) if you do fall seriously ill.