Clock ticks on healthcover

In the field of health insurance, old people need young people. And right now in Ireland, as with the global pensions industry, there aren't enough of the latter to support the former.

In both pensions and health insurance, there are far more old people drawing down money than there are young people putting in money.

Here in Ireland, this has led to a distorted health insurance system, because the younger generation has taken something of a gamble since the economic crash: spending the money that would have gone on health insurance on more pressing purchases in the hope that they didn't have a major health issue down the line.

According to Donal Clancy, executive director of Laya Healthcare, notwithstanding the exigent economic circumstances, this approach has unsettled the overall health insurance market.

''The person who has been in an insurance plan when they're least likely to need it is doing a community service, he said, since they provide the cash that the older policy-holders need - and which they themselves will need when they get older and sicker.

New rules

The government agrees with him. Which is why, on May 1, 2015, it will introduce its new lifetime community rating scheme. The scheme is presented as an incentive to take out health insurance, but that incentive comes in the form of heavily punitive annual price loadings for people who take out their health insurance later in life.

At 2 per cent a year, the risk is not insignificant. A 30-year-old who waits until she is 40 to get health insurance will pay 20 per cent more than her colleague who does so before May of next year.

According to Jim Dowdall, chief executive of Glo Health, the plans will go some way towards rebalancing the serious age imbalance in the Irish health insurance market.

Lifetime community rating ''addresses one flaw in the system and could help stabilise the market in the medium term, he said.

For consumers, the introduction of the plan has a number of consequences, in terms of the prices they pay and the plans they take out - all with a big scary deadline looming.

But most experts are advising that there is time for customers to take as much advice as they can, to decide the best plans for them, and to get the most affordable deals.

Dermot Goode of financial services company Cornmarket said: ''I don't think we'll see any movement until January or February. Around 45 per cent of all renewals take place in [those months], with 20 per cent of the market in January alone.

This gives people time to take that advice and to sufficiently inform themselves. The issues that face them, most industry experts agree, relate to the price they can bear and the precise structure of the plans they can get.

And, those same experts agree, all the aces lie with the customer right now. Goode said: ''Right now, there's phenomenal value in the market for people willing to do a bit of work.

While the government is introducing these new penalties for health insurance laggards, the momentum is very much with customers, particularly younger customers.

The various companies, including VHI, Laya Healthcare, Glo Health and Aviva, have been slashing prices – with some policies being cut by as much as 30 per cent, as well as various special offers such as, say, half-price for policies with children and students.

All told, people looking for better deals with their current insurers have the upper hand. Quietly, most insurers will acknowledge that the goal is no longer to sell their customers more expensive deals – in recent years, simply holding onto customers has been the goal. And particularly for younger customers, who are the most sought-after, armed with as much information they can strike good deals with their insurers.

For most customers, that's a simple case of shopping around for the best price they can afford, but they also need to know more about the structures of those plans.

According to Cathy Herbert, director of communications with Aviva Ireland, most packages that new or returning health insurance customers will be buying – and certainly the ones most likely to be offered in the coming months – will be the pared down, stripped back versions.

Upgrade dilemma

And while that might suit many people, there are risks. By way of explanation, many health insurers have used the analogy of third party insurance for cars. A young driver, or someone who can't afford a more comprehensive plan, is likely to go for a third-party car insurance plan until they can afford something better, at which point they'll upgrade.

However, for health insurance customers, it's a bit trickier. If they choose a stripped-down version of health insurance and subsequently discover they have a condition which is not covered, no matter what coverage they upgrade to, they'll be kept under the old coverage terms for that particular condition.

According to Goode, in terms of the structure of plans, there are two broad changes an insurer can make. One is to reduce the price and increase the excess that the customer will have to pay - essentially, increasing the cost of the bet they take that they'll remain healthy.

''If you want a lower price, you'll take on a higher risk, he said. So if the excess is Euro 500, to take an example, and the customer has two hospital visits requiring an excess payment in a given year - hardly an outlandish prospect – that Euro 1,000 wipes out any savings they might make when taking out the policy.

The other approach to paring back insurance plans is to restrict the hospitals that a particular plan will give you access to, known as network plans.

''Two years ago, we really didn't have any of these, Goode said. ''Now, there's a plethora of them.

For these, he said, customers need to make sure that these are hospitals they might need access to, both in terms of the geographical location and the likely health complaint.

For example, a particular specialist may only operate in one hospital, Goode said. ''Here's the risk, he said. ''Let's say you chose to exclude Santry Sports Clinic, and the only person who can handle your knee injury is in Santry. Then you change back to add in Santry. The upgrade rule says if you add something back for something you already have, it might be adding on a private room, or a hospital you weren't previously covered for, or a plan with no excess - if you improve your cover in any way, they'll all apply the upgrade rule.

A more informed approach to the structure of their plan, though, could reveal options that many customers did not know were available to them.

Split cover

One of the more beneficial of those is the ability to break up a plan between family members, according to Goode, which helps customers to tailor their needs as they shop around. That can also mean different family members being covered by policies from different insurers, a concept known as split cover.

''Say you have a family with two adults and three children, he said. ''It doesn't make sense to have the same cover for all of those individuals with their potentially specific and unique medical histories, he said. ''So you may be happy on a public only. Your wife may have an existing medical condition [thereby requiring more cover, and possibly a different policy].

In such a situation, the family could be split between one parent and one child, and the other parent and the remaining children.

''Your children could have different levels of cover, he said, ''but all on the one policy, or split between different insurers.

Meanwhile, Goode expects a number of new types of plan to come on the market to increase the competition and choice for consumers.

''I guarantee you, in 12 months, there will be an Irish version of major medical cover policies for big operations such as heart surgery or hip replacements, where the consumer takes it upon themselves to pay the huge chunk of the routine operations themselves [with the policy covering the more expensive procedures].

A further possible change to prices could come if, as many industry figures are calling for, the government removes its taxes on health insurance.

For Glo's Dowdall, lifetime community rating needs to be executed in conjunction with a serious plan to tackle the costs of health insurance in Ireland, especially if the government wants to attract those crucial under-35s to balance out the market.

''Overall, the real need is for an urgent change in government policy which has forced up the cost of cover over recent years, he said, including ''imposing Euro 300 million in costs on health insurance customers over the last year alone.

None of that is likely to be imminent in the medium term, however, and for consumers there are other, more immediate, ways of getting more affordable cover. Ultimately, most advocates warn, getting as much advice and information as possible is critical. Thus, the latter months of 2014, before the first few months of 2015, is a critical information gathering time.

According to several market experts, it is critical for people taking out insurance, or changing the type of insurance they have, to seek comprehensive and detailed advice in the face of what is likely to be a whirlwind of plans and options and prices.

''There's a lot of pressure in the media and a lot of chatter [that] you can do this if you go for an excess or [that if you] exclude certain benefits, said Cathy Herbert. ''So you do need a discussion with yourself and possibly someone who has expertise [before making any decisions].

Like the rest of her industry, Herbert agrees that between now and May 1, 2015, there is plenty of time to find the right plan.