Irish Health Insurance Market
The outlook for the Irish health insurance market is bleak to say the least.
Only last week, VHI announced a 2% price increase and Quinn have just announced their latest increase of an average of 12% which will come into effect on 1st Jan next. We can expect all three insurers to announce further price increases in quarter 1 similar to what happened between Jan- April this year. Approximately 43,000 people cancelled their health insurance in the first half of this year and we can expect this figure to be over 75,000 by year end. These people will now have to rely on a public system which is already creaking. Recent figures show that there are approximately 30,000 people on public hospital waiting lists and this figure is likely to rise. If prices were to increase in 2012 on a similar level, the cancellation figure could be anything up to 100,000 by end of 2012. Unfortunately for Irish consumers, these increases could not come at a worse time.
The health insurance landscape is extremely uncertain in respect of the three main providers. Quinn Healthcare is still for sale and it is uncertain when this process will be finalised. We are awaiting the Minister’s proposals regarding the future structure of VHI and there has already been speculation that the organisation may be split up into two or three entities with the state possibly retaining some degree of ownership. Aviva has announced their re-structuring plans although it appears that their health insurance operation in Ireland will be unaffected. All three insurers are waiting to see what changes the Minister will make to the health insurance levies and the public hospital charges. These were increased by 11% and 21% respectively on 1st Jan last which directly impacted on the level of price increases imposed by the insurers. If the Minster was to increase these charges by a similar figure from 1st Jan 2012, the insurers would have to pass on these charges to its membership almost immediately. There is a strong likelihood that the Minister will have to pass on some level of increase which means we can all expect to pay considerably more for our health insurance from January onwards. An added pressure for the health insurers is their rising claims costs. The majority of those exiting health insurance altogether are the young, healthy lives. This means that those left in the system are more likely to claim and thus the cycle continues, i.e. claims costs increase, premiums increase and therefore more people leave and take their chances on the public system.
Consumers have already been reacting to these price increases. Increasing numbers are downgrading their cover to public hospital plans only or alternatively, they are taking on excess based plans for private hospital cover. This can reduce their costs by approximately 9% but they will be liable for an excess on any admissions to private hospitals which could wipe out their savings. For those reducing their cover to public hospitals only, it will simply mean that you have more people trying to access less beds which in turn may increase waiting times. If this trend continues, it could put pressure on the private hospitals as they try and maintain their occupancy rates. Already, consumers will have noticed the increased advertising by some of the leading private hospitals promoting their services.
In addition to the above, many are reducing their cover for dependent children or are deleting them from their policies altogether. The insurers have reacted by launching a range of lower cost options which is welcome news, but consumers need to understand that if they’re reducing their premium by €700 per adult, then they are not comparing like-with-like. For example, VHI has introduced a range of ‘Restricted Illnesses’ which means that members will no longer have full cover for these conditions in private hospitals. In some cases, this could leave the member with a shortfall of up to 20% which in the case of a hip-replacement procedure could mean a bill of up to €3,000. Aviva will be introducing a similar restriction from 1st Jan on some of their plans but the shortfall will be capped at €2,000 irrespective of the cost. This is a dangerous trend for the industry and it could mean that going forward consumers will be paying higher premiums for less cover. Whilst this list is restricted to orthopaedic and ophthalmic procedures at present, there’s nothing to stop the insurers broadening the number of procedures that will fall into this category. VHI have also amended all of their contracts now to include financial penalties for mid-term cancellations. So whilst the regulations always indicated that you could switch your cover at anytime, this is no longer possible with VHI. There is every likelihood that this policy could be adapted by all three health insurers.
Unfortunately, health insurance has now become so complex that consumers must get independent advice. A quality advisor can advise consumers on corporate plans, split cover, reduced day-to-day cover, renewal date changes and many other tactics to help reduce the overall cost. They can also ensure that they understand all policy changes without having to read through all of the complex insurance literature.
In summary, there is little good news on the horizon for health insurance customers. However, by reviewing their cover properly, they should be able to defer the upcoming price increases for at least a further 12 months and then see what options are available at this stage.
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Cornmarket Group Financial Services Ltd. is regulated by the Central Bank of Ireland.Back