The health insurance industry has become a minefield to navigate in recent years – soaring premiums, losses of cover, product proliferation – but there are ways for canny customers to save, writes CONOR POPE.
THESE ARE TOUGH times for more than two million people who have health insurance in Ireland. Prices are climbing, cover is falling, people who can’t afford premiums anymore are being hit with massive termination fees while the sick and vulnerable are being asked by some providers who seem to be haemorrhaging money to jump through hoops to get access to treatments.
The price increases in particular are taking their toll. The cost of some premiums sold by the VHI, the largest player in the market with more than 1.3m subscribers, increased by more than 60 per cent last year alone. The hikes forced 65,000 people to abandon their health insurance in 2011, a 100 per cent increase on the numbers who cancelled subscriptions the previous year, according to figures released today by the Heath Insurance Authority (HIA).
And the problem is getting worse. A recent survey carried out by the Irish League of Credit Unions found that nearly one in 10 adults with health insurance would abandon policies this year because they could no longer afford them, while 31 per cent claimed that if prices increased again this year – as seems likely – they will follow suit.
The VHI, as the largest provider in the State, gets the most flack. Looking at some of the moves it has made over the past 18 months, it probably deserves it.
It is the only insurer in the market to impose punitive charges on people looking to cancel policies, and while it does cut people slack if they are cancelling following a bereavement, the loss of a job or emigration, everyone else has to pay a €50 administrative fee and percentage of the health insurance levy – how much depends on how long the person is into a 12-month contract.
This rule saw one family who contacted this newspaper hit with a cancellation fee of €700. The company stoutly defends the charge, which it started imposing in the middle of last year, and says it refers to the consequence of early cancellation by a customer and to terms and conditions in its contract renewal letters.
SITTING IN HIS office overlooking the Grand Canal, Liam Sloyan, chief executive of the Health Insurance Authority (HIA), is surprisingly upbeat about the state of the market, although he is not oblivious to the problems which policy holders are being forced to confront.
Even in the current climate, he points out, the vast majority of consumers with health insurance are hanging on to their cover, and while thousands are leaving the market each month, in percentage terms, he says, the impact is still relatively small with just 2 per cent of the total market cancelling their policies last year.
Sloyan has one simple message which he repeats over and over again. He wants people to know that when it comes to health insurance, they have choices, and if they choose wisely they will save money. He says the most important thing consumers should do to shop around and not be afraid to switch.
During the boom years, many Irish people couldn’t be bothered looking for better value elsewhere. There was a huge level of inertia in the health insurance market, with just 1 per cent of the market switching provider each year, despite the fact that prices were regularly going up by three or four times the rate of inflation.
Now it is a different story. As the economic downturn worsened the numbers taking their business from A to B to C spiked. Today, almost 25 per cent of the market has switched provider at least once and, according to Sloyan, most have been motivated to do so because of money.
“There was a lot of inertia, but when the economic conditions changed, all our priorities changed,” he says. “People can save hundreds of euro and still have a similar level of benefits. Maybe there is an excess, but that excess might be €100 per hospital visit and they might be saving hundreds of euro each year,” he says.
Sloyan is perhaps stating the obvious when he says that “health insurance can be confusing in a number of ways”. He also says that too many people are unaware of their rights as consumers and are afraid to tinker with policies in case they find themselves cut adrift when the get sick. But Sloyan says people can switch “even if you are older or you are sick. Consumers who have the information can save themselves a lot of money.”
While the growing numbers switching represent “a very big change”, Sloyan says, it is “only part of the story”. He points to even greater numbers who have chosen to stick with the same insurance company but have modified their policies in order to get better value. The biggest shift has been towards corporate policies. According to the latest figures, one in three people with private health insurance now has a corporate plan. It is such an easy way to save money, it is a wonder more people aren’t doing it.
Over the past three years, the health insurance providers have all started offering discounted plans aimed at businesses. These are cheaper than regular policies, but the companies rarely advertise their existence far and wide.
But it is worth looking – a family policy for two adults and two children bought under a corporate scheme can cost more than €1,000 a year less than an identical policy sold primarily in the mainstream market. The HIA has details of all of the products available on its website hia.ie, but the easiest thing you can do is contact your insurer directly and ask for an equivalent company plan.
A more proactive approach being taken by consumers has gone some way to offsetting the premium increases that have been imposed on the market by all three companies, Sloyan says. While premiums have increase by more than 10 per cent across the board in the past 12 months alone, the average price of premium per person has increased by just 6 per cent. He accepts that this average “hides a lot and says that the reality is that some people are paying much larger increases.
For “some people”, you could read older people. The manner in which the price hikes have been targeted at older, less profitable customers, with almost surgical precision is a concern for the HIA.
IN JANUARY 2011 the cost of the Plan B Options policy, now known as HealthPlus Extra, stood at €986 for an adult. The VHI announced a 45 per cent increase that month, taking the cost to €1,429. It rolled out a further 2 per cent increase in November 2011, which saw the price rise to €1,461. And the cost of the plan is set to climb a further
12.5 per cent from St Patrick’s Day, March 17th, seeing the price climb to €1,644, a whopping 65 per cent higher than it was at the beginning of last year
“We have a community-rated market, which means all adults have to be charged the same for a specific product – but some adults cost at lot more than others,” Sloyan says.
The average cost of a claim for someone in their 60s and beyond is around €3,500 per year, while the cost for someone in their 20s or 30s is closer to €500.
This discrepancy gives the companies a huge incentive to target the younger people and absolutely no incentive to sell to older people, and it also explains why there has been a dramatic segmentation of the market in recent years – there are now more than 200 different policies available.
“The public policy objective is to have a community-rated market, but unless you align the commercial incentives with the public policy objective, commercial companies will find ways in which to meet their own objectives – which is to make money. What we have to do is align public policy objectives with commercial incentives. The way you do that is, if you want the same premium to be charged to everyone, then everyone has to cost the insurer same amount.”
Sloyan points out that the only solution is a risk-equalisation scheme, which is to be introduced next year.
And it is not just prices but cover that concerns the HIA. Last year, the VHI substantially reduced the cover it offers for certain procedures under some popular schemes. Under the changes, cover for certain orthopaedic and ophthalmic treatments was reduced to 80 per cent of the total cost if performed in a private hospital. This changes could leave people facing shortfalls of at least €4,000 on certain operations.
When challenged on the move by this newspaper last year, the company said the changes were outlined in renewal letters sent to consumers, but critics said it was buried in the terms and conditions and easy to miss. Sloyan describes the reductions in orthopaedic and ophthalmic benefits as part of the segmentation. “Consumer information is a matter for the financial regulator and the NCA [National Consumer Agency]. We would say that it is important that consumers get full information in order to help them make the right decision.”
“The contract between an insurance company and the insurer is a very important document, and people should refer to it. But we would like to see significant changes, and particularly reductions in benefits highlighted. We don’t have a role in enforcing that, but I think it is sensible and important thing.”
Sloyan returns to the topic of prices. “People should pay as little as they can for the benefits they want, and the place to find that information is our website. It is up to the market, if organised properly, to have the incentives to reduce prices to win custom and to control their own costs to keep the prices lower.
“Prices for health insurance have increased for many years, but I don’t think that is something we should just accept. Prices increased in other areas for many years and have started to reduce. Claims costs increased very much in the late 2000s, and since then, insurers have got a better handle of them and that goes to show things can change. We should not necessarily accept that prices will rise inevitably.”
