The wide-ranging changes being proposed have sparked fears of significant premium hikes for consumers, writes MARTIN WALL
IT SEEMS clear now that one way or the other, the private health insurance market in Ireland in the near future will look very different to that today.
Over the past few weeks, there have been a number of announcements and leaks indicating that wide-ranging reform is on the cards.
Much attention has been given to the warnings from the industry that the Government’s plans to increase the revenue generated from private beds in public hospitals will lead to significant premium hikes.
There is also likely to be a large State financial injection into the reserves of the VHI to allow it be authorised by the Central Bank, a new scheme to try to spread the cost of dealing with claims from older subscribers and possibly significant changes to existing ownership arrangements in some cases.
There is also likely to be a new focus on cost-containment, which could have widespread implications for patients and hospitals. And all of this is before the Government introduces its plans for universal health insurance.
The Irish private health insurance industry grew rapidly following the ending of the VHI’s monopoly position and the advent of competition in the mid-1990s. The number of people covered increased from about one-third of the population to just over half.
However, structural weaknesses which were there from the start were never fully addressed. The State-owned VHI, for example, was exempt from some rules regarding authorisation by the Central Bank and the requirement to have specific levels of financial reserves, which had to be followed by its competitors.
Government policy was that community rating – where everyone paid the same for similar products and older people would not face large “loadings” on their premiums because they were considered to be a higher risk – would apply.
It was also believed that a risk-equalisation scheme would be necessary to spread this cost across the market.
However, there were arguments for years over this scheme and ultimately the Government’s plan was struck down by the Supreme Court without VHI ever receiving any financial compensation from the other companies in the market.
Three years on from this judgment, the market is in an even more uncertain situation. The number of people covered by inpatient health insurance plans is continuing to slide – down 53,000 in the first nine months of the year.
The new Fine Gael/Labour Government abandoned the plans of the former minister for health Mary Harney to sell off the VHI.
In recent weeks, Minister for Health James Reilly sought Cabinet approval to examine the purchase of Quinn Healthcare, which is currently in administration following its takeover by the former Anglo Irish Bank from the Quinn group.
The Minister suggested that both companies could be merged and then divided into two equally sized entities, which would have similar numbers of younger and older subscribers.
Reilly’s proposals to Cabinet form part of an overall initiative to deal with the fallout from the critical judgment of the European Court of Justice last September.
It found that the State-owned insurer being exempt from Central Bank authorisation and regulation was in breach of obligations under EU directives.
The Cabinet was told that to facilitate the authorisation of the VHI by the Central Bank, the State may have to invest up to €220 million into the reserves of the health insurer.
Even if Reilly secures Cabinet approval to seek to buy Quinn Healthcare, it may face competition, with reports that insurance giant Swiss Re is already eyeing it up.
What effect the Government’s announcement to changes in the way public hospitals are paid for private patients treated in their facilities has on any such discussions remain to be seen.
It’s certain though that the three measures announced in the Budget will have significant implications on the finances of all companies in the sector.
Reilly is to raise the cost of private beds in public hospitals by about 4 per cent from January. This will cost the industry an additional €18 million.
The Department of Health is also looking at chasing the insurance companies for about €50 million in outstanding money owed to public hospitals.
The third measure, ending the system of formally designating private beds in public hospitals and allowing them to charge for all private patients treated, is the most serious worry.
The Department of Health is looking at raising €75 million next year from this reform. However, the cost will be even larger in subsequent years.
It is largely this third measure that has led the VHI to estimate that premiums may have to rise by 50 per cent.
Reilly has responded by arguing that the VHI needs to look at its costs before passing on more increases to subscribers.
He has indicated that the company could make further cuts to the amount it pays to doctors and hospitals.
He has suggested that the insurer could seek private hospitals to introduce cost-saving measures put in place in the public system, such as bringing patients in only on the morning of treatment, more efficient use of theatres and earlier discharge.
The Minister is also sending back in the consultants Milliman, who last year drew up a highly controversial report on cost savings in the VHI.
The VHI maintained that the Milliman recommendations would see it assessing the necessity of treatment before, during and after a medical procedure before agreeing to pay.
It remains to be seen whether this is the approach the Minister envisages, but it is likely to generate further controversy.
The Minister is to call in the board of the VHI to express his unhappiness about the suggestion of a 50 per cent premium rise and at changes to procedures covered in health insurance plans popular with older people.
His intentions regarding the future of the VHI, whether it be on investment in the reserves, the type of plans he wants it to offer and his proposals for changes to its cost base, may become known after that meeting.
HEALTH REMEDY LOOK FOR ALTERNATIVES TO DROPPING OUT OF HEALTH INSURANCE
NEWS THAT health insurance premiums could increase by as much as 50 per cent if proposals contained in last week’s budget on how private beds are treated in public hospitals come to pass will have frightened many consumers already struggling to pay their bills.
The bottom line makes for very bleak reading. If the increases do happen, it will add at least €1,000 onto the annual cost of a fairly standard family policy and will see many people fall out of the health insurance net.
The news comes on the back of a year of dramatic price increases across the market.
Last month, Quinn Healthcare announced that it was to increase the cost of its premiums by an average of 12 per cent from next year.
This will add more than €200 annually to the cost of an average premium for a family of four and was the second price increase announced by the State’s second largest health insurer this year.
The cost of Quinn Healthcare’s Essential Health policy for a single adult rises from €767 a year to €865, while the cost of the same policy for two adults and three children, one of whom is a third-level student, climbs from €2,149 to €2,366, an increase of €217 a year.
Weeks earlier, the VHI announced a 2 per cent rise on top of price increases of up to 45 per cent announced in January.
The cumulative effect of the increases saw the price of Plan B go up by more than €325 for an adult. Families on a Parents and Kids policy, which the VHI says is its most popular family plan, will have seen their premiums increase by more than €350 per year.
For its part, Aviva announced a price increase of 14 per cent in March.
The change saw the cost of cover for an individual on its Plan Level 2, by far its most popular, increase from €848 to €967, a jump of €119 per year. A family of two adults and two children on the same policy saw their annual premium increase by €356 a year from €2,544 to €2,900.
For people wondering how they can cope, there are options to dropping out of the system entirely. Moving down the ladder is one.
The Health Insurance Authority website – hia.ie – should be the first stop for people wanting to make price and cover comparisons between various plans. There is also the option for some people to switch to a cheaper corporate plan.
The health insurance providers have discounted plans aimed at businesses which are cheaper than private ones, but they make them difficult to find.
The HIA has details of all of the products available, but the easiest thing you can do is contact your insurer directly and ask for an equivalent company plan. It is possible there is no such equivalent.
And then there is the Hospital Saturday Fund (HSF). It is not a replacement for health insurance and is not a health insurer in the traditional sense, but what it does is give cash back to policyholders to offset some day-to-day “outpatient” expenses.
This includes GP fees, prescription costs, consultant and dental fees, and physiotherapy visits, as well as grants for hospital stays, births and worldwide accident cover.
Payments into its personal scheme start from €9.50 per month, rising to €55 per month for maximum cover.
Someone paying €55 per month will get back half their dental and optical expenses, up to a maximum of €550 a year; €32 per GP visit; €16 for every prescription filled and half the cost of visiting a specialist up to a maximum of €1,200.
Grants for overnight stays in hospital range from €20 to €120, depending on the size of the premium.
Conor Pope