The sole survivor

Hard Times:The one exception to the retrenchment is private health insurance as more people sign up

LAST WEEK the Central Bank announced that Ireland had experienced negative inflation for the first time for nearly 50 years.

House prices are falling at a precipitous rate and so too are petrol and grocery prices and the cost of services.

Across the board, prices are falling as the economy enters a period of severe retrenchment, but there is one notable exception. Prices across the insurance sector, notably in health insurance, have risen by 19.6 per cent, partially as a result of the new insurance levy which came into being on January 1st following a Supreme Court decision in November.

The Supreme Court found the risk-equalisation scheme, where rival insurers paid tens of millions of euro to VHI to compensate it for its older customer base, was wrong in law.

The Government has now imposed a levy of €160 on adults and €53 on children to fund tax breaks for the over-50s.

VHI increased its premiums by 23 per cent and Quinn Healthcare by 16 per cent in November citing, not just the levy, but increasing demand for medical care and the rising costs in both the public and private health sectors. Hibernian Aviva did not increase its premiums at the time.

The cost increases, coupled with rises in unemployment and the inability of cash-strapped companies to pay for health insurance for its employees, ought to be resulting in a flight from the market.

Instead, the opposite would appear to be the case. Last year, which saw a 60 per cent rise in unemployment nationally, the number of insurance subscribers increased by 50,000 to 2.3 million, according to the Health Insurance Authority (HIA).

HIA chief executive Liam Sloyan said the economic woes and the levy were manifesting themselves in many people switching insurers rather than dropping out of the insurance market altogether, a marked change from survey results last year which showed that 77 per cent of people had never considered switching.

“The trend has continued pretty much as was, up until December 31st. It is a competitive market and, if people want to move, they will move. The consumer has a lot of power now,” he said.

Last year the HIA conducted research which found that 89 per cent of people do not regard health insurance as a luxury, but rather as a necessity. A similar number said they would always have health insurance, irrespective of their financial circumstances.

“The research we have found is that people would be slow to let their health insurance lapse, people are very strong in holding on to their health insurance come what may,” he said.

A similar thing happened in the 1980s when the number of health insurance subscribers increased despite a long and very damaging recession, reflecting the belief that in hard times the public worry more about their health and have even less faith in a health service when resources become scarcer.

Hibernian Aviva managing director Jim Dowdall said it has added 22,000 new subscribers in the past two months as a result of holding the line on prices. In December, Hibernian Aviva offered a price reduction of 10 per cent for consumers joining that month, gaining 10,000 new members. A further 12,000 joined in January.

“Our business is growing at a very strong rate. We had our two best months ever in December and January.

“This is hugely influenced by the economic environment with people shopping around so that they get best value for money. We’re attracting a lot of switchers and a lot of new entrants,” he said.

“We operated in a market that was typically characterised by inertia. People did not move. Now they recognise that it is very easy to switch health insurers.”

The change is manifest among both individuals and companies. He cited the example of two companies, one a Co Galway employer which employs 120 workers, which has switched its policies at a saving of €15,000, and another with 30 employees which has saved €3,700 by switching its health cover.

“Financial directors are now in a position that they will check everything. Corporate customers are very concerned about costs,” he said.

Quinn Healthcare general manager Donal Clancy said it has added 5,000 new subscribers since January 1st, the majority of them switchers

He said Quinn Healthcare had an entry level subscription of €330 to individual insurance subscribers and €1,590 for a family of two adults and two children.

“We have the lowest priced entry level product on the market to ensure people stay in the market and have a premium they can afford,” he said.

The company has opposed the insurance levy saying the same figure for every subscriber punishes those who are on lower cost plans disproportionately.

VHI director of marketing and business development Declan Moran said it too was trying to keep subscribers in the market. He expects the number of health insurance subscribers across the industry to shrink this year, but “I don’t think that the market in health insurance will shrink by as much as other markets because people see this almost as an essential purchase.

“When you look at the pressure that the sector is under, that makes the case even stronger for ensuring that you keep your health insurance.”

Mr Moran said the 23 per cent rise in premium costs was down to demand rather than price with 18 per cent more procedures carried out in private hospitals last year.

“The reason our premiums rose is not because of the levy. The biggest single reason is because more and more people are accessing healthcare.

“I believe price inflation in medical care will be very low this year.”

The VHI is now looking at initiatives for those who plead inability to pay and drop out of the market for a time.

“Like everybody we have had a busy time in January with people ringing our call centre worried about their health insurance. Our first conversation is about what the subscriber can afford.”

Currently, if a subscriber’s insurance cover lapses for 13 weeks, you have to enter the market as a new subscriber and it is as if you were entering the market for the first time.

“We’re actively looking at giving people a safety net for a period of time so they won’t have to go on reserve waiting lists. We all recognise we are in pretty exceptional circumstances,” he said.