Health insurance costs could spiral because of failure to introduce risk equalisation to the sector, the leader of Ireland’s second largest trade union claimed today.
John Tierney, national secretary of Amicus, said the private health insurance sector is “inherently unstable” and market uncertainty would be prolonged after the Minister for Health Mary Harney decided against introducing the measure yesterday.
Mr Tierney said her decision contradicted advice she received from the Health Insurance Authority and other quarters.
Ms Harney surprised many in the sector when she announced yesterday that risk equalisation - the sharing of claims costs across health insurers - would not be introduced. State-owned VHI customer profile is much older than its main competitor, Bupa, and it therefore pays out more often. Bupa, who have been in the Irish market for 15 years, has a younger customer base, giving it fewer claims.
Ms Harney said the Government was committed risk equalisation "in certain circumstances". But she said payments - in which Bupa would give an estimated €30 million to VHI - would be "premature" in advance of a Government decision on the commercial status of the company.
Other companies in the market like Vivas will also have to make payments to VHI, but because it is a newcomer would have a longer period before paying.
Mr Tierney said analysis commissioned by Amicus showed the Irish market was unique in that community rating - the balancing of costs among all age groups - operated without risk equalisation.
"This is producing a highly distorted market which has the trappings of competition but none of the benefits - other than those accruing to new market entrants such as Bupa," he said.
The FGS Consulting analysis also found that premiums could in theory jump by 600-700 per cent if situation is not addressed. Mr Tierney noted that if premiums increased significantly then company schemes would inevitably be abandoned putting greater pressure on the public health service.
"In such circumstances, apart from the VHI itself, the major losers would be employees, their dependents and those retired from employment. In particular, there would be a huge impact on those who have paid into work-related group schemes as net contributors over the greater part of their working career," Mr Tierney said.