Health insurers ‘cherrypick’ customers

Health insurers are continuing to adopt strategies to segment and select profitable business by putting in place differential pricing for targeted groups, the regulator for the sector has told the Minister for Health in a newly released report.

The Health Insurance Authority said this practice was undermining the principle of community rating (where everyone pays the same for identical products regardless of age) and the main objectives of the health insurance Acts.

The report said that these strategies included the maintenance of a large number of plans offering similar benefits but with significant differences in pricing.

Lower risk
The report said that lower-cost plans were being marketed to lower-risk groups.

“All of the open membership insurers also have lower-cost products with reduced orthopaedic benefits in private hospitals. Few older people are insured on these plans.

“In respect of products that mainly cover public hospitals, there is less price differentiation between similar products, with the main differences being for products that offer limited maternity cover, which are significantly lower in cost.”

The Health Insurance Authority report also maintained that the number of young people between ages 18 and 29 covered by private health insurance fell by 10 per cent last year.

Overall the numbers with private health insurance reduced by 3.2 per cent.

The report said that in the year from July 1st, 2012, to July 1st, 2013, the number of people aged 18-29 with private health insurance fell from 241,222 to 217,588, a reduction of 10 per cent.

The report said the continuation of the trend of falling numbers of people between the ages of 18 and 29 with health insurance was threatening to undermine the inter-generational solidarity that supported the principle of community rating.

It suggested that to mitigate this risk the Government could introduce the principle of “lifetime community rating” that would allow insurers to charge a loading to people over 30 taking out health insurance for the first time.

Discounted rates
The report also said that to incentivise young adults to take out private health insurance in their own right, insurers could be allowed the option of introducing discounted adult rates for people between 18 and 29 years. "For example, legislation could provide for optional discounts of up to 15 per cent for adults between the age of 18 and 29 (inclusive) who are not in receipt of a student discount."