Covid-19: What does the crisis mean for private health insurance?

For existing policyholders and people thinking about taking out cover, private health insurance can seem a fiendishly complex subject at the best of times. The implications of a pandemic haven’t made it any less so.

For the 45 per cent of the population with private health cover, immediate issues posed by the coronavirus crisis range from rebates on premiums for benefits that aren’t actually available at the moment to methods of maintaining their policy in the event their ability to pay has taken a knock.

There may be longer-term consequences too: Covid-19 could shape people’s attitude to private health insurance for some time to come.

Premium rebates

While it would be hard to class it as "good news" exactly, the decision by State-owned VHI, Laya Healthcare (owned by US insurance giant AIG) and Irish Life Health (owned by Canada-based Great-West Lifeco) to refund a portion of their premiums was certainly the correct move.

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This was a straightforward response to the State’s effective takeover of private hospitals to cope with the expected surge in Covid-19 cases. That meant that the main and most expensive benefit of most health plans was no longer there.

The degree to which private sector consultants would be in a position to treat their existing patients for non-Covid conditions during this period was unclear as of mid-April, but insurers went ahead and established rebate mechanisms.

"There comes a point where you have to make a call," says Don Gallagher, chief executive of the Health Insurance Authority (HIA).

The regulator had been in contact with the insurers since the question of rebates was first raised at a consultative forum in March and Gallagher says he was ultimately impressed by how fast they responded.

Because VHI, Laya Healthcare and Irish Life Health customers have different risk profiles, the impact of the Covid-19 crisis on each company’s policyholders is not the same. The big difference is that VHI’s member base is “older and sicker than the other two” and are more likely to be signed up to higher-end policies with comprehensive private hospital cover. Correspondingly, their rebates will be higher too.

How much and when

VHI customers will see an average premium waiver of 50 per cent for three months, with waivers beginning from mid-May. For annual payers, a part-refund will be issued, while holders of monthly direct debits will see due payments reduced.

For the 5 per cent of its membership on the six VHI plans with the most extensive private care, the waiver will be 60 per cent. On a further four HealthPlus plans, the waiver is 55 per cent. For the 80 per cent of its membership who belong to its 75 lower cost plans, the waiver will be 45 per cent.

Laya Healthcare will give customers a cashback payment amounting to €195 for every adult member and €60 for every child member on the plan, split over three equal instalments from April to June. The first instalment was due to have been made on April 30th.

Technically, the payment is broken down into two elements, which Laya calls a Covid support benefit and a Covid financial benefit, with the latter going to the payer of premiums, which may be an employer.

Irish Life Health will apply a rebate for April, May and June. As with VHI, the sums will be offset against due premiums unless there was an upfront annual payment, in which case a part-refund will be issued.

Customers on its advanced plans, which include private hospital cover, will receive between 36 and 60 per cent of their monthly premium back, while those on cheaper plans will receive between 17 and 21 per cent.

These rebates should happen automatically. Where employers make a part-contribution to the cost of premiums and the sums are deducted through payroll, it may be no harm for employees to double-check that the rebates are being passed on to them in proportion to their own payments.

If the employer pays for the policy as a benefit-in-kind, there may be a tax implication: the member should only be subject to income tax on the now reduced level of “notional pay” represented by the policy.

The three-month period of rebates mirrors the length of the contract between the State and the private hospitals. With any luck, it won’t have be extended further, as that will mean the worst of the Covid-19 crisis will have passed.

“We will be watching what happens at the end of the three months,” said Gallagher. VHI has already indicated it will continue its rebates if the State contract is renewed.

Dental treatment

It’s not just private hospitals. Policyholders may be insuring themselves against the cost of other treatments that aren’t actually available for now. For example, because many dental practices closed for non-emergency business as a result of Covid-19, VHI said it would waive 30 per cent of the premium for customers of its dental insurance plans for three months.

Although they might not realise it, policyholders usually have cover under their private health insurance if they need to be hospitalised abroad (although the limits to the payouts on claims might not be sufficient for dealings with US healthcare, for which separate travel insurance is advised).

This may be a moot point given the difficulties in going anywhere right now, but if you choose to travel abroad against the advice of the Department of Foreign Affairs and subsequently require hospitalisation overseas for Covid-19, expect your insurer to give your claim short shrift.

The private health insurers have been assuring customers that they still have a range of benefits in place. This includes cover for private care in public hospitals, psychiatric inpatient and day-care treatment, maternity care and treatment for addiction. Some policies will also cover the public hospital charge of €80 a day (which is capped at €800 in a rolling 12-month period).

Telemedicine

Given face-to-face appointments pose the risk of spreading the virus to GPs and others on the healthcare frontline, telemedicine is the big theme of the new, enhanced or simply relabelled benefits that insurers are communicating to their policyholders.

For example, VHI has extended day-to-day benefits to include telephone or online consultations with GPs, clinical psychologists, physiotherapists, dieticians, practice nurses, physical therapists, occupational therapists, speech and language therapists and employee assistance programme (EAP) consultations.

Laya Healthcare and Irish Life Health have also stressed that virtual appointments with doctors, nurses and specialists for non-coronavirus conditions can now be claimed back. All three insurers already had telehealth GP services in place, which they are now encouraging policyholders to use to take pressure off GP practices.

Laya Health and Wellbeing Clinics are now physically open only to minor injuries, while people requiring advice or treatment for minor illnesses such as upset stomach, kidney infections, and skin or eye issues are urged to book a video consultation if they wish to use the clinic. VHI’s SwiftCare clinics have moved to an appointment-only basis.

Insurers should be keeping members up to date with the full list of benefits on their plans. For comparison data and the latest news in the sector, the HIA’s website is a good port of call. Gallagher says the regulator is “not quite an advocate for insurance”, nor a broker, but is mandated to make consumers aware of their rights and entitlements in their dealings with private health insurers.

Financial distress

While the Government’s emergency pandemic payments will be keeping many afloat, the spike in unemployment and loss of income is inevitably taking its toll on people’s ability to pay various bills and premiums.

Gallagher says he would expect insurers to be “as accommodative as possible” if policyholders are having financial difficulties and seeking to defer payments.

It is in insurance companies’ own interest to prevent policies from lapsing. For members, too, being without cover for 13 weeks or more will mean that they could face lengthy waiting periods to regain cover for pre-existing conditions if they take out a new policy at a later date.

Irish Life Health and Laya Healthcare have always allowed their customers to revise their cover mid-year if necessary, while VHI is likely to be equally flexible for distressed customers, according to TotalHealthCover.ie's Dermot Goode.

The health insurance broker is reminding policyholders that it is possible to save money by switching plans that offer equivalent benefits. There are “significant savings” to be made for people on “dated cover”, meaning a plan that has been on the market for seven to 10 years or more.

Another option, for people who haven’t already done this, is to choose a policy with an excess (meaning the policyholder pays an agreed portion of the claim), as these will have lower premiums.

“If at all possible, try to maintain continuity of cover, as access to private care could be essential when this crisis is over for those who need quick access to elective medical treatment,” says Goode.

Claims levels

At the HIA, Gallagher will be keeping close watch on one particular metric: the level of claims both this year and beyond.

It might seem counterintuitive amid a headline-dominating health crisis, but claims will likely fall in 2020, then rise once the worst of the pandemic is over and a range of elective procedures begin again. There is a precedent for this. During the Sars outbreak in Asia in 2003, Singapore and Hong Kong experienced “a dramatic drop” and then a sharp increase in private health claims as healthcare systems dealt with pent-up demand for elective treatment, says Gallagher.

He is “very conscious” of these trends, as they might affect the annual recommendations made by the HIA on the operation of the State’s risk equalisation fund. This is the scheme by which VHI is effectively compensated by the other insurers for having an older, riskier member base.

For insurers, the Irish market had been in good shape pre-Covid, with VHI reporting a higher net surplus in 2018 and Laya Healthcare and Irish Life Health both increasing their profits.

By the end of 2018, some 2.22 million Irish people had private health insurance, a year-on-year increase of 2.1 per cent. Indeed, the numbers have risen year-on-year since 2014, boosted by growth in the economy and employment and also helped by the introduction in April 2015 of what is known as lifetime community rating.

This added a loading of 2 per cent on your premium for each year above 34, up to a maximum of 70 per cent (for 10 years) to the premiums of people aged 35 and over who were taking out health insurance for the first time. It was a tweak on the principle of community rating that still underpins private health insurance, which means a particular plan costs the same to customers regardless of whether they’re young or old, healthy or ill.

Younger people

Community rated markets depend on a continuing influx of younger people (who make fewer claims) in order to keep the cost of premiums for everybody in some sort of check. So health insurers will naturally be anxious about the economy plunging into recession.

Younger people who may have been considering taking out cover for the first time as an adult may no longer be in a position to do so if they lose their employment or income as a result of the pandemic shutdowns.

If they are healthy, they may reasonably consume the daily news headlines and judge the contraction of Covid-19 to be their highest risk of hospitalisation, while simultaneously understanding that if they are infected, they will be treated within the public system.

“You wouldn’t be expecting a lot of new entrants right now,” says Gallagher.