Healthy start for new entrant to private insurance market

‘Affordability crisis’
In contrast to the blizzard of products on the market, Glo’s product palette spans five basic plans, though customers can personalise policies according to need.

Though no less immune to the virus of rising premiums than anyone else in the business, it claims to offer savings ranging from €400 to €599 compared to its rivals, for a family of two adults and two children.

Yet it too is suffering from the “affordability crisis” caused by the exodus of mostly younger and healthier subscribers from the market.

A 60 per cent rise in health insurance costs since 2009 is driving the trend, but Dowdall claims the problems of the sector can be traced back to one simple cause, the insurance levy introduced to fund risk equalisation.

Because the VHI has more older and therefore sicker customers than its private-sector rivals, the money raised through the levy largely goes to compensate the State-owned insurer for the extra costs involved. This year it is likely to benefit to the tune of about €60 million.

Dowdall claims this money is an indirect subsidy that allows the VHI, and the Minister, avoid having to deal with the State company’s high cost base.

“We need to address the elephant in the corner, which are the cost issues of the VHI. It wouldn’t take a cynic to think that the levy is more about providing an income stream for VHI to help it get regulated by the Central Bank than anything else.”

He says the current policy isn’t working and “somebody needs to stand up and say ‘no more’”.

Dr Reilly could reduce the cost of health insurance overnight if the levy was removed, he claims. “It would keep the VHI awake at night because it would then have to address efficiencies issues but why not: that’s the way most commercial organisations work.

“If VHI had a look at its own organisation, its own cost base and the efficiencies it could make, it could save more than it’s getting from the health levy today.”

The levy, he asserts, acts more as a penalty on the competitors to the VHI than it is of value to VHI itself. “It leads those competitors to put their prices up and so VHI doesn’t have to worry about cost issues.”

Hefty increase
In Opposition, Dr Reilly was “scathing” about the levy, he points out. “If the Government were strong, the Minister would address these issues. That policy may have been sustainable in the Celtic Tiger years but it certainly is not sustainable now. We need to be brave and stop it, or at a minimum not put it up anymore.”