Solidarity between young and old must remain a key element of health insurance
Opinion: Due to late arrival of competition in the market one company has the vast majority of older customers
Older people obviously will tend to make greater demands on the health service than the young.
At the heart of our strategy for private health insurance is keeping it as affordable as possible for everyone. I recognise that the increased cost of health insurance over the last few years at a time of financial crisis has made it too big of a burden for many households to carry. I am determined that we can have a competitive, well-regulated market and drive costs down to the benefits of consumers. But we also have to continue to get the basics right.
Sense of fairness
In Ireland, we have fundamentally observed the principle that everyone pays the same for their particular plan regardless of age, health status or gender. I believe that Irish people, who have a deep sense of fairness and a high regard for the older generations who built this country, want this approach continued. Most people are aware of health insurance markets in other countries, notably in the US until recently, which evolved so that people who couldn’t afford insurance were simply blocked out of the healthcare system. Often these were the most vulnerable people and most in need of care. Not only do we not want to even contemplate such a situation in Ireland, we want to evolve to an even fairer system of universal health insurance.
This will move us away from the unfair, two-tier system to a single-tier healthcare service with the patient at the centre.
We have taken the first steps on the path to that goal, but there’s a long way to go. In the meantime, we have to preserve the principle that people pay the same regardless of their particular circumstances.
And we must maintain the solidarity that younger people in the health insurance market, who are generally well, show towards older people, who may be less well and need more care. That’s what community rating is all about.
Underpinning community rating is something called risk equalisation. It is the system which balances how younger health insurance holders subsidise older people on the understanding that these younger people will themselves be subsidised by the generations that succeed them. The aim of risk equalisation is to look at the market as a whole, and to distribute fairly the differences that arise in insurers’ costs due to the differing health status of all of their customers. This way, older people pay less than they would in what is known as a “risk-rated” system, which could see many older people find health insurance totally unaffordable.
This is particularly relevant in the Irish market where competition arrived relatively recently so that one company has been dominant and has the vast majority of insured older people among its customers.
In order to allow cost-sharing between the generations which hold insurance, risk equalisation operates a system of health credits and stamp duties. The health credits apply to insured people over 60 and means their premium is discounted by an amount appropriate to their age so that the cost is lowered and community rating is maintained. The stamp duties are levied on health insurers to fund these credits.