Health insurance customers to get €180m in refunds

A Government takeover of private hospitals to combat Covid-19 will leave health insurers nursing a revenue hit of €180 million, industry sources say.

Private hospitals will return to normal service at the end of this month after being enlisted to provide beds for coronavirus sufferers needing treatment from the beginning of April.

Industry sources calculate that the move will have cost health insurers €180 million to €185 million in refunds to customers.

The insurers were obliged to refund part of the premiums they collected as the takeover of private hospitals meant their customers would be unable to access some of the services for which they had paid.

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State-owned VHI along with private sector rivals Irish Life Health and Laya Healthcare, the three insurers who provide cover for more than two million people in the Republic, did not say how much they would return to customers as a result.

VHI is thought to have taken a disproportionately higher hit as it has a larger number of older clients more likely to get sick and claim against their policies. Consequently its premiums are higher also.

The company has at least 1.1 million customers, more than half the overall market.

Final bill

Estimates of the final bill to the company run to far higher than €100 million. A VHI spokeswoman confirmed it is refunding an average of 50 per cent of premium payments for the three months to each customer. She explained that the individual amounts varied between 45 per cent and 60 per cent.

She could not say how much it would actually cost the taxpayer-owned company, pointing out that a number of factors would have to be taken into account before the final bill could be calculated.

Irish Life Health, which has about 20 per cent of the market, many of them people who have switched from its rivals, could be facing a €15 million to €20 million hit, according to some calculations.

The insurer is refunding between 17 and 62 per cent of premiums to customers, depending on the cover offered by different policies. It has not said how much it will finally return to clients.

Laya Healthcare, which insures close to 600,000 people, is returning €195 to each adult and €75 for each child it covers over the three months. It has also refused to say what this will cost.

Commercial sensitivities

Health insurance advisor Dermot Goode said at the weekend that the different approaches the three companies took made it difficult to estimate the final cost.

“But I would say that all of them know how much it has cost them,” Mr Goode added.

He suggested they were unwilling to say as the information was commercially sensitive.

Mr Goode explained that the insurers would still have to pay out on treatments covered by their policies.

He pointed out that while the Government takeover of private hospitals meant patients had to delay treatments, people were still likely to receive them in the longer term, and thus would claim against their insurance.

Health insurers could only return part of the premiums paid to them as Central Bank rules require them to keep cash in reserve against potential claims, while they were also providing cover for care provided outside private hospitals.

More than 2.2 million people in the Republic pay a total of €2.6 billion a year to health insurers for private medical cover.