Health insurance Q&A: What exactly happened this week and what does it mean for me?

When it comes to health insurance, it takes a lot to shock Dermot Goode. He has been working as a broker and analyst in the sector for many years and has successfully predicted countless price moves by all the players in the space but the size of the increases averaging 7 per cent rolled out by VHI Healthcare earlier this week caught him off guard.

“We were expecting more increases, we weren’t expecting another 7 per cent,” he says. He notes that in times past, if a company imposed a big increase, if they followed up with a subsequent hike it would be smaller. “To follow a 7 per cent average with another 7 per cent average is not what we were expecting,” he says, and points out that some of VHI’s plans are going up by closer to 10 per cent while others will be losing some cover as part of the shake-up.

But the State’s largest provider of private health cover has not being acting alone and its latest increase is part of a trend that has prices soaring for Irish consumers and – often – the level of cover offered falling.

What exactly happened this week?

The VHI, announced price increases which it said averaged 7 per cent. The increases kick in from March 1st. The move comes on top of a similar increase the company imposed in October.

That seems steep?

The company blamed a post-pandemic surge in demand and the cost-of-living crisis and said the increase was “necessary to meet the healthcare needs of members as claims volumes have risen by more than 20 per cent in 2023 and inflation has had a significant impact on the cost of delivering healthcare”. It also pointed to “advances in drugs, procedures and other medical innovations and technologies, supporting enhanced healthcare outcomes”.

What does it mean for me?

That depends. The cumulative impact of the two hikes will see some policies climb by close to 20 per cent. In cash terms, that could see many families made up of two adults and two children worse off by well in excess of €500 while individuals on some of the older and more expensive plans could be facing increases of more than €700 per person.

What does it mean if I have just renewed my policy with the company?

The good news is that the new increase will only impact the price you pay on your next renewal date. Anyone whose 12-month annual contract with the company is due for renewal before March 1st will only feel the pain of the October hike and it will be a full year before the impact of the latest increase is felt.

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My contract expires at the end of March – could I renew now instead and get locked in at a lower price?

No.

But the VHI is not the only company increasing its prices, is it?

Absolutely not. Shortly before Christmas Irish Life Health announced a third price increase in just 10 months. The company said that from January 1st its prices were going up by an average of 4.8 per cent, although some policies increased by 6 per cent. Irish Life Health, which has some 500,000 customers, increased its prices last March and again in July, with a cumulative increased cost for some policies of up to 15 per cent. And last August Laya Healthcare rolled out price increases averaging just 3 per cent – although some of its policies climbed by about 5 per cent.

Five per cent? That’s a bargain.

You might want to wait and see what happens next. Companies don’t flag their price hikes in advance but a notable feature of the health insurance market is that when one company increases its prices the others follow suit soon afterwards. The smart money would suggest that Laya’s prices will increase again sooner rather than later.

Do many people have health insurance?

As of last September, 2.48 million people in the State had private health insurance. That’s 46.8 per cent of the population, according to the Health Insurance Authority (HIA).

What can I do to save money?

The key to saving is shopping around either with your existing provider or with one of the others ahead of your next renewal date. But not many people do that. Recent research published by the HIA showed the vast majority of Irish consumers have never switched health insurance provider despite the potential savings to be made. The average length of time people have stayed with their current provider is 15 years with those over 55 often paying significantly more as a result of being on the same policy for a long period of time.

What does significantly mean?

People over the age of 65 typically pay between 40 and 45 per cent more for cover than younger people. They are also less likely to switch, which puts them at higher risk of being on dated plans. It is also frequently the case that the older the plan, the higher the price.

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But switching is complicated, right?

There are more than 300 different plans to choose from, all of which cover a dizzying array of potential conditions and options. On top of all that, most of us are pretty risk-averse when it comes to our health. It is entirely understandable to be afraid of making a mistake by switching to a policy that does not cover what we need when we need it. And this fear comes into sharper focus if you have a pre-existing condition and are concerned that by switching you might lose cover or have to wait for coverage to kick in. The good news is that much of the complexity is easy to sidestep and it is probably harder to get wrong than many people might think.

What do you mean by that?

There are strict rules in place that give consumers protection irrespective of their age or health issues. A person who has a long-standing policy with Company A will have already been through their waiting periods and can switch to Company B and get all the existing cover they had with Company A immediately.

To put that more simply, you do not lose the cover you already have by moving from one company to another.

And unlike other forms of insurance, you cannot be penalised financially because of pre-existing conditions or your age.

So what should I ask if I contact my provider?

Ultimately, the questions can be distilled down to three – although please do ask more. The first question is: “Does the plan I am on offer me value for money?” The second question is: “Could I get a comparable level of cover for less either with my current provider or one of its two competitors?” And the third question is: “How long have I been on the same policy?”

If the answer to that last question is more than five years, then you are probably overpaying by about 25 per cent.

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But I have been with the same company for years. Do I have to switch to a different one?

No. The first step is to call your current provider to see if they have a lower-cost equivalent plan to the one you are on and say you are happy to take on some minor reductions, depending on the savings. Your existing insurer will already have a complete record of all previous claims you have made, so the simplest question to ask is whether any new and cheaper plans would have covered all the claims that have been paid out over the last two years and to the same level. If the answer is yes, then your choice is pretty simple.

And if the answer is no?

You could call the other providers and see what they offer. When you make that call be upfront, bearing in mind you will not be penalised for honesty. Detail all the key elements of your existing policy and outline any underlying conditions and procedures carried out. Have them confirm that any new and cheaper plan will cover everything you have had covered in the past.

Apart from the price hikes, you mentioned the VHI was cutting back on some cover?

Goode has noted some policies have seen a reduction in what is offered, particularly on corporate plans. Examples of cover being lost on some plans will see 50 per cent benefits for GP visits change to 50 per cent to a maximum of €40 per visit. Meanwhile, 75 per cent benefits will change to 75 per cent to a maximum of €60 per visit.

When it comes to consultant visits on the impacted plans, 50 per cent benefits will change to 50 per cent to a maximum of €125 per visit while 75 per cent benefits will change to 75 per cent to a maximum of €190 per visit.

Day-to-day excess has climbed too, something that will impact all members immediately, Goode says. At present, the excess on your annual outpatient claim is €1. This will now increase to €10 per member from March onwards.

So what can I do?

At the risk of repeating ourselves, the best way to approach an era of price hikes is to shop around. And ask questions about better value and lost cover.

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Health insurance Q&A: What exactly happened this week and what does it mean for me?

Increases averaging 7% rolled out by VHI Healthcare earlier this week, which could see many families worse off by more than €500 a year