Over-35s taking out health insurance face penalty

First-time insurance subscribers to face 2% per year penalty after May 2015

Minister for Health Dr James Reilly has introduced a new insurance ‘loading’ system. Photograph: Frank Miller

Minister for Health Dr James Reilly has introduced a new insurance ‘loading’ system. Photograph: Frank Miller


Customers over the age of 35 will pay a 2 per cent per year penalty on their health insurance following the introduction of a new loading by Minister for Health James Reilly.

In a move designed to attract younger customers back into the market, Dr Reilly said health insurance premiums will rise more slowly as a result.

A grace period to May 1st next year will apply, during which time thousands of people are likely to take up cover in order to avoid the loading.

The change means a 40-year-old buying health insurance for the first time after next May will have to pay 12 per cent more than someone of the same age who is already insured.

For a family headed by two 40-year-olds, the total additional loading on a typical premium of €1,100 will amount to €264 a year.

A 50-year-old will face a 32 per cent loading. For a family headed by two 50-year-olds, the total additional cost will be €704 a year.

The “age at entry” loading is capped at a maximum of 70 per cent for those aged 69 and over. Credit will be provided for periods of unemployment and for times when health insurance was held.

A nine-month grace period will apply to people buying health insurance after moving to Ireland.


Implemented in Australia

The measure, known as Lifetime Community Rating, is designed to encourage younger people to take out health insurance. Younger subscribers are normally healthier and their entry into the market helps to drive down premiums.

Currently, everyone is charged the same premium for health insurance, regardless of their age, gender or health status – under a policy known as community rating.

When Lifetime Community Rating was implemented in Australia, there was a surge in people seeking health insurance cover for the first time, according to Liam Sloyan, chief executive of the Health Insurance Authority. This reduced the average age of people with cover by 1½ years.


‘Premium cliff’

The Government also plans to introduce a sliding scale of discounts for younger people taking out health insurance, ranging from 50 per cent for a 21-year-old to 10 per cent for someone aged 25.

At present, parents face a “premium cliff” when the cost of cover doubles as their children reach 21 and are moved to the adult rate. As a result, many young people end up going without cover. This measure requires legislation, which is unlikely to be ready before the end of the year.

Dr Reilly said Lifetime Community Rating, which has been signalled for some time, will make the insurance market more efficient. “This is an important initiative which will support sustainability and competitiveness in the health insurance market.”

Insurance expert Dermot Goode, of Cornmarket Group Financial Services, said the measure would force many people to “get off the fence” and buy cover in order to avoid the loading. But he said it would make things even harder for people who can’t afford health insurance, because it will become even more unaffordable at a later stage.

Under the regulations signed by Dr Reilly, credit of up to three years will be provided for people who previously had health insurance cover but stopped it since 2008 because of unemployment.

Where a person previously had cover but let it lapse, the loading payable on resuming cover will be reduced by the number of previous years cover.

More than 250,000 people have dropped private health insurance since 2008.