Insurers may be allowed ‘load’ premiums of older entrants

Health insurance companies may be permitted to introduce "loadings" on the premium of people who take out cover later in life under measures being considered by Minister for Health James Reilly.

At present in Ireland a concept of single-rate community rating applies which means that the age of entry of a person to the health insurance system does not determine the level of premium that has to be paid.

The Department of Health said last night that the Minister was "disposed to considering any measures that may assist with ensuring the maintenance of a healthy and functioning private health insurance market, in the transition to a universal health insurance system".

The department said one measure under consideration was the introduction of a system of lifetime community rating.

It said that, at present, everyone was charged the same premium for a particular health insurance plan, irrespective of age, gender and the current or likely future state of their health.

'Incentive'

It said that under a system of lifetime community rating the premium that a person paid would rise with the age at which they entered the private health insurance market.

“Regulations on lifetime community rating could perhaps be used as a mechanism to discourage people from only taking out private health insurance as they get older (by allowing commercial insurers to charge higher premiums to “late entrants” to the market) and thus provide an incentive for people to take out private health insurance at a younger age.

“There are a number of technical issues which would have to be considered before any possible introduction of lifetime community rating, such as the age at which premium loading should commence and the rate at which loading should apply, to ensure that such a measure could be introduced in an appropriate, balanced manner.”

The comments by the Department of Health came in the wake of controversy over the likelihood of further increases in the cost of private health insurance on foot of a decision by the Government on Tuesday to increase stamp duty on most health insurance products by 14 per cent from next March.

The net price paid by consumers for many health insurance plans has already increased following the reduction of tax relief in the budget.

Dr Reilly suggested yesterday that insurance companies could absorb the cost of the increased stamp duty or "health insurance levy" by reducing the level of profit they were making on cover provided to younger people.

Costs tackled

He also said that costs in the private health insurance sector had not been attacked in any meaningful way.

Speaking on RTÉ Radio he said that costs would be tackled in the future.

Dr Reilly said 60,000 people a year had left the private health insurance market over the past four years and he indicated the same number could drop out this year.

However, the country's second largest private health insurer, Laya Healthcare, said it was not possible to avoid passing on the proposed levy increase to customers.

Laya managing director Dónal Clancy said the suggestion by Dr Reilly that private health insurers absorb the increase themselves was “unsustainable”.

“There’s no doubt that if we have to pay out that money, we will have to collect that money,” he added.