A string of recent rises in health insurance, most recently by the VHI, has put the focus on the seemingly relentless increases facing consumers in this area. The providers now typically push up prices twice each year, blaming higher claims costs. For many households, this is an increasingly significant cost in their annual budget, yet one they feel they have to pay, largely because of shortcomings in the public system.
There is a lack of clarity here for consumers about the precise reasons why prices are increasing and where cost pressures are emerging. The Health Insurance Authority, the industry regulator, (HIA) might do more here to explain what is going on and reassure consumers that the health insurers are not profiteering. From what we know, the health insurers are responding to higher costs from private hospitals, which are themselves passing on rising costs they are facing . So-called medical inflation has run ahead of general inflation in recent years, also putting pressure on the public system.
There is some competition in the health insurance market, added to last year by the arrival of Level Health, backed by Aviva, which promised lower prices and clearer policy choice. The decision by this new entrant to increase its prices in April, a few months after its arrival, is another indicator of the general pressure caused by claims costs.
The bigger players also serve consumer poorly through an extraordinary complexity of product choice and a lack of clear guidance on finding the best value. The HIA does provide useful comparative information and guidance here, but the companies should do much better. Consumers need to look after their own best interests as many could save significantly and still have the same cover.
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The underlying story here is the ongoing increase in the privately insured population, driven in large part by the inadequacies of the public system. In an increasingly two-tier system, consumers rely on the private system for more and more of their healthcare needs - and private hospitals are spreading their services, even into areas of emergency medicine. They are also becoming more efficient providers and so claims continue to rise.
Despite billions extra being spent on the public system, improvements in many areas remain painfully slow. Meanwhile, private health numbers are rising, but the rate of increase is now slowing, presumably due to the cost. The risk is that younger people with tight budgets but low claim levels decide to pull out, as prices continue to rise. In turn this could destabilise the system, which is based on the concept of community rating, where younger customers effectively support older people with higher claims levels.
