HEALTH MINISTER LEO Varadkar is planning to tackle price rises in the health insurance sector by offering a Government commitment not to increase some taxes on the industry for up to two years.
Insurance companies would be asked to freeze their prices in return as part of the plan, details of which were revealed this morning in the Irish Times.
The proposal, which is to be discussed by Cabinet in the next few weeks, would see the Government offer a freeze on increases in stamp duty levies paid by the insurers, which go into a ‘risk equalisation’ fund used to compensate companies with a larger number of older, less profitable customers.
The duty was increased by former Health Minister James Reilly last year, and companies passed the increase on to customers when the changes came into effect in March.
Another part of the plan being proposed by Varadkar would see a sliding scale of discounts offered to younger people aged between 21 and 24. There’s been a fall-off in younger people taking out insurance policies in recent years.
The community rating system, whereby customers who wait until they’re 35 to take out insurance will face a financial penalty, is also due to come into effect next year.
[Health Insurance Authority]
So, what have people been saying about the recently-installed Minister for Health’s big plan?
Dermot Goode, health insurance expert with totalhealthcover.ie, said he would “love to see it happen on one level”…
“From a consumer perspective it would be fantastic if he could lock the companies in for two years.”
But I don’t see how he can do it. They have to cover their claims.
Goode said factors like medical inflation are putting huge pressure on companies’ costs, noting that a raft of new, expensive drugs have come onto the market recently — including for instance, skin cancer treatments that cost between €50,000 and €100,000.
If their claims costs continue to increase they’ll have no option but to pass on price increases.
Regarding the other strand of Varadkar’s plan, Goode said he welcomed the Minister’s plans to incentivise younger people to take out insurance, though he notes:
The real cohort we need to target is 25- to 34-year-olds. They’re the ones that are leaving in their droves and they’re the ones who don’t claim.
Goode believes the Minister should increase the age-group threshold to 29, in addition to bringing-in other incentives for younger policy holders, like reducing the health insurance levy of €399 per adult, and reinstating a tax-break abolished in the last Budget.
And he said that if the Minister was intent on taking action, he needs to do so before the end of the year, when most policy renewals take place.
UCC Health Economist Dr Brian Turner described Varadkar’s plans to tackle stamp duty rates paid by insurers as a “good start”.
While regarding efforts to incentivise plans for younger people, he said a sliding scale would help tackle the problem.
“Student premiums are at most 50 per cent of the adult premiums — so you’re talking about at least a doubling of premiums if someone comes out of a student category or if someone comes out of a child category and goes into the adult category,” Turner told Newstalk’s Pat Kenny Show.
“That’s a big jump for people so I think having a sliding scale would certainly help.”
The idea with that is that it would attract in younger consumers who don’t really have high claims costs — they’re the ones the insurers want to attract in or want to retain as the case may be. They’re the ones of course who are subsidising the older consumers who have higher claims costs.
Denis Naughten, the former Fine Gael and now Reform Alliance TD, says it appears the Government are “late converters” on the issue, and are finally waking up to flaws in policy.
“There’s been a crisis within the health insurance market since the recession came in,” said Naughten, who has been an active campaigner on health issues.
A lot of families have either left the health insurance system altogether or have taken their kids out because they can’t afford it.
Naughten agrees that the Government needs to incentivise policies for younger people.
“I think they’re going to have get more creative in how they offer incentives too, to get people active: for example, if you have a policy with the VHI that you could get discount in relation to the local gym or swimming pool.
“The current system of just treating people when they are sick has to change,” Naughten added.
TheJournal.ie has also asked the health spokespersons from Fianna Fáil and Sinn Féin for reaction. We’ll update the article once we hear from them.
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