The state controlled health insurer, VHI, was nearly €42 million in the red at the end of last year. It had lost 120,000 customers, most likely through a combination of policy non-renewals from the downturn and increased competition.
The upshot of all this for customers of the health insurer is that they face further hikes in their premiums of around 6 per cent to 7 per cent.
VHI said that it is losing significant sums of money on its older client base. All of these issues raise serious questions about the future direction of health insurance in this country.
The sector is fraught with problems, anomalies and inconsistencies. Customers have benefited from increased competition in recent years, with the arrival of Quinn Insurance, taking over Bupa’s Irish business, and the country’s largest insurer, Aviva, taking over Vivas.
The sector has one state-controlled and two private sector operators.
The private sector players complain that the system is heavily weighted in favour of VHI, which is the largest player and is exempt from certain solvency ratios applied to them.
VHI maintains the system where its competitors partly subsidise its operations because of its older client base, does not go far enough.
While the private sector operators complain, they continue to make profits. But equally, while VHI enjoys exemptions, it continues to hike prices and rack up losses.
Both sides of the argument have a point, but ultimately a proper reform of the market is required.
Government policy is to maintain community rating, whereby older customers do not pay more for their health insurance because of their age. This weighs heavily on VHI, but also allows its competitors to cherry pick the market.
The form of risk equalisation, aimed at compensating VHI for its older customer base, was intended as a temporary measure, after previous legislation failed to stand up in court.
The government must decide whether it wants community rating or not. If it does, then a proper transparent framework must be devised to the benefit of all the players in this market and the customers in need of adequate cost-effective health insurance.
Undoubtedly, VHI should do more to absorb losses by cutting its cost base. Its competitors operate on much lower costs. But equally, the parties complaining the most about the system, namely VHI competitors, are making money.
The government plans to give VHI a cash injection as a precursor to a future privatisation of the company. If this forms part of a proper reform of the system then it should be welcomed.
Ireland’s ageing population is a simple fact that will not change. People have a right to an adequate health system but equally they should not have to pay exorbitant premiums for private cover, due to inadequacies of the public service in this area.
Health insurance has been put on the back burner since the collapse of the new legislative framework aimed at resolving the issue. A proper long-term solution is long overdue.
Source: Sunday Business Post