Has Lifetime Community Rating re-ignited the Health Insurance market?

It seems like a long time ago now, but on 1st May this year there was a significant change to the Health Insurance market in Ireland. As a result of the introduction of Lifetime Community rating (LCR), members of the public aged 35 and older taking out private health insurance since 1st May 2015 are now being charged extra. This change was introduced to encourage younger people into the market, as the participation of younger people helps to keep the cost of Health Insurance down.

Since 1st May and as a result of LCR, consumers’ premiums will be permanently loaded by 2% per year for every year they are aged above 34 when they commence their health insurance cover. For example, if a 44-year-old decides to take out private health insurance for the first time now, they will have a loading of 20% added to their premium every single year that they remain insured. As the introduction of LCR loomed, there was an expectation of quite a rush of people aged over 34 looking to commence their Health Insurance cover before the new system came into effect on 1st May.  So the question is, did this rush actually happen?

Well the good news is that it did! And this is good news for all health insurance subscribers as it is likely to bring more stability to the market and to the price of health insurance in general.

To put numbers on it, the trend over recent years has seen up to 24,000 people leave the market in the first quarter of each year. However in 2015, the first three months of this year saw an extra 6,000 taking out private health insurance. But then during the month of April, 74,000 policies were taken out in just 30 days, coinciding with the introduction of Lifetime Community Rating. While a detailed breakdown is not yet available of the age distribution of those newly insured or returning to the health insurance market in April, initial findings indicate that new policyholders were primarily in the 35-50 year age range. This is not surprising as these people were aware that Health Insurance was about to get significantly more expensive for them for this year and every year into the future, if they left the purchase until after 1st May.

The end result of this according to the Health Insurance Authority (HIA) is that more than 2.1 million people in Ireland now hold private health insurance. At the market peak in 2008, almost 2.3 million people were insured. Again according to the HIA and based on returns from insurers to the HIA and on Central Statistics Office (CSO) population data, 45.7% of the population were covered by inpatient health insurance policies at the end of April. This compares to the 2008 peak of 50.9%. So the market is pretty healthy again!

So is it all good news? Well not quite… One of the concerns in the market now and that we at Lyons Financial Services are fully aware of is the quality of some of the plans of offer. Recent years have seen the introduction of entry-level plans, which don’t include some of the valuable benefits of the more standard plans. These entry-level plans tend to have higher excesses (the amount you must pay yourself at claim stage), limited hospital coverage and shortfalls in some areas of cover, such as orthopaedic cover. In fact, the likelihood is that these entry-level plans will also see ongoing price inflation.

So what does all this mean for you? Obviously if you are a younger customer of ours, you need to remain aware of the importance of having Health Insurance in place and how delaying taking out this cover could cost you in the long run. For all our customers with Health Insurance cover in place, we need to remain focused on the quality of your cover. Does your cover meet your specific needs? Is it the right plan at the best price for you and your family? These are the areas that we consider every year for our customers. So please, before you next renew your Health Insurance policy, contact us here at Lyons Financial Services so that we can ensure that you have the very best Health Insurance plan in place to meet your needs.

Photo courtesy of Flickr username 401(K) 2012