Like many economic predictions when it comes to the pandemic, forecasts around the health insurance market have turned out to be wide of the mark.
Given the impact Covid-19 has had on employment and incomes, it was reasonable to assume that health insurance would be high on the list of products that households would look to ditch while trying to make savings.
And as the private hospitals were effectively taken over by the State for a period to help cope with an expected surge in the number of patients presenting with Covid-19, there was an even more compelling argument for households to put the health insurance money to better and more urgent use.
However, it appears the pandemic has had the opposite effect.
More people signed up than discontinued cover last year.
The numbers with private health insurance grew by 36,000 bringing the total market to 2.3 million members, according to figures supplied by the Health Insurance Authority to Dermot Goode of totalhealthcover.ie.
That’s the highest number of people here with private health insurance since 2008.
“Our expectation was that the market would contract somewhat due to uncertainty over jobs and incomes in some industry sectors, but the market has bucked this trend and continues to perform well,” Mr Goode said.
So why the desire to get insured now?
“From speaking with consumers that are contemplating signing up to health insurance, people seem increasingly concerned that waiting lists across the public hospitals are likely to grow further as a result of the pandemic. Hence, their decision to apply for private health insurance,” he explained.
With more people entering the market, should premium prices fall?
In theory, yes. The reverse trend was one of the reasons for prices going up in the early part of the last decade.
After reaching its previous peak in 2008, the health insurance market went through a period of decline during the downturn which saw membership falling to just over 2 million by December 2014.
It was the first time since the VHI was established in the late 1950s that the market contracted.
“Worse still, most of those who cancelled cover were the young, healthier lives which put further upward pressure on claims costs, driving premiums higher,” Mr Goode said.
To address that problem, a system known as lifetime community rating was introduced in April 2015.
This was a system whereby those who waited until later in life to sign up to a health insurance plan for the first time – when they’re more likely to need health insurance – would be penalised for doing so.
“A loading of 2% of the gross premium will apply for every year of age higher than age 34 that an individual has attained when they first purchase inpatient private health insurance,” the health insurance authority (HIA) explains on its website.
The loading then increases by 2% every year. So, at 35 it is 2%, 36 is 4%, 37 is 6% and so on. The maximum is 70% which applies for 10 years and it then ceases to apply.
The ultimate aim of the practice is to ensure a continued flow of younger people – who tend to claim less on average – into the market to keep premiums down for everybody.
Now that more people are entering the market, prices must be falling again?
Well, no. They’re actually rising.
VHI’s premiums went up by an average of 3% from the start of this month.
Laya is increasing some premiums by an average of 2.3% from June.
That comes on the back of an increase of on average 3% on other plans in January.
Irish Life is raising prices on some of its plans by an average of 1.6% from the start of next month, having hiked prices on some plans last October.
“The price increases now are relatively modest compared to what we saw during the recession,” Dr Brian Turner, Health Economist at UCC explained.
“There was only one year where prices fell because the insurers were engaged in a bit of a price war. That was short lived, so we’re back to price increases but it’s what you might call a normal level of price inflation.”
However, it’s important to note that these are all just averages.
Some plans have gone up, or are scheduled to go up, by between 10 and 12%.
But you get more cover for the more expensive plans?
That’s not necessarily the case.
And that’s why it’s vital for those entering the market – as well as those renewing their health insurance policies – to shop around.
As a rule of thumb, if you’ve been on the same plan for more than three years, you’re likely over-paying on your policy, as are members who are on plans that have been available on the market for 7 to 10 years or more.
Dermot Goode said those in the latter category could make savings of up to €1,000 per adult.
“Take on an excess if you don’t already have one on the policy,” he suggests as a further cost saving measure.
“In return for a small excess of possibly €75 per claim in private hospitals only, members could reduce their costs by €500 – €1,000 per adult, depending on the plan held,” he said.
Opting for semi-private cover instead of private cover in private hospital is another cost saving measure for those looking to make cuts to their premiums.
Why are prices rising?
Healthcare costs are rising everywhere due to a range of factors.
“It’s mainly down to claims costs, which tend to rise over time,” Dr Turner said.
“We have an ageing population. Older people are more likely to claim. Also, the cost of treatment is increasing. We have more drugs, technologies and procedures that are more effective, but they’re also more expensive, so that drives costs.”
According to consultants Willis Towers Watson in their annual global medical trends survey, healthcare benefit costs are expected to jump by more than 8% in 2021 alone.
“Globally we are seeing an increase in medical costs that are reflected here in Ireland,” David Glennon, director of health and benefits at Willis Towers Watson said.
Do we need more competition in the market?
With over 300 plans on offer, it’s tempting to conclude that there’s more than enough choice.
In fact, the market is simply ‘mind-boggling’ for many consumers, according to Dr Turner, and it’s a deliberate strategy by insurers to make the landscape opaque.
But there are only three providers.
Would a new entrant or entrants make a difference?
“At best, we’ve only ever had four providers,” Dr Turner points out.
“There’s a debate as to how many insurers the market can facilitate to make it worthwhile for other insurers to come in.
However, he says what’s more important is that there is a good spread of membership among providers, and that situation is improving.
“There was a time when VHI had over 80% of the market. At the moment it has about 50%, Laya about 27% and Irish Life Health about 23% so there’s a better balance between the competitors in terms of market share.”
The market here is fairly consistent with the situation across Europe.
Even though there may be more providers in some countries, the top three providers generally tend to account for the bulk of the membership in most markets.
In short, additional providers may not make much of a difference in a market where rising costs are driving the cost of premiums.
However, as with all insurance products and utilities, the message is to shop around and don’t be afraid to change providers.
There is nothing to be gained by staying loyal to a particular brand.
“Insurers must take you on and they cannot restrict you from cover by law. You don’t have to re-serve waiting periods. Everything you’re accustomed to with your current provider will be available with a new provider,” Dermot Goode advises.
And don’t be afraid to ask your existing provider for a better product if you feel that you’re over-paying, he suggests.
“Ask them to check all plans and recommend the closest to the equivalent of what you have – including corporate plans – that are cheaper.”
Plans can be compared on the Health Insurance Authority website, hia.ie.
Do some advance research and create a shortlist of plans that you wish to compare.
Otherwise, the information can be overwhelming.
However, it’s worth the effort. The savings can be considerable.