It now appears clear that the State is intent on increasing the cost charged to insurers for private patients in Public Hospitals under new legislation due to take effect from the 1st of July 2013.

Effectively at present, if a Public Hospital has 100 beds and 50 patients are admitted with health insurance, the insurers are only charged to a maximum of 20% capacity, i.e. for 20 patients.  The insurers are charged at public rates for the rest, i.e. €75 per night per patient for up to 10 nights.

The proposal is to remove the 20% cap so that the charge would be payable in respect of all 50 patients in the above example.  The State also looks set to charge the insurers the cost of private accommodation in these Hospitals, regardless of the level of accommodation provided.

This is the issue that saw the Vhi threaten increases of up to 50% in premiums at the end of last year. This announcement comes despite lobbying by all four Health Insurers (Aviva Health, GloHealth, Laya Healthcare and Vhi) that this would lead to a level of premium increase unsustainable to the market.  The Government seems to have been strongly supported by the Troika in this move which is probably part of the reason that there has been no concessions given to the insurers despite their warnings.

Despite these warnings I do not feel that the market could survive premium increases of 50% across the board, so I suspect that the market will find a way to survive. In my opinion this could be a mixture of premium increases and the development of a raft of new plans that effectively side step the measures by cutting out certain Public Hospitals. This of course will be subject any such plan meeting the minimum benefit regulations as laid out in the Health Insurance Act 1994.

With regards to Public Hospitals, the minimum benefits are as follows:

However under the following Minimum Benefits exclusions there may be some room for insurers to create such plans:

Preferred Providers 

Private health insurers may also specify healthcare providers in respect of whose services the insured person is covered. The objective is to facilitate arrangements for insurers with preferred providers so as to contribute to cost containment without compromising the quality of care and, thereby, support the affordability of private health insurance. Each health insurer publishes a list of hospitals with whom it has negotiated an arrangement to provide services. A health insurer may exclude an individual health service provider from the scope of its cover if the same service is available from another provider specified in the contract. This exclusion may also be applied to the services provided in a public hospital as no distinction is made between providers under the relevant Article of the Regulations.

Regional Plans

We currently see this is the market in the other direction.  For example Laya Healthcare’s Aspire Plan, focuses it’s cover for Dublin users and fully covers the Beacon Clinic in Sandyford and The Sports Surgery Clinic in Santry, yet it has no cover for many of the other Private Hospitals in the area.  We could see this type of regional focus in reverse.  For example a new plan might cover High Tech Clinics and Private Hospitals but may be regionally restricted to only 1 or 2 Public Hospitals.

Either way this legislation will clearly hit some insurers harder than others. As mentioned above Vhi have previously muted 50% increases, but the other insurers have also brought calculations of their own to the health Insurance Authority. Laya Healthcare has speculated premium increases of between 20% and 40% and GloHealth has speculated 6%.  Aviva Health has not announced the percentage level of increase they feel would be necessary as yet. It will be interesting to see how this development effects the sustainability of the various insurers.

Certain questions however need to be asked of the Minister for Health about this move from a consumer standpoint.

1. Why should patients who have private health insurance and who pay their taxes lose their universal entitlement to public health care funded by the state?

2. How can one expect the industry to retain its customers given the scale of price increases that would result from this change?

3. If the market shrinks as it may continue to do, how will the State fund the increased demands on the public system and will the public finances be better or worse off on a net basis after the increase?

4. As the young and healthy continue to leave the market, how do we expect those remaining to bear the ever increasing burden of premiums and levies?

For what it’s worth, my opinion is that in the near future, Health Insurance will become compulsory under Irish Law as part of the Universal Health Insurance System. In fact you might even find that some of the insurers reactions to this latest development could result in some very keenly priced plans.

Patrick Brennan

Irish Health Insurance

www.IrishHealthInsurance.ie

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