Purpose of Risk Equalisation

• Risk Equalisation (RE) is a process that aims to equitably neutralise differences in insurers’ costs that arise due to variations in the age profile of the insurers
• Involves transfer payments between health insurers to spread some of the claims cost of the high-risk older and less healthy members amongst all the private health insurers in the market in proportion to their market share
• In the absence of an effective risk equalisation system, there is a threat to the existence of a community rated market when significant differences in risk profiles exist between competing insurers.

History of Risk Equalisation

• Previous (RE) Scheme was due to come into effect on 1^st January 1996
• Stay on payments was imposed by Courts until it ruled on constitutional challenge to (RE)
• In July 2008 Supreme Court ruled it unconstitutional based on an interpretation of existing legislation
• (RE) replaced with an interim measure of levies and age related tax credits in 2009
• The levy has increased since then by almost 80% to €285 per adult and €95 per child.

New Changes under Health Insurance Amendment Act 2012

• Levy will increase again under (RE) by up to 22% in March 2013.*
• The legislation creates a Risk Equalisation Fund administered by the Health Insurance Authority.
• Supports the community rated market by providing credits in respect of those over the age of 60 that help to meet their higher claims costs
• The health credits vary by age, and for the first time by gender and Level of Cover
• A hospital bed utilisation payment of €75 is paid in respect on each night spent in private or semi-private accommodation by an insured person.
• Other measures are included to protect community rating and prevent market segmentation
• More powers given to HIA – e.g. provision for conviction of persons and organisations who contravene the provisions of the act
• Minister can now make new regulation without being required to present drafts to Oireachtas
• New classification structure to differentiate between advanced and non advanced products
• Changes to Age Related Tax Credits (ARTC)
• Extension of HIA notification period for introduction of any new product or any price/benefit amendment from 10 days to 31 days
• Extension of the period of time an insurer must maintain the price or benefit change to a plan from 31 days to 60 days.

Structure of how Plan type and gender now considered for first time in calculations for (RE) Levy

New Health Insurance Levy

Increase in Levies through (ReS):

€5 for Non Advanced Products &

€65 for Advanced Products

Example of how insurer is compensated

• 65 year old paying a premium of €1,000 per annum for Advanced Product.
• Insurer is paid €1,000 from customer
• Insurer pays HIA levy of €350
• HIA pays Insurer Tax Credit of €1,050
• Total amount received by insurer €1,700

For more information on how these changes effect you please contact us at info@IrishHealthInsurance.ie  or 01 403 0700.