Risk Equalisation

Background

Health insurance claims costs increase with age. The average prescribed claims cost for people aged 70-79 in the year from July 2010 to June 2011 was €2,386 compared to €213 for those aged 18 - 29. Vhi Healthcare has a much higher proportion of older lives than Quinn Healthcare or Aviva Health. For instance, Vhi Healthcare currently (figures from January - June 2011) has a 53% market share in the 30 -39 age group and a 91% market share of the over 80's age group. This contributes to Vhi Healthcare having a higher average claim cost per member than Aviva Health or Quinn Healthcare.

Risk equalisation is a process that aims to equitably neutralise differences in insurers' costs that arise due to variations in the age profile of the insurers. Risk equalisation involves transfer payments between health insurers to spread some of the claims cost of the high-risk older 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. Risk equalisation is a common mechanism in countries with community rated health insurance systems.

2005

The Health Insurance Authority recommended to the Minister for Health in October 2005 the commencement of risk equalisation payments. In December 2005, the Minister for Health and Children decided that risk equalisation payments would commence from 1 January 2006. A stay on payments was imposed by the Courts until it ruled on a constitutional challenge to the Risk Equalisation Scheme .

2008

On the 16th of July 2008, the Supreme Court ruled that the Risk Equalisation Scheme was unconstitutional. The Government announced, in November 2008, an initiative of an interim age related tax credits and health insurance levy to support the cost of health insurance for older people. This interim system was designed to last for three years and to be exchequer neutral.

2010

The Government, on 27th May 2010, announced a comprehensive strategy and set of actions for the health insurance market. These actions included the development of a full, robust new risk equalisation scheme to start in 2013 and the implementation of new transitional arrangements from 2012 that closely approximated the effect of the full risk equalisation scheme. The Health Insurance Authority published a consultation paper on risk equalisation on 21 June 2010 and submitted a report to the Minister for Health in December 2010.

Interim Tax credits and community rating levy amounts

Tax Credits	2009	2010	2011	2012
50-59	€200	€200	Nil	Nil
60-64	€500	€525	€625	€600
65-69	€500	€525	€625	€975
70-74	€950	€975	€1,275	€1,400
75-79	€950	€975	€1,275	€2,025
80-84	€1,175	€1,250	€1,725	€2,400
85+	€1,175	€1,250	€1,725	€2,700

Community Rating Levy
Adult	€160	€185	€205	€285
Child	€53	€55	€66	€95