Health Insurance Levy/Risk Equalisation

Background

Healthinsurance claims costs increase with age. The average prescribed claims cost for people aged 70-79 in 2011 was €2,442 compared to €224 for those aged 18-29. Vhi Healthcare has a much higher proportion of older lives than Aviva Health, laya healthcare or GloHealth. For instance, Vhi Healthcare, at December 2011, has a 56% market share in the 0-49 age group and a 90% 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, Laya Healthcare or GloHealth.

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 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. Risk equalisation is a common mechanism in countries with community rated health insurance systems.

2006- 2008

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. On the 16th of July 2008, the Supreme Court ruled that the Risk Equalisation Scheme was unconstitutional.

2009-2012

The Government announced, in November 2008, an initiative of an interim age related tax credits and community rating health insurance levy to support the cost of health insurance for older people. This interim system commenced in 2009 and was designed to be exchequer neutral.

2013+

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. 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.The Government announced details of the scheme in January 2012. Legislation was published in October 2012 and enacted in December 2012 to apply from January 2013.

The legislation creates a Risk Equalisation Fund administered by the Health Insurance Authority. The Risk Equalisation Fund supports the community rated market by providing age related health credits in respect of those over the age of 60 that help to meet their higher claims costs. The health credits vary by age, gender and by Level of Cover. Credits are also provided in respect of each overnight stay in a hospital bed in private or semi-private accommodation. These credits are funded by a community rating health insurance levy paid by health insurers which vary by Level of Cover.

The health credits and the community rating health insurance levy are administered by the health insurance companies and the Risk Equalisation Fund. Community rating health insurance levy payments for renewals from 1 January 2013 are paid by insurers to the Revenue Commissioners who in turn pass the money to the Risk Equalisation Fund. Health credits are paid out of the Fund to the insurers. Any surpluses or deficits in the Fund are carried forward and allowed for in setting future levy amounts.

The health credits and the community rating health insurance levy for renewals occurring up to 31 March 2013 are the same as applied for renewals under the interim system in 2012. See below for details of these payments. The amounts of the health credits and community rating health insurance levy for policies renewing from 31 March 2013 are as follows:

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.

Interim System credits and community rating levy amounts for renewals in 2009  2012

Links

Department of Health and Children Press Release 19 November 2008
Health Insurance (Miscellaneous Provisions) Act, 2009
Government announcement of 27 May 2010
HIA publishes consultation paper on risk equalisation in the Irish private health insurance market 21.06.10
Department of Health-Risk Equalisation and Interim Scheme
Health Insurance (Amendment) Act, 2012
HIA Report to the Minister for Health on an evaluation and analysis of returns for 1 July 2011 to 30 June 2012 including advice
December 2010 HIA Report to the Minister for Health and Children on Risk Equalisation in the Irish Private Health Insurance Market