Cabinet Plan to Limit Health Cover Costs for Elderly 

By Stephen Collins and Simon Carswell, The Irish Times

November 19, 2008

Ireland

The Cabinet has agreed a plan designed to ensure older people are not forced to pay far more for health insurance in the future as a result of a recent Supreme Court decision.

The issue was considered by the Cabinet yesterday for the fourth time since the Supreme Court decision in July to strike down risk equalisation in the health insurance market. Risk equalisation was designed to ensure that the rights of older and chronically ill people were protected.

The Cabinet decision will now require the approval of the EU Commission to ensure that it does not infringe EU law on competition or state aids.

As the commission was happy to accept the concept of risk equalisation in the first place, no insurmountable difficulties are expected by the Government in getting its new scheme accepted.

The details of the scheme will not be announced until it is approved by the EU, but a quick decision is expected.

It is expected to include an extension of income tax relief on private health insurance payments made by those over the age of 50.

The new scheme is designed to ensure older people are not put at a serious disadvantage as a result of the Supreme Court decision.

It is understood that a new way of spreading the cost of health insurance across all age groups is at the heart of the Government scheme rather than a direct State subvention to keep the cost of insurance down for people over 50.

The effect of the Supreme Court decision to strike down risk equalisation was that VHI customers aged over 50 would have had to pay at least triple their current insurance premiums unless the Government intervened with a new scheme.

Figures compiled by the VHI for the Department of Health showed that the price of a typical plan B insurance premium would rise from a about €745 a year to €2,625 for those aged 80 years and over. Its figures also suggest the cost for those aged between 70 and 79 could rise to €2,246 while for customers in the 60 to 69 age group it could rise to €1,435.

Risk equalisation is essentially a compensation scheme under which companies such as the VHI, which has a larger number of older subscribers who tend to claim more frequently, would receive payments from rivals with a relatively younger membership profile. The VHI had expected it would receive €40 million in payments under the scheme, largely from Bupa, which is now owned by Quinn Insurance.

Minister for Health Mary Harney said earlier this month that the Government was devising a measure to keep health insurance affordable for older people.

She said that as a result of the Supreme Court decision there were huge question marks over community rating, but she and the Government were committed to "using whatever mechanism we can to make sure that we maintain community rating so that older and sicker people can afford health insurance".

The Government is keen to announce the scheme before the health insurers start sending out policy renewal notices to customers in the coming weeks, in advance of January 1st when new policies come into effect.

The VHI has not yet announced the premium increase that it will be seeking for next year.

Health insurers have been assessing the effect of the decision of the Supreme Court, which, in a unanimous ruling on July 16th in a case brought by Bupa Ireland, found that the introduction of risk equalisation by the Minister for Health in December 2006 had been based on a wrong interpretation of law and should be set aside.

The Government had introduced the scheme to underpin the concept of community rating, under which everyone pays the same for the same health insurance product, regardless of age.

The court ruled that community rating under current legislation was defined as applying across individual plans rather than across the whole population of insured people.

The Government has responded with a new scheme in order to avoid the emergence of a range of new health insurance plans targeted at younger rather than older people. This could involve new products covering benefits attractive to younger subscribers like maternity or laser eye treatment.

This would inevitably lead to younger people migrating from the traditional plans which, in their absence, which would become more expensive for older people, even though the official ban on price discrimination on age grounds would remain.

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