Companies that provide private health insurance for their employees are feeling the pinch amid rising healthcare premiums with the cost of some packages soaring by 20 per cent over the past 12 months, insurance broker Lockton has warned.
Private health insurance premiums surged by 10 per cent last year, or around €500 from 2022 to an average of €1,594, figures from the Health Insurance Authority revealed in April. The rate of increase has accelerated this year with average premiums up 13 per cent at the end of March 2024 compared with the first three months of 2023, the HIA said.
With Irish Life Health, Laya and VHI all announcing further price increases in 2024, the cost to employers of some sponsored schemes will have increased by €200,000 in recent times, according to Dermot Goode, head of the healthcare division at Lockton Insurance Brokers, or as much as 20 per cent in the past year in some cases. Further increases this year cannot be ruled out, Lockton also warned.
“This has created a huge financial dilemma for employers who are keen to continue to offer this benefit to workers but are finding the escalation in costs a huge challenge,” Mr Goode said. “Most employers have only budgeted for increases in line with medical inflation, meaning the rises they’ve been hit with over the last year are up to three times more than they budgeted for.”
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According to Lockton, some 520,000 people have their health insurance paid in full or partially by their employer. In the face of rising costs, employers will now have “no choice but to go to market to source similar cover that fits within their budget parameters”, the firm said.
“However, switching to a lower-cost alternative plan may not be straightforward,” Mr Goode said. “Employers may be constrained by legacy contracts of employment and could meet resistance if there is any reduction in benefits that could adversely impact employees. Expert advice is always recommended to help employers avoid the common pitfalls associated with changing benefits.”
Against this backdrop, employers may have to set monetary limits on the extent to which they cover employee premiums. They may also have to pare back spending on other benefits if they are “double paying” for other initiatives like health screening or a company doctor, Lockton said.
Employers are also advised to seek the maximum discount from insurers and ensure defined eligibility rules are in place and enforced.
“With healthcare costs and claims, and in turn private health insurance premiums, likely to continue to increase into the future, employers need to make it their priority to explore options and ways to reduce the huge health insurance cost increases so they can continue to offer this benefit to their workers,” Mr Goode said.
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