Rate of VHI rises may be slowed

Private health insurance policyholders could face changes in the cost of their premiums, following the introduction of the new risk-equalisation scheme by the Government.

The VHI welcomed the move, saying its 1.5 million members could be facing lower rates of premium increase as a result.

The first phase of the scheme is due to come into effect on July 1st.

A spokeswoman for the health insurer said 4 per cent of its 18 per cent increase in September 2002 was directly linked to the absence of risk-equalisation in the Irish market.

The VHI lobbied strongly for the introduction of the scheme under the Health Insurance (Amendment) Bill, 2000, which was passed in the Dáil and the Seanad last week. BUPA opposes it.

Risk-equalisation provides for transfer payments between insurers to spread the claims costs of older and less healthy members among all companies. It is also intended to discourage companies from selecting younger, healthier people as members.

As a result, BUPA may have to pay up to €20 million per annum because the profile of its policyholder is younger and less at risk. BUPA has declined to comment on whether the introduction of risk-equalisation payments would affect premiums for its more than 300,000 members.

Consumer research published by the independent Health Insurance Authority (HIA) this year found that 46 per cent of VHI's customer base is aged 45 years and over compared with 29 per cent of BUPA's members.

The study also shows that policyholders are more likely to make claims as they get older.

Health insurers will be required to provide claims data based on age and gender to the HIA for the six months from July 1st.

If this information shows a risk disparity among insurers of between 2 and 10 per cent, the HIA will make a recommendation to the Minister for Health, Mr Martin, as to whether or not he should start transfer payments.

Administering any transfer payments will be the responsibility of the HIA, and this fund will be audited by the Comptroller and Auditor General.

A spokesman for the HIA said the introduction of transfer payments was not a foregone conclusion."It all depends on the data we receive from the insurers, and we won't have that until January 2004," he said. The earliest date for any possible transfer payments was spring 2005.

The Department of Health has sought to introduce risk-equalisation because the Government requires health insurers to operate on a community rating basis. Under community rating, an insurer in the Irish market cannot charge older, less healthy people more for the same insurance policy than it charges younger, healthier people.

The European Commission competition authority ruled in May that risk-equalisation payments are not a State aid.