Private Health Insurance Unit

Functions and Responsibilities

Private Health Insurance

Interim Scheme of Age-Related Tax Credits and Community Rating Levy
Health Insurance Authority – functions and activities

Functions and Responsibilities

Policy and Regulation in relation to the Private Health Insurance Market

VHI – authorisation and other issues including the European Court of Justice case on derogation
Restructuring of the Private Health Insurance market
Risk Equalisation
Interim Scheme of Age-Related Tax Credits and Community Rating Levy
Minimum Benefit Regulations in relation to Private Health Insurance policies
Lifetime Community Rating Regulations
Corporate Governance Framework matters in relation to the Health Insurance Authority
Liaison with European Union officials on private health insurance matters
Litigation management in relation to Private Health Insurance matters

Private Health Insurance in Ireland

Private health insurance in Ireland is voluntary and has a valuable role in helping to fund the provision of health services. Approximately 80% of health funding in Ireland is provided from public sources through the taxation system and private health insurance provides a useful additional source of funding. Private health insurance contributions have traditionally attracted tax relief, which is currently provided at the standard rate of income tax. Almost 50% of the Irish population have private health insurance with 2.228million having private health insurance policies at the end of 2010.

The main legislative provisions for the regulation of the Irish private health insurance market are included in the Health Insurance Acts 1994 to 2009 and Regulations made under those Acts. The Principal Objective of the Minister and of the Health Insurance Authority under this legislation includes the following statement:

The principal objective of the Minister and the Authority in performing their respective functions under this Act is to ensure, in the interests of the common good, that access to health insurance cover is available to consumers of health services with no differentiation made between them, in particular as regards the costs of health services, based in whole or in part on the respective age range and general health status of the members of any particular generation (or part thereof) .....

Key Principles

The Irish private health insurance regulatory system is based on the key principles of community rating, open enrolment, lifetime cover and minimum benefit and aims to ensure that private health insurance does not cost more for those who need it most. The system is unfunded, meaning that there is no fund built up over the lifetime of an insured person to cover their expected claims cost. Instead, the premium contributed by insured people is expected to cover the cost of claims and expenses in that year.

Under community rating, everybody is charged the same premium for a particular health insurance plan, irrespective of age, gender and the current or likely future state of their health. The only exceptions to this rule relate to children less than 18 years of age, students in full time education and members of group schemes. Community rating therefore means that the level of risk that a particular consumer poses to an insurer does not directly affect the premium paid.

Open enrolment and lifetime cover mean that, except in limited circumstances specified in legislation, health insurers must accept all applicants for health insurance and all consumers are guaranteed the right to renew their policies regardless of their age or health status.

An exception to these provisions is that they do not apply to certain “Restricted Membership Undertakings”. These undertakings mainly provide health insurance to certain vocational groups and their families and account for about 4% of the health insurance market.

Under the current Minimum Benefit Regulations, all insurance products that provide cover for inpatient hospital treatment must provide a certain minimum level of benefits. It is considered necessary to regulate the minimum level of benefits in order to support community rating and because of the complex and specialist nature of private health insurance products.

Risk Equalisation

Community rating needs to be supported by a scheme that subsidises the cost of health care for older and sicker people across the market of health insurers, where one or more companies have a greater share of older or sicker customers. Otherwise, companies would have a clear incentive to attract and retain only healthy customers who were less likely to make claims. This support system is called risk equalisation.

Risk equalisation is a process that aims to equitably neutralise differences in insurers’ claim costs that arise due to variations in the health status of their members. Where it applies, risk equalisation involves transfer payments between health insurers to spread some of the claims costs of high-risk members amongst all the private health insurers in the market in proportion to their market share.

Arrangements are now being put in place to introduce a new permanent Risk Equalisation Scheme with effect from 1 January 2013. In the meantime an Interim Scheme of Age-Related Tax Credits and Community Rating Levy has been in existence since 2009 which has ensured that every customer has had the benefit of a community rated health insurance premium.

The Interim Scheme provides that health insurers receive higher premiums in respect of insuring older people, but that older people receive tax credits equal to the amount of the additional premium so that all people continue to pay the same amount for a given health insurance product. In this way community rating is maintained but insurers receive higher premiums in respect of older people to partly compensate for the higher level of claims.

Private Health Insurance Market – trends and developments:

Latest figures from the Health Insurance Authority show that there were 2.173 million people or 47% of the population with private health insurance in-patient cover as of end September 2011. This represents 42,000 fewer people covered than in March 2011 and reflects the continued downward trend since the start of the recession. The figures also include those insured by restricted membership schemes which mainly operate for certain vocational groups. In addition, 102,000 people currently have “cash plan” health insurance. Individuals with cash plans have not been included in the 47% population figure.

Interim Scheme of Age-Related Tax Credits and Community Rating Levy

(Updated November 2011)

Community rating, in principle, provides that everybody is charged the same premium for a particular health insurance plan, irrespective of age, gender and the current or likely future state of their health. The only exceptions to this rule relate to children less than 18 years of age, students in full time education and to a limited extent, members of group schemes.
Community rating therefore means that the level of risk that a particular consumer poses to an insurer does not directly affect the premium paid. It also means that premiums for younger or healthier lives are typically higher than their expected claims would require, whereas for older or less healthy lives, premiums are typically lower than the expected claims would require. It is also useful to note that older people who have been paying health insurance premiums for many years will have contributed to intergenerational solidarity when they were younger, and could reasonably expect to benefit from it now.
The Interim Scheme has been in existence since 2009. It works by allocating Tax Credits for persons in three age bands and funding this by the collection of an annual levy on health insurance companies based on the number of lives covered by policies underwritten by them. It is designed to be Exchequer neutral and ensures that every customer has the benefit of a community rated health insurance premium.
Restricted membership undertakings (the membership of which is restricted to employees and pensioners of particular organisations) are excluded from the scheme as their insurance products are not available to the general public.
The Scheme provides that health insurers receive higher premiums in respect of insuring older people, but that older people receive tax credits equal to the amount of the additional premium so that all people continue to pay the same amount for a given health insurance product. In this way community rating is maintained but insurers receive higher premiums in respect of older people to partly compensate for the higher level of claims.
The scheme allows for insurers with additional costs arising from insuring older people (who have a preponderance of claims) to be compensated for up to, but no more than, 65% of these additional costs.
The amounts of the tax credits by age group have been chosen such that where an age group gives rise to higher than average claims costs, the system should reduce the excess of claims costs by 65%.
The choice of a 65% reduction in average claims costs at older ages is designed to strike a balance between reducing the incentive that exists for insurers to avoid older customers, while also allowing for a competitive market in which individual insurers are not required to share efficiencies in their own claims management with their competitors.
The Health Insurance Authority (HIA) Report on the Interim Scheme (submitted in October, 2010 ) recommended increasing the tax credits applying for policies commencing in 2011 to equate to 65% (up from 50%) of the higher levels of prescribed benefit for older people and combined this with a proposal to remove tax credits in respect of those in the 50-59 age group.
The HIA determined that there was no overcompensation in respect of 2009 and concluded that the net impact of the tax credits and levy proposed for 2011 is significantly less than the estimate of the extra cost of providing cover to older people, calculated using market data.
The amount of levy collected in 2009 was €197 m and the amount collected in 2010 was €318m. A breakdown between the amount collected in respect of individuals aged under 18 and individuals aged 18 and over is not available. The levy in 2009 was in respect of seven months’ of insurance policies, whereas the 2010 figure represents 12 months’ worth of insurance policies.
On current estimates the Scheme will transfer some €275M from younger to older lives, ( aged 60 years plus) in 2011.

The rates of tax credits and levy for 2011, 2010 and 2009 are set out below:

Age-Related Tax Credits 2011 (Additional tax relief, for the benefit of health insurance companies, starting for people aged 60 and over and increasing for higher age groups)
Age Band	2011 Rates	2010 Rates	2009 Rates
50-59	Nil	€200	€200
60-69	€625	€525	€500
70-79	€1,275	€975	€950
80+	€1,725	€1,250	€1,175

Stamp Duty 2011

The rates for 2011 are set out below with 2010 and 2009 rates in brackets.

€205 in respect of each insured person aged 18 or over (2010 rate €185) (2009 rate €160)

€66 in respect of each insured person aged less than 18 (2010 rate €55) (2009 rate €53)

Health Insurance Authority – functions and activities

HIA functions

The Health Insurance Authority is independent in the exercise of its functions. The principal functions of the Authority as provided for in the Health Insurance Acts include the following:

To monitor the health insurance market and to advise the Minister (either at his or her request or on its own initiative) on matters relating to health insurance;
To monitor the operation of the Health Insurance Acts and, where appropriate, to issue enforcement notices to enforce compliance with the Acts;
To carry out certain functions in relation to health insurance stamp duty and age related tax credits and in relation to any risk equalisation scheme that may be introduced;
To take such action as it considers appropriate to increase the awareness of members of the public of their rights as consumers of health insurance and of health insurance services available to them; and
To maintain “The Register of Health Benefits Undertakings” and “The Register of Health Insurance Contracts”.

HIA activities

In the performance of its functions listed above, the HIA regularly provides the Minister with reports and advice on a range of health insurance issues including:

Quarterly reports on market trends (numbers with PHI, age profile, market share etc.)
Twice yearly reports on the evaluation and analysis of information returns from insurers
Report on the interim scheme of risk equalisation
Reports on risk equalisation and minimum benefit were provided in December 2010 following public consultations conducted by the HIA.

The HIA is also very active with regards to its functions around increasing consumer awareness of their rights as consumers of health insurance products and in its interaction with the media as summarised below:

HIA Website: The HIA website provides information to consumers including a product comparison tool, which provides consumers with access to details of every plan on the market and is the only resource where this information is available. The average number of website visitors per month in the first half of 2011 is 40,000.
Consumer Queries: The HIA dealt with 2,250 consumer queries and complaints in 2010. In the first 6 months of 2011, the Authority dealt with 3,650 queries and complaints.
Consumer information: Consumer information statements from the HIA are included in renewal notices issued by insurers. In this way consumers are provided with information on their rights when the information is most relevant to them.
Consumer information booklets: In 2010, 175,000 consumer information booklets were distributed to doctor’s surgeries, health clinics, Citizen Information Centres, Financial Services Advisors and directly to consumers. In the first half of 2011, 86,000 have been distributed.
Consumer survey 2010 - In June 2010, the HIA published the findings of a national survey of the private health insurance market in Ireland. This provided a comprehensive insight into attitudes amongst consumers in the marketplace, showed that there is a strong desire for health insurance, that consumers value their health insurance, consider it a necessity rather than a luxury and purchase it to secure access treatment in hospital and to insure against the high cost of medical treatment. The recession is however impacting on policies, with previous policy holders citing job losses as one of the reasons for cancelled policies.
Volume of media activity: Over the course of the last 18 months, the HIA has conducted a wide range of media activity and advertorial campaigns designed to encourage consumers to shop around for health insurance.
Newsletters: The HIA publishes two types of newsletter on a regular basis, an industry news letter and a consumer newsletter. 4 industry newsletters were published in 2010 and 2 to date in 2011.

Staff

Principal Officer	Dermot Ryan
Assistant Principal Officers	Gráinne Duffy
	Roisin Cahillane
	Eddie O'Reilly
	Paul Flanagan

Contact

Telephone: 01 - 635 4029, 01 - 635 3048
Fax: 01 - 671 4396
Email: healthinsuranceunit@health.gov.ie

Legislation

Publications:

Bodies under aegis of DoHC:

Section 15 of FOI Act

Record Classes Files on Policy Issues, Correspondence, Representations and PQs

Information Routinely Published None

Significant Systems N/A

Personal Information Holdings N/A

Purpose N/A

Disclosees Notes: including info an admin access practice, Ebriefs etc.

Private Health Insurance Unit

Functions and Responsibilities