The Sunday Times - Money Comment 06/09/09

Posted by Jill Kerby on September 06 2009 @ 20:23

As usual, the people of Ireland, at least those of us lucky enough to be still working, continue to do the right thing as the Great Recession deepens.   

According to the latest Central Bank monthly statistics, we are now paying off our credit cards faster than we are spending on them. We’re also doing our bit to recapitalize the banks with real money and not with borrowings from the ECB. Last July, overnight or demand deposits rose by another €555 million while three month notice accounts rose by €633 million. 

We’re just as wary about taking on mortgage debt as the banks are to lend it to us in this falling housing market. The annual rate of increase in outstanding residential mortgages in July was just +1.3%, says the bank; by the end of this year it expects we will be actually paying off the nation’s collective mortgage bill, not adding to it. 

This is bad, bad news for the property developers and builders, architects and lawyers, estate agents and granite topped kitchen fitters who relied on a steady stream of mortgage borrowers for their livelihoods during the bubble years, but it’s a perfect reflection of how depressed is the real economy. 

It’s also a point that is being overlooked in the endless debate over the merits of Nama or the other good bank/bad bank ‘solutions’. 

The argument seems to be – but who really knows - that the banks must be recapitalized, no matter what the cost, in order that businesses and individuals can return to the old formula of borrowing and spending, so that our economy can ‘recover’, and grow again. 

They’re the experts, of course, but it seems to me that this is just more bubble blather.  

Our current enthusiasm to repay of our personal debts and rebuild our savings funds proves that a lot of us now realise that all that foolish borrowing and spending has actually left us a lot poorer, not richer, than we were before those mad, boom years. 


‘Buyer Beware’ should be stamped all over one of the VHIs newest products, First Plan Extra. 

For the first time, say private health insurance brokers, a health insurer is putting restrictions on where certain common surgical procedures – like hip replacements or cataract surgery, can be undertaken and how much they will pay towards the cost.  The fear is that customers who buy this plan, because it is cheaper, may not realise that it comes with unusual restrictions that could result in them waiting longer for treatment and paying far more too. 

First Plan Extra costs €690 a year, at least €200 cheaper than other popular VHI plans in the same range, such as Plan B Options, Plan B, and Plan B Excess.  It generally advertises the same access to public and private hospital accommodation as these other plans, except for certain surgery - any joint replacement surgery, such as common hip replacements and any eye surgery, including for cataracts will not be performed in public hospitals. For those private hospitals where the surgery is conducted, only 35% of the cost will be covered by VHI.  These are treatments mostly common to older patients and members, of which VHI, the state owned insurer has the greatest number, a throwback to being the only provider until 1996. 

Specialist health insurance brokers say this restriction is a dangerous precedent in a market that is already stuffed full of complicated plans and policies that consumers already find difficult to compare for cost or quality.

They also say this new policy doesn’t clearly define or highlight the ne w restrictions and that buyers may not realise that they could end up both paying for and waiting much longer for specified hip, knee, shoulder joint replacement and major eye procedures if treatment is only available in a restricted number of hospitals. 

By then it could be too late to switch to another plan.

This certainly looks like a matter for the industry regular, the HIA. If VHI, the biggest insurer, owned by the state, thinks it’s acceptable to start targeting ‘loss making’ treatments like hip replacements, what’s to stop them – or any other insurer – from extending these restrictions to other types of surgery or treatment.  

So much - again - for the spirit of community rating which is already being whittled away by the introduction of so many plans in which the benefits are clearly aimed at specific age groups.  

For the moment, the price of this product is still too high for it to attract that many new customers, says Dermot Goode of www.insurancesavings.ie, who offers a fee based comparison service and Aongus Loughlin of Watson Wyatt Health, who advises corporate clients on their health care plans. 

They both site a number of Quinn Healthcare and Hibernian Vivas Health products that are either cheaper, or only a few euro dearer than this one, and which provide the same or better benefits without any restrictions.

The state owned insurer is losing money and members and has again missed its latest EU deadline for complying with solvency reserve requirement: that gap is now reckoned at €100 million.  

Nor is this the first cost cutting measure the VHI has brought in this year – they slashed benefits from their Life Stage plans this past summer and have chopped and changed their family plans and child premiums, amid considerably confusion, say the brokers. 

But what is truly extraordinary is that despite being the sole beneficiary of the new €150 adult and €60 per child insurance levy – a subsidy from every other health insurance member in the country – the VHI still feels compelled to target this vulnerable age group.

Do yourself a favour.  Check out the competition. 



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