The Sunday Times - Money Comment 10/01/2010

Posted by Jill Kerby on January 10 2010 @ 10:44

Here's your first mugging of the year

On New Year’s Day, over two million people were mugged in this country. And practically nobodyMugging noticed. Unbeknownst to nearly every private health insurance member in this country, an extra €25 and €2 was slipped onto the existing health insurance levy of €160 per adult and €53 per child member.

The levy was unilaterally introduced last year by the government to subsidise their own insurer, the VHI, after the Supreme Court threw out the original, illegal, risk equalisation legislation in 2008 that, had it been implemented, would have resulted in an annual subsidy of tens of millions a year to VHI from the other two private insurers. This levy is an outrage; let’s call it what it really is – a tax.

But it was also outrageous for the government to arrange for it to appear as a footnote in the papers on New Year’s Eve, a day when most of us were either distracted with that evening’s plans or doing our best, for at least one more day, to ignore what was happening outside our own four walls. This first tax increase of 2010 means that a typical family of four with private health insurance will need to find another €480 this year on top of whatever increase their health insurer has imposed - regardless of the value of that plan. For the typical VHI member family of four, whose premiums, it was announced last Tuesday, will rise by c€180 in 2010, their health insurance bill will now be €660 higher than it was before the levy was introduced. Is it any wonder the VHI have lost 120,000 members in the past year? (The price hike, incidentally, was not passed onto corporate members – more about that below.) Meanwhile, do not be deceived: the price of health insurance is soaring and the number of members is now falling, not just because, as VHI insists, the cost of delivering better health treatments continues to defy normal inflation. No, premium costs now because the government, and specifically the Department of Health who oversees VHI, is not willing to properly address two problems - VHI’s disproportionate number of older, legacy members who could be distributed to the other two insurers on exactly the same terms and cost, and the fact that the government should not be in the private health insurance business in the first place. Instead, the Department of Health mandarins, whose empire would go if the VHI was privatized have convinced the government to tax every private insurance member in the state to keep their VHI alive. This government run company has lost 120,000 paying customers in 2009, and it will incur losses of €80 million. It is obliged – like all insurance companies operating in Ireland - to have solvency reserves of 40% in place by March, yet they have steadily fallen since February 2008 from 35.9% to just 22%. And by some form of accounting method known only to its chief executive, the VHI last week claimed it is the most cost-efficient health provider in the state. The VHI is hemorrhaging members and income and it cannot meet its solvency requirements. It is likely to seek a direct government bail-out in 2010. Yet it has not made any sweeping, cost reductions. There is no redundancy plan in place. It maintains a staggeringly expensive (and in deficit) defined benefit pension plan and it still operates six branch and offices in Cork, Abbey Street and the Naas Road in Dublin, in Dun Laoghaire, Galway, Kilkenny and Limerick, and in Gweedore, Co Donegal for crying out loud. This is not a legitimate company operating by the same rules that its owner imposes on its competitors. But unless some solution – other than levies and taxes – are considered the risk is community rated, private health insurance premiums will simply become unaffordable to the wider community: it is, after all, younger, healthier members who are cancelling their policies, not the older ones who are claiming the expensive treatments and benefits. Meanwhile, in light of all of this, allow me to share my first money-saving tip of the year with you: if you are determined to keep your private health cover but need to cut its cost, here’s what you do, because I did it myself last week. Under community rating every health insurance plan must be available to every member, regardless of age, including the equivalent plans aimed at the corporate sector. The health insurance companies do not want you do know this. That’s why they say they are “specifically designed for businesses” and don’t promote the plans in any materiel they distribute to individuals or make it easy for individuals to access information about the equivalent corporate plans on their websites. However, fee-based, independent insurance brokers and advisors say switching to a corporate plan – the equivalent or lower level to the one you have now – is a guaranteed way for individuals and families to potentially save hundreds of euro a year. After finding out the corporate equivalent to my excellent Quinn HealthManager plan last week, I saved my family of two adults and one child €231 a year by simply requesting the Quinn staffer at their call centre to make the switch, which was done after my instruction was cleared with a supervisor. To give them their due, Quinn Healthcare and Aviva Health include all the corporate plans on their website so that you can – admittedly with some effort – compare them to your existing one (or an even lower value plan). Save yourself the effort and pay a good broker a modest fee to do it for you. Unfortunately, if you are a VHI member you won’t be able to check out their corporate plans – they are not available on their website. Why doesn’t this surprise me? Call the broker.

1 comment(s)

  1. Dolores O'Flynn
    VHI have a 'group scheme' rate e.g. teachers paid salary by a Vocational Education Committee (or other groups of workers) can avail of the group rate. The employer deducts the premium from salary and the saving is in the region of 10%. Also tax relief at the standard rate is given on premiums paid. I am not aware of any other savings that can be made on premiums paid to VHI. I don't think I should have to pay €100 to an advisor to get the reliefs available.
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