MoneyTimes - January 13, 2011

Posted by Jill Kerby on January 07 2011 @ 08:48


Is the private health insurance industry model ‘broken’, as the VHI boss Jimmy Tolan has suggested?  Have older people been priced out of the market as a result of the latest price hikes?

While a rise in your health insurance costs are probably on the cards no matter which of the three insurers you belong to, VHI’s shocking announcement that it will increase premiums by 15%-45% goes much further than it not having sufficient premium income this year to meet the cost of servicing their disproportionate number of older members.

At the heart of the problem is that VHI remains under the ownership and administration of the second most dysfunctional department of government (after the Department of Finance) – the Department of Health. Despite last May’s announcement that the company would be privatised and sold off within two years, most likely at an additional cost of about €350 million to already beleaguered taxpayers, no reform has taken place.   No structural reform – to reduce staff numbers, cut pay and pensions – have take place despite the continuing loss of membership and VHIs inability to meet reserve requirements.   

Instead, the health levy has gone up – it now costs €205 per every adult and €66 per child member but the €55 million subsidy to the VHI is still not sufficient for it to meet its claims.  Nor will doubling the price of popular plans like Plan B and Plan B Options and increasing all the others by c15%-25% be sufficient to sustain the VHI long term.

Older customers are intentionally being priced out by the company and should switch, though stay with the same level of plan if they have a pre-existing medical condition.

All health plan members should review their policies with the help of a fee-based insurance advisor who will diligently look at the plans of all three companies and not just recommend Aviva plans because Aviva is the only one who pays commission. Aviva is extremely competitive, but you should still have a look at all the plans on the market. 

For that fee the advisor will make sure you are in the correct plan  - most people are not. They’ll help you with any paperwork if you switch from one company to another and tell you how to collect your refund.

Dermot Goode (www.healthinsurancesavings.ie) is one of the best known fee-based advisors:  “Even if you stay with VHI, you should cancel your existing policy before the end of January and then renew it immediately in order to lock in 2010 rates before they change on February 1st. VHI corporate plans will probably go up in April.”  Quinn and Aviva customers, even those in group schemes, should cancel and go onto an individual plan at 2010 rates.

Goode also recommends that everyone switch to the equivalent corporate plan, which you are within your right to do under Community Rated pricing. “The providers won’t necessarily make it easy for you to do this”, says Goode, but the savings can amount to up to 40% and you can check the Health Insurance Authority website www.hia.ie to find the corporate equivalent of your plan.

Another way to lower your cost is to drop any stand-alone outpatient benefit plan, like VHI’s ‘Day to Day’ and save hundreds of euro. Goode again: “If someone is under age 55 ends up with a condition that is going to result in lot of visits to the GP or consultants, x-rays, etc, you can call your broker the next day and renew the day to day cover from that day.  It’s as easy as that.”

All three providers have introduced free cover in the past year for children under 18 who are included under popular family plans. Yet families who were already on those plans before the offers were introduced may still be paying for their children.  Cancel and renew – at the 2010 rate - AND get the children free for 2011, says Goode.

Even if you do switch from the uncompetitive VHI, many people could still find the cost of their equivalent Quinn and Aviva plans are still going to be too expensive.

The danger of simple dropping down a plan, without carefully checking the benefits, is that the low cost entry plans are often inadequate now that so many hospitals are cancelling elective surgery and treatments and where private beds are very few. You will still be able to jump the queue to see a consultant, but after that, you join a long waiting list.

If none of these cost cutting options work for you, you may still be able to afford a healthcare cash plan for the whole family form the likes of HSF (see www.hsf.ie) that will pay you and each member of the family a tax-free cash payment for an assortment of treatments, from GP and consultant visits, daycare and in- hospital stays, dental and optical treatment and even maternity grants.

No one knows what’s going to happen to the VHI or the health service in the near future, but the picture is already grim.

Private health insurance has never been so essential as the HSE budget is cut by nearly €1 billion.  Act now to mitigate 2011’s higher costs.


Readers who would like Jill to organise a personal finance seminar for their group or organisation this year, can contact her at jill@jillkerby.ie for more information about topics, venues and cost.  Sandra Gannon, the TAB Guide co-author and tax expert is also available during the seminars to answer individual tax questions. 

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MoneyTimes - January 6, 2011

Posted by Jill Kerby on January 06 2011 @ 00:49



Today, January 6th, is the Epiphany, or the Day of the Three Kings in some countries. It marks the last of the 12 Days of Christmas and is the day when many orthodox Christian families exchange gifts. 


So it is the ideal day in which to share with readers what I think is the best gift that you can give yourself and your family this difficult year:  the gift of a financial education.


In my 20 years writing about money and personal finance – 10 years in this syndicated column alone –  the biggest handicap that Irish people have suffered in terms of their personal financial situations, has been their poor understanding about how money works.  That lack of knowledge and understanding has also been one of the contributing factors to what brought this country down, and when its mixed with notions of power and greed, it is what now threatens our fellow indebted club members of the Eurozone.


Regular readers should know pretty much where I stand:  to have financial peace of mind, you need to live within your means, you need to be debt-free and have, at the very least, a steady source of income.


Wealth and financial independence is another matter. This requires a growing income, profit that is saved or invested, which in turn provides income and/or profits that are then re-invested.  This is a life-long process if it is to be sustainable.


The wealthiest people usually take a different, higher risk route and use their income, saving and borrowings to building a company, the profits of which will make them – eventually – financially independent.  This isn’t a quick fix, but if successful, the company owner can become independently wealthy sooner than the person who doggedly earns a salary, saves and invests their money.


The gift of a financial education for 2011 isn’t about getting wealthy.  It’s about not becoming poor. It’s about being able to preserve what wealth you have, avoid the dangers of the money marketplace, about not getting caught out by the threat of sovereign default, the possible end of the euro, food and fuel price inflation and the continuing weakness of the property market.


Regular readers know that I swear by having an individual or family budget. This is an emergency savings fund to cover everything from a broken boiler, unexpected illness or even temporary redundancy. On top of that, you need to save another percentage of your income – from the moment you start working – to help pay some day for large items like a car, a first home, family weddings, retirement.


Avoiding expensive debt is another key lesson in your financial education.  Credit cards, for example, are hugely useful financial instruments that can be manipulated to your advantage if you gain huge bonus points, but they can also be the ruin of you if you don’t have the discipline to pay off your balance every month, thus avoiding double digit, compounding interest.


The most important part of your financial education will be to understand the fundamentals of investing.  The core message hasn’t changed:  investing your money in successful, profitable companies, property, commodities, even in the debt of a company or country (bonds and gilts) will, especially with the magic of compounding the annual gains, exceed the return you will get from a savings fund.


But the investment environment is volatile, uncertain and even dangerous to the unwary. The rules have been twisted and tampered with by central banks and the politicians and powerful investors with whom they collude. That the insiders – the corporations and individuals who control the markets - make the most money is nothing new:  Mark Twain, on a tour of Wall Street and lower Manhattan at the turn of the century wasn’t particularly impressed when all the great banker’s yachts were pointed out to him on the Hudson:  “Where are all the customer’s yachts?” he asked.   


What is different now, is that for the past 40 years there has been no ‘sound money’ behind the great credit binge and ordinary people have been left to somehow pay off the catastrophic debt that was created.


This coming year, you need to concentrate not on building a yacht but an ark. Many younger people who have lost their jobs may have to retrain or immigrate – their ark - if they can’t find work here.  Everyone who remains, as taxation increases and state services shrink, needs to find answers to these pressing questions:


  • What bank should I save with?  How safe is the bank?
  • How can I refinance existing debt?  Or achieve debt forgiveness?
  • How can I avoid higher taxation? 
  • What assets should I own to protect against currency debasement or devaluation? 
  • How can I lower my overheads – especially insurance and utilities, transport and education costs?
  • What good value investments - should I buy, for income or growth purposes?
  • How can I fund retirement, now that tax incentives are disappearing?
  • Is there a cheaper, more tax-friendly place to which I can retire?


Starting next week, I’m going to identify some of the practical tools you will need to avoid making personal financial mistakes and then how to make your money work for you.  We’ll then move onto the savings/currency options you need to consider, and then the investment trends you should be considering. 

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Sunday Times - MoneyComment - January 2,2011

Posted by Jill Kerby on January 02 2011 @ 09:00


What would the New Year be without another rise in the private health insurance levy – aside from being easier on the wallets of Aviva and Quinn healthcare customers? 

This year’s €20 per adult and €11 per child mugging, er, increased levy, will bring the total annual cost of subsiding the sickly, ageing VHI, to €205 and €66 respectively or €532 for a family of four.

That the VHI still remains wholly owned by the Department of Health should surprise no one, despite the announcement last May that it would be sold off.  There’s hardly a queue of foreign insurers lining up to buy a company that is weighed down by a legacy older, higher risk members, a huge staff on civil service pay rates and defined benefit pensions and expensive overheads.

Anyway, this is hardly a good time to be expanding a health insurance business into Ireland as more members drop to lower cost plans or lapse their policies altogether.

The combination of the levy, the 21% higher charge for private beds in public hospitals that was announced in November and the usual c10% hike that is probably on the way due to endless medical cost inflation, means that some people on higher value plans could see their health insurance premiums soar by about 25% this year, say health insurance brokers.

Unless you’ve got a very secure job and deep pockets the only thing to do is to review your policy and see where you can cut corners.  Dropping down to the lowest cost plan, is not necessarily the best idea however, since so much elective surgery in public hospitals is being curtailed and the cheapest plans may not provide much or any access to private hospitals. Also, moving back up to higher value plan later may not be possible if you develop a medical condition in the interim.

Consulting a good broker who specialises in private health cover before your renewal date is highly advised.

Dermot Goode of www.healthinsurancesavings.ie says exiting your existing plan before your renewal date, even if you are in a group scheme, and then setting up a new policy could mean you secure your premium at the 2010 rate for another year. You should also consider switching to the better value corporate version of your plan, which everyone is entitled to do, or you can drop access to private room accommodation or even the ‘day-to-day’ part of your policy to potentially save hundreds of euro.

As for the VHI, it will remain, like the now nationalised toxic banks, a government owned black hole into which other people’s money will flow, unless it is privatised, broken up and sold off.  

The danger with the VHI, like the banks, is that because of its dominant, ‘too big to fail’ status, the levy will have to keep going up, making private health insurance even more unaffordable than it has become for so many people.

The pressure that will put on the public health service isn’t worth thinking about.

*                      *                        *

Health insurance is just one of many a big ticket expenditures you may want to keep paying in 2011, along with the mortgage or rent, groceries, utilities, educating your kids and putting away some money for a pension. 

Unfortunately, you may also need to factor in thousands of euro in higher taxes starting this year and for at least a generation as your personal contribution to the monumental private debt bill that the outgoing government ‘socialised’ in its attempt to save the insolvent Irish banks.

Depending on who you ask or who you read, the total debt bill of the Irish nation ranges from about €160 billion to somewhere in the region of €400 billion.  Let’s just agree that it’s too big for 4.2 million people to ever pay, especially since of only 1.8 million are actually working.

None of us were asked if we wanted to pay this debt, or if we could.  As far as this government has been concerned, the debt and the austerity plan is ‘manageable’.

Of course it isn’t.  We’ve run out of other people’s money and the austerity plan is just another shovel that will dig the hole deeper.

Hopefully, the new government we elect in a few months will also recognise this and not just call a halt to the EU/IMF ‘recovery’ plan, but make sure Ireland is first in the queue to declare it unworkable, before all the other countries with serious bank problems, non payable national debts and unsustainable public spending bills are also forced to face reality and the eurozone unravels. 

Not being able to pay your debts, especially bank debts that were not entirely of your own making, isn’t an excuse for a country, or an individual, to borrow more. It’s an opportunity to seek a controlled bankruptcy that will certainly cause great hardship, but only temporarily.  It’s a chance to rebuild a broken state and broken lives.

Hopefully, this is the year in which we all learn about money – not just how it is manipulated and distorted by politicians, bankers and other vested interests - but how, living within our means, it can be legitimately earned, saved and invested for the prosperity of the entire nation.

Let 2011 be the year the government fears the people.  

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