To Review the full report click here.

Executive Summary

• After several decades of steadily increasing enrolment, private health insurancecoverage has fallen sharply in recent years. From 50.9% in December 2008, coverage had declined to just 45.7% in the four years to December 2012. Numbers covered declined by almost 200,000 over the period.

• This decline is attributable, in part to the rapid rise in unemployment, aresumption of emigration and the deep downturn in the economy which hasadversely affected the demand for goods and services, including health insurance.The decline in enrolment has been exacerbated by a dramatic increase in the costof premiums which have doubled in real terms, that is, relative to the overallConsumer Price Index, in the period since 2007

• The decline in overall membership has been accompanied by a trend of even morerapidly declining enrolment in the younger age-groups. This trend is set tocontinue according to the latest population figures, which show rapid shrinkage inthe 20 to 39 age bracket as population growth in the older age group continues togather pace.

• Our community-rated system requires a sizable cohort of younger and therefore healthy members to offset the high costs incurred in meeting claims from the rising number of older members. For every scheme member aged over 60 in 2008, there were 2.21 members aged 18 to 39. This ratio has since fallen to just 1.54.

• Health insurance companies have responded to these changes in the composition of enrolment by increasing premiums in order to balance their books and meet solvency requirements.  The sensitivity of scheme membership to cost is confirmed in a recent Rec C market research survey, which suggests that future premium increases will deplete coverage by a substantial further margin. Once a concerted shift in the age distribution of memebrs away from the younger age -groups becomes established, rising average premiums can make a community-rated system dynamically unstable.

• The proposed public bed re-designation will add about 13% directly to premiums on a full year basis. The continuing drain of young adult members will result in upward pressure on premiums. Our expectation is that these two effects will mean premium increases in the region of 20 - 25%.

•  The health insurance industry is not making significant profits (1.3% of premiums in 2011). Some business written at today's premium is not profitable and there is an independent, upward, momentum to premiums from this source.

• VHI must  be re-captialised by the Government, as a result of a European Court decision. If premiums are forced up by the proposed public bed re-designation, the re-capitalisation ccost rises, diluting the Exchequer benefit. There is also the likelihood that dwindling private coverage will result in additional demands, and hence costs, for the public system. 

• The private health insurance model, based on community rating, is becoming fragile in teh face of escalating premiums and unbalancing of the membership age structure. In the absense of measures to encourage private health insurance membership, the momentum in the figures continues to be downwards. This has implications for the governments plans to introdcuce Universal Health Insurance by 2016.