Why health insurance premiums keep rising

Population growth, an ageing society, and rising costs are all having an effect on the health insurance market

Many headlines have been written already this year about recent health insurance premium increases and no doubt many more will be written before the year is out. But what lies behind these increases and is there any end in sight?

Fundamentally, the main driver of any insurance premium is the cost of claims. Insurers must ensure that what they take in as premiums will cover these. However, as insurance is, by definition, a risky business, insurers also need to have provision to cover unexpectedly high claim costs if they should materialise. So they must keep capital reserves on their books to cover this eventuality and must therefore compensate the providers of this capital in the form of returns, which are also incorporated into the premiums, as are administrative costs.  Insurers may also invest some of the premiums they receive, in the hopes of making a positive return, with which they can offset some of the claim costs.

When it comes to health insurance, claims costs have been rising in recent years – not just in Ireland, but internationally. This is primarily the result of two factors. The first is the growing and ageing population, which is leading to additional demand for healthcare and a higher volume of claims. To put this into perspective, between 2016 and 2022, the last two Census years, our population increased by 387,274 people, or 8 per cent. In that timeframe, the over-70s population saw the fastest increase at 26 per cent.

The second factor is the increasing cost of healthcare.  This is being driven by a range of pressures. 

Healthcare is a labour-intensive sector, meaning increases in salaries have a greater impact on costs than in many other areas of the economy.

Meanwhile, medical technologies are advancing all the time, with the newer technologies almost inevitably being more expensive.

However, they are also almost inevitably more effective, so the quality of healthcare is rising along with the cost, which at least is a positive.

A peculiar effect on health insurance premiums in Ireland in recent years is the impact of Sláintecare reforms and, in particular, the drive to remove private practice from public hospitals. 

Since the public-only consultant contract (POCC) was launched, take-up has been quite high.

All newly appointed public hospital consultants must take up this contract, but a significant number of consultants on previous contracts that allowed for private practice have also transferred over to the POCC. Currently, just over two-thirds of public hospital consultants are on the new contracts.

This has reinforced the trend of privately insured patients being increasingly treated in private rather than public hospitals. 

This can be seen in the figures from the Health Insurance Authority (HIA) on where insurers’ claim spend is going. 

In 2016, public hospitals accounted for just over 30 per cent of total health insurance claims. By 2024, this had fallen to less than 13 per cent, while the share going to private hospitals increased from 43 per cent to 49 per cent over the same period. This shift has occurred alongside a pricing environment in which charges to insurers for public hospital bed-nights, set by the Minister for Health, have remained unchanged since 2014, whereas private hospital charges are determined by market rates.

Despite these premium increases, however, the market is continuing to grow. The most recent figures from the HIA show that, at the end of 2025, there were 2.55 million people insured, an increase of just over 5,000 over the quarter and around 30,000 over the year. However, their figures also show that the average price increase on individual plans over the year was 12.2 per cent, whereas the average premiums paid by adult members increased by 9.2 per cent.

This suggests that consumers may be shopping around – and possibly reducing their cover in some cases – to maintain affordability.

The pattern may continue into the future, as it is unlikely that we will see any sustained reduction in premiums in the medium- to long-term, although short-term dips cannot be ruled out. The growth and ageing of our population and the advancements in medical technologies will likely continue unabated, driving up claims costs, and therefore premiums, for some time to come.