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Shifting sands in Ireland’s health insurance market

This year witnessed a major change in the private health insurance market in Ireland.

Lifetime community rating (LCR), also known as ‘late entry loading’, commenced on 1 May and the new regime means that anyone aged over 34 years who did not have private health insurance before that deadline will now have to pay higher rates if they do take out a policy.

Minister for Health Leo Varadkar led the high profile campaign to encourage sign up for health insurance policies before the 1 May deadline. Defending his choice to introduce LCR, he told the Seanad in June, “for a community-rated health insurance system to work we need young healthy people paying in so that we do not have to levy older, sicker people with higher premiums, which we do not do.”

However, there remains fierce critics of the LCR campaign.

“It effectively means that the Minister in charge of the public health system is promoting private-for-profit healthcare, and endorsing a two-tier system,” People Before Profit TD Richard Boyd Barrett tells the Medical Independent (MI).

“It is outrageous that the Minister should be endorsing that situation.”

But beyond the politics, was the campaign a success?

The Minister and the Department of Health certainly think so. A spokesperson for the Department tells MI the number of people in Ireland with health insurance has increased by over 90,000 since the start of the year. Insured numbers increased by 74,000 during the month of April alone, in a clear rush to make the LCR deadline.

“The number of people who currently hold health insurance now stands at 2.118 million, and has risen for three quarters in a row,” says a Department spokesperson.

“The Minister’s view is that this increase in the number of people holding health insurance is extremely welcome, as it helps to control premium inflation and helps to keep health insurance affordable for all.”

However, health insurance premium rises show no sign yet of stabilising.

HIA

The Health Insurance Authority (HIA) played a crucial role in raising public awareness of the introduction of LCR. MI has learned that the Authority spent €730,000 on its “extensive public information” campaign.

The Authority has a unique role, being the statutory regulator of the private health insurance market and also having a number of functions, including increasing awareness among the public about health insurance.

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Mr Don Gallagher, CEO, HIA

Speaking to MI, at the Authority’s headquarters in Dublin, HIA CEO Mr Don Gallagher expresses his views on where LCR will have the largest impact on the market.

“There was obviously an increase in the number of younger people entering the market,” he says.

“But almost more importantly the legacy will also be, we believe, a reduction in the level of drop-offs of people with health insurance. Because if you are 50, or 40 or 35, you may think twice now before you drop out of the market. Because up until now, you could drop off at 40 and come back at 45 and there was no penalty. But now you will think again before you drop your insurance.

“Because you know that if you drop off for five years the charge for every year is two per cent – this means a permanent levy of 10 per cent, forever, if you come back into the market again. We expect that one of the main benefits will be a reduction in the drop-off rate.”

Mr Gallagher believes LCR “should be a positive factor in the control of premiums and that was one of the intentions behind it”. However, the general trend of the market ageing will continue despite LCR.

“But all these things, including LCR, help. Another thing that will help is the general recovery in the economy,” he continues.

“It is difficult for consumers during a recession, but things are improving a bit. There is a well-acknowledged connection between the levels of employment and the percentage of those taking out health insurance. It is more often than not on people’s wish list to have health insurance, because it is about peace of mind.

“Competition increased a few years back when GloHealth came in, and the authorisation of Vhi, we had advocated for that. That improves the market, it is a more level playing field.”

But, there may be difficulties ahead for the LCR system, which could concentrate the minds of the authority and the Minister. The HIA CEO warns he expects “hard cases” to crop up in the future that the current legislation “is silent on”.

“There will be issues – if someone goes away working for a multi-national for five years and comes back this could mean a 10 per cent loading on their policy premiums. How do you deal with that?,” he asks.

“We know these things will crop up – and the legislation is silent [on this]. I guess the slight piece of light is that the legislation does refer to the option of the Minister having a right to review the legislation after two years.

“As advisors to the Minister, if we become aware [of problematic issues] we may recommend certain changes. We expect that some hard cases will come up, because at the moment it [the legislation] really just deals with the introduction of LCR as of 1 May and a number of specific circumstances that could arise.”

But, what of public concerns over the level and quality of care provided by some of the new ‘cheap’ policies launched in the short period before LCR was introduced?

“There were a number of entry level products produced in anticipation of LCR,” Mr Gallagher acknowledges.

“These are entry level products, they really don’t give you any access to private hospitals. All they really do is pay the €75 per night at the public hospital… but, on the other hand, you are then on the ladder for lifetime community rating.

“You might say, ‘is that enough?’ But it might be enough for now, if that is all you can afford, at least you are on the ladder.”

However, the introduction of LCR remains politically controversial. While supported by the Government, there have been some strong political voices hostile to the move.

“While this, on the surface, might appear to bring an element of fairness to the private health insurance market, in reality it represents the propping up of a deeply inequitable system,” Sinn Féin health spokesperson Deputy Caoimhghín Ó Caoláin, tells MI.

“The subsidisation of the private health system at the expense of public healthcare must be brought to an end.”

But outside the political debate, Mr Gallagher notes the Irish healthcare system rests on pillars of both public and private care. Private care, he says, has a beneficial impact on the public system – something he argues is often ignored.

“You have to go back to the basic structure of the Irish health market,” he tells MI.

“You have a public health system, but it is supplemented by a private health insurance scheme as well, and in a sense they are symbiotic. Because, not withstanding whatever position you want to take as to whether you are pro or anti private health insurance, the reality is, the more people that are in private health insurance, the more it relives pressure in the public system. I think that needs to be borne in mind and it is not always appreciated.”

UHI

Increasing the numbers of people with private health insurance, following the decline in both the number of policies and higher quality plans during the recession, was also seen as a key requirement in advance of the introduction of the Government’s universal health insurance (UHI) plan. However, since the potential costings of UHI emerged in the media this summer, estimated at between €2,200 to €3,200 per person and potentially higher depending on the level of care that will be covered, its future is in doubt.

If UHI is introduced, concepts such as open enrolment, lifetime cover, and community rating will continue to operate as they do under the current system. However, a new concept of equal access would apply, whereby cover would be based on need and premiums based on the ability to pay. While the exact basket of care to be provided to people under UHI is to be determined, there are currently three proposed baskets which are incremental in nature.

The HIA has played an important role in providing reports to the Minister on UHI, including information on its structure, costings, and the, as yet undecided, basket of care.

“Government policy is UHI,” says Mr Gallagher.

“The HIA has prepared reports for the Minister regarding UHI. This comes under our function in advising the Minister.”

Mr Gallagher says the Authority is not currently working on any more reports on the issue for the Minister and had nothing more to add on the topic.

Competition

Despite some media speculation earlier this year that the Authority was keeping the number of health insurance plans in the Irish market under review, the HIA CEO pours cold water on this and insists the Authority has little to no influence over this area.

“We cannot control the number of plans for competition law reasons, it is a free market… nor indeed should we, if it is a free market,” he adds.

“I know it can be frustrating for consumers as there are a huge number of plans out there. We have a comparison tool [on the HIA website], we have a consumer helpline. Competition in the health insurance market also helps control premium prices.”

In terms of market share, and customer ‘cherry-picking’, the Authority has somewhat more influence — but not much.

“We do not control movements in the market share for different insurers,” Mr Gallagher says.

“What we do is, we ensure that insurers comply with the legislation and the insurance acts and that they are not in breach of the rules. For instance, engaging in activities such as market segmentation, whereby they might design an insurance product, which is designed just to focus on a particular segment of the market, such as the under 30s. We will prevent them doing that, as far as we can, under the legislation.

“That is where the RE scheme comes in. The intent is that no insurer should be disadvantaged from insuring a 60-year-old versus a 20-year-old. That is the intent; otherwise you would have a dysfunctional market in a community rating sense.”

In terms of public awareness, HIA figures show that the public is engaging in large and increasing numbers with its website.

“To June of this year we have had 265,000 visitors. Some 146,000 were first-time visitors and a huge increase for March and April. Some 70,000 in each of March and April on their own,” concludes Mr Gallagher.

HIA – regulator or advocate?

“We do not advocate. Making the public aware is not the same as advocating.”

Mr Gallagher is responding to a question on the HIA’s advertisement push in the run up to the launch of lifetime community rating (LCR).

Was it advocating young people to join the private market, rather than just providing information?

“They [the public] must make the decision. We do not recommend, we tell them what they should know and let them make the decision,” Mr Gallagher maintains.

“From the very first meeting we made it clear that we must not become an advocate for the insurers or private health insurance and we reiterated what our brief was in terms of increasing consumer awareness. This was important for us – we are not a commercial player in the health insurance market.

“Our role is around awareness; it is not to be an advocate. We made stringent efforts to increase awareness dramatically and I think we did. A measure of success per se is not an increase in the number of policyholders, nonetheless, it would be silly to suggest that 74,000 additional policyholders is not indicative of the success of the awareness campaign.”

This figure of new entrants to the Irish health insurance market due to LCR is significantly higher than the original forecasts of between 50,000 to 60,000. A post-campaign survey conducted by the company Phd, (the results of which have been seen by this newspaper), show that public awareness around LCR was significantly increased by the HIA campaign.

However, Mr Gallagher confirms that the Authority did co-ordinate closely with private health companies at the beginning of their information campaign.

“We dovetailed our campaign with those of the insurers,” he says.

“In other words we shared with the insurers the thrust of our campaign in advance of them doing theirs.

“Because naturally for it to be a success they had to link in with it, which is why the date of the 30 April was very important, and they dovetailed in with that.

“There was an alignment in terms of the messaging. They were saying ‘take out the policy’, we were saying ‘be aware [of the introduction of LCR]’. In terms of that, there was an alignment of interests.”

However, despite this defence, some political sources contacted by MI said that they had concerns over the HIA’s role in the campaign.

“I think there is no question that they became an advocate,” claims Deputy Boyd Barrett. “You have the regulator and the Minister acting as touts effectively for the private-for-profit health industry. That is an utter scandal.

“It was a massive PR campaign where the regulator and the Minister were trying to scare people into taking out private health insurance. And, of course, the only reason someone would do that is because of the crisis in the public health system.”

Sinn Féin health spokesperson Deputy Caoimhghín Ó Caoláin, also has concerns with the role of the Authority.

“I am concerned by the role played by the HIA in advertising the campaign for LCR because the HIA is the statutory regulator of the private health insurance market,” he says.

 “Again, I feel it is inappropriate for the suggestion to be made that private health insurance is the answer to the woes of our health service. We must change tack and ensure that our public system is one we can trust and be proud of.”

However, the Department of Health insists that the campaign remained within the HIA’s information remit. Although it does acknowledge that the introduction of LCR was first recommended by the Authority itself.

“The Department does not agree with the view proposed of the role of the HIA as an advocate seeking business for the market,” a spokesperson tells MI.

“As the independent regulator of the market, one of the principal functions of the Authority is to monitor the health insurance market and to advise the Minister (either at his or her request or on its own initiative) on matters relating to health insurance. In this context, the Authority recommended the introduction of LCR as a necessary measure to help support the health insurance market.

“The Authority ran an extensive communications campaign to publicise this significant change to the health insurance market, to ensure that as many people as possible understood the measure.

“In doing so, the Authority fulfilled one of its other principal functions, which is to provide information to consumers and to take such action as it considers appropriate to increase the awareness of members of the public of their rights as consumers of health insurance and of health insurance services available to them.”

LCR campaign — an example of nudge theory?

In March Minister for Health Leo Varadkar told RTE news that LCR “is not compulsory, it is voluntary”.

So was the introduction of LCR one of the most high profile examples of the use of ‘nudge theory’ in Irish public health policy?

Nudge in public health policy is the application of behavioural science to encourage people to voluntarily make different choices. Nudge is about changing the ‘choice architecture’ in people’s lives, thus altering the context in which we make decisions.

””
Minister for Health Leo Varadkar

In June, MI revealed that the National Advisory Committee on Bioethics is working on advice for Minister Varadkar and his Department on the ethical implications of nudge theory.

The Department did not answer questions from this newspaper on whether it regards the LCR campaign as an example of nudge and if the Committee will review it.

“The National Advisory Committee on Bioethics has recently commenced drafting an opinion paper, which will explore the ethical issues relating to the use of nudging in order to influence people’s behaviour and encourage the adoption of healthier lifestyle choices,” confirms a Department spokesperson.

“While drafting is at an early stage, it is envisaged that the paper will provide a general overview of the field and consider whether or not nudging is an efficient and proportionate tool of governance.”

But for some critics, the LCR campaign was less a gentle nudge and more a rough push by the Minster.

“I think it was highly inappropriate for the Minister to pressurise people who, in some cases, could ill-afford to take out private health insurance,” Sinn Féin Deputy Caoimhghín Ó Caoláin tells MI.

“It sent out the message that the Minister was in no position to guarantee a basic level of service in the public system.”

Risk equalisation scheme under review

Ireland’s risk equalisation (RE) scheme for health insurance is currently under review with a new scheme due to be launched at the beginning of next year.

The scheme is funded by stamp duties levied on health insurance policies, and the money generated is used to pay RE credits to take account of the higher costs of older and sicker people in the market.

The RE scheme is maintained by the HIA, and currently involves cash flows of around €1 billion, according to the recent HIA annual report.

“At the moment we are coming to the end of a three-year cycle and a new one will be starting in January 2016. That is in process as we speak. Discussions are underway between the EU Commission and the Department of Health.”

In 2014 the Department and the HIA commenced work on the development of a more refined health status measure using diagnosis related groups (DRGs) to enhance the RE scheme by enhancing support for less healthy people of all ages. The HIA carried out an analysis of international regimes and submitted a report to the Minister on incorporating DRGs into the Irish RE scheme.

“The scheme could be different next year, for instance, it might be for longer than three years (cycle) but that is currently in discussion. Discussions will continue on a number of matters…. It will be approved hopefully in time for the new scheme to come into effect for January 2016.

“But it is too early to say what the outcome will be. One of the areas of ongoing discussion between the Department and ourselves and the EU Commission is fine-tuning and making it more relevant to the nuances of the Irish health insurance market,” Mr Gallagher outlines.

“We are continually trying to refine it and make it as nuanced as possible. There are (also) issues around having sufficient data.”

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