Pricing patients out of the health insurance market

Two patients are lying on trollies in casualty in a public hospital. One has health insurance and the other doesn’t. There are no private beds available. Which patient gets a bed first?

You'd like to think it would be dependent on need but, under a new system proposed by Minister for Health James Reilly, it could make financial sense for the hospital to move the patient with private health insurance to a bed first. Why? Because for a public patient the cost of the bed is just €75 a night – but for the private patient, irrespective of the fact that it's not in a private ward, the bed could bring in as much as €1,122 for the hospital.

While this may appear unfair to public patients, who either cannot afford, or choose not to avail of private cover, it is also going to be seriously disadvantageous to private patients, who could be facing significant price increases.

Since Dr Reilly came out with the proposals under the Health (Amendment) Act, with the stated aim of raising €60 million in additional revenues this year, and a further €120 million next year, insurance companies have been quick to respond.

Last year, VHI said price hikes could be as high as 50 per cent, while more recently a figure of 30 per cent has been put on it by the Insurance Ireland Health Insurance Council, which represents the four providers in the Irish market. But is this just scare tactics on their behalf, aimed at pressuring the Minister into reducing the charges?

'Drastic effect'
"I don't think they're scaremongering," says Dermot Goode, general manager of health insurance with Cornmarket, adding: "If the legislation is enacted as is, and implemented tomorrow or whenever, it would have a drastic effect on insurance companies."

As it stands, if insurance companies are obliged to pay as much as €1,122 a night for a private patient in a public bed in a public hospital, it would represent a 15-fold increase, up from the present rate of €75. Not only that, but the current rate only applies to the first 10 nights. So, if a patient is in a public bed in a public hospital for a month, an insurer could be faced with a bill of some €30,000.

From a patient’s perspective, if a public hospital is making the same amount of money from an insurer, there may be no incentive to move them to a private bed.

For consumers, it’s more bad news. An average mid-level health insurance plan for a family of four is now of the order of €2,500 a year – and the mooted 30 per cent increase could bring this well over €3,000.

If, of course, it comes to pass.

"There is still a good bit of uncertainty in relation to how the change in public-bed pricing will impact, and the figure being cited is the worst case," says Priscilla Sweeney, healthcare consultant with Mercer.

The price hikes might also impact on employees who, heretofore, have been largely unconcerned about the cost of health insurance because it has been covered by their employer.

“We don’t see anyone cutting the benefit, as it’s still very valuable and can be quite emotive,” says Sweeney, adding that what’s happening is that companies are looking more to bespoke plans, which might offer lower benefits at a similar price, or might impose an excess on private hospitals or day-to-day expenses, for example.

What is certain, however, is that regardless of the current furore, prices have been on an inexorable ascent since 2008, when the first health levy was introduced. According to Sweeney, since 2009 the cost of health insurance in Ireland has risen by a staggering 71 per cent and, so far in 2013, costs have jumped by 13 per cent, driven in part by the recent increase in the health levy, which now stands at €350 per adult and €120 per child.

Another issue for health insurers is that they are unable to negotiate with public hospitals. While they are in a position to agree fixed-price procedures with private hospitals – which is, in turn, putting pressure on these hospitals – they can’t negotiate the same terms with public hospitals.

“The problem for insurance companies is that they’re not allowed to negotiate with public hospitals, so they can’t reward those that are more efficient,” says Goode.

All these factors are conspiring to push up the cost of health insurance, which means that more people are likely to leave the system. At present, about 6,000 people are cancelling their cover each month.

“It will force more and more people out and they will cancel their cover and fall back into the public system,” says Goode, noting that this in turn will put more pressure on the public system – and increase prices for those who remain in private health insurance.

'Big exodus'
This is even more problematic when the age of those leaving the private health insurance market is considered.

“We’re seeing a big exodus in the 20-39 age bracket; but they’re the ones you need to keep in,” says Sweeney. Indeed, over the past eight years, the VHI has seen the number of its customers aged under 60 drop by a third, while between 2009 and 2012, the number of its customers over the age of 80 increased by 33 per cent.

So for now, the onus on insurers is to incentivise the young and healthy to take up – and stay in – the private health insurance market.

“If more and more young healthy people fall out, they will have to budget for an even higher increase. It’s scary in terms of what might happen,” says Goode.

Last year, the market was rife with offers of free insurance for children under a certain age, as insurers looked to sign up young families to prop up their more expensive elderly customers. Now, however, GloHealth is they only insurer with any incentive, says Goode, as it is currently offering free cover for children under three.

Another tool used by insurance companies is to introduce lower-priced plans to try and keep people insured.Last week Aviva brought six lower-cost plans to the market, costing from just €525, but the plans cover fewer hospitals and consumers may have to partly pay for some procedures. Laya is also expected to follow suit with its own range of lower priced plans.While lower prices will be welcome, stripping out some benefits adds a further layer of complexity and confusion.

And, with some 55 per cent of the population now relying on the public system for health services, we look to be moving further away from the Government's avowed goal of introducing universal health insurance by 2016.


Pill Bill: Who covers what on new drugs
While insurers may be criticising the Government for its proposed approach to charging for public beds, they themselves are also coming into the firing line for their willingness – or otherwise – to pay for certain drugs.

Oncologist Prof John Crown says the decision by some insurers not to offer the skin cancer drug Ipilimumab is “absolutely cynical”.

While the drug, which costs €85,000 per patient, is available to public patients, insurers such as Glohealth and Aviva do not offer it, even though the latter offers it in the UK –where it actually costs more. Aviva has been quoted €102,000 for the drug in Ireland, which is not economical it says, arguing that the UK is a very different health insurance market. The National Centre for Pharma- economics in Ireland did not approve the drug on the grounds that it does not offer value for money because it may only be of benefit to a “meaningful minority” of patients.

For Crown, however, it is still worth using. “Some people are going from having an imminent death sentence to living for a few years, and in some cases, although it’s still speculative, being cured,” he says of the drug. “We think the behaviour of the insurance companies has been appalling.”

And, despite all the warnings at this time of year not to get your prescriptions filled while on holiday, Prof Crown, who is also a Government-appointed Senator, is more relaxed on the issue.

“I would be very very open-minded on buying abroad,” he says.

That's good news given that a survey from the ESRI last week showed that Irish drug prices are among the highest in Europe, with the highest price for nine out of 13 commonly used generic medicines.


Monetary policy: How to save on your health insurance cover
Thanks to the Health Insurance Authority (hia.ie), it's now possible to easily search between all the private health insurance policies available on the market – which is good news given that there are hundreds to choose from.

However, the sheer number of policies available, and their complexity, means that it’s still a difficult task, particularly when it’s hard to judge exactly what your medical needs might be in the future.

Where once you could have opted for a middle-of-the road, standardised policy, it has now become a lot more difficult to do so, given the rate at which insurers are chopping and changing available benefits.

Here are some useful tips:

Get your student rates:
According to Dermot Goode, insurers don't automatically offer student rates – you have to ask for them. So make sure you're not over-paying for the students in your house

Corporate plans are for everyone:
Just because a health insurance plan has "corporate" or a specific profession in the title such as teacher or nurse, doesn't mean you, as a consumer, are excluded from it. Given that insurance companies often negotiate better rates for corporate clients, these can often be the best buys.

Reconsider your accommodation needs:
Yes it's nice to have your own room, but is it really necessary? A plan that offers a private room in a so-called "hi-tech" hospital could set you back more than €4,000 a year. Just by compromising and opting for a semi-private room, you could save yourself almost €1,500 a year.

An excess might be just what the doctor ordered:

Don’t automatically be put off a plan if it imposes an excess on out-patient fees or treatment in a private hospital. If you’re unlikely to be making a lot of claims, it could save you money in the long run.

Brush up on your ‘restricted illnesses’: It can be a false economy if you give up a plan that offers cover for certain illnesses for a cheaper option that doesn’t, if you end up needing such treatment. For example, the shortfall on a hip replacement could be as high as €4,000. So check the small print of your policy before switching.