by Susan Mitchell, Sunday Business Post

Health insurers will have to pay for all private patients who end up in a public hospital under moves proposed by Minister for Health Dr James Reilly. At present only 20 per cent of beds in public hospitals are deemed private or semi-private and, therefore, chargeable.

Roughly half the population has health insurance, and about half of people who go into hospital emergency departments are private patients. They will all be billable irrespective of whether they lie on a trolley or manage to secure a private or semi-private room.

This, according to health insurers, would have monumental repercussions on the cost of health insurance. VHI said it spent €320 million in public hospitals in 2010. It said that spend could potentially double if the minister pressed ahead with his plans. It could increase the cost of health insurance by as much as 50 per cent, according to the VHI.

In a market where 110,000 people have quit health insurance since the beginning of 2009, this would clearly be unaffordable.

Health insurers can only increase premiums on a renewal-by-renewal basis, so it could take up to two years to fully recover the increase, the VHI said.

“For example, somebody renewing in December this year would not pay any additional amount until December 2012 and, at that stage, would only pay increases on a month-by-month basis – so it would be December 2013 before we had collated a full year’s increase. By December 2013, we would have been paying the increased costs for two years. Therefore, it would take two years to fully recover any increased costs,” said a VHI spokeswoman.

In a recent statement, VHI chief executive Declan Moran said a price increase of the order of 50 per cent would force many out of the market.

“We therefore need to consider our position and make a decision on whether we continue to provide cover for all public hospitals in the future in light of this,” he said.

Although he hinted at it, Moran did not explicitly state that the VHI was examining the possibility of a private hospital-only insurance product. The VHI is not alone. Aviva and Quinn Healthcare confirmed they were also examining a private-only option.

All three insurers stressed that was one of a number of options under active consideration.

Private-only products would be advantageous to insurers. Health insurers reduced their costs in private hospitals, whereas charges in public hospitals are climbing. They can negotiate with private hospitals and pay per procedure. In public hospitals they pay the rate set by the minister which has been rising.

Quinn said its public hospital spend had increased by 18 per cent this year alone. The VHI said average in-patient costs in private hospitals had dropped by 6 per cent since 2009, while average in-patient costs in public hospitals had increased by 21 per cent. The insurers were not paying the full economic cost for the beds, but will be paying the full economic cost of those beds in January when the 4 per cent increase in the price of a private bed in a public hospital is implemented.)

“Already the public hospital system can be more expensive than the private one for similar services and this is unsustainable and uneconomical,” said Moran.

The VHI would like to reimburse public hospitals on a per-procedure basis as it believes this would be more efficient and result in shorter stays.

“This has been the experience in the private hospitals,” said a VHI spokeswoman.

“Paying on a procedure basis is a better use of our customers’ premiums.

“It encourages hospitals to keep the length of stay in a hospital to a medically-appropriate level. If you pay a daily rate, there is no real incentive to discharge the patient at the appropriate time.”

Patrick Brennan of Dublin-based firm Irish Health Insurance said “insurers [could] contain costs better in the private sector. I’m not surprised that they’re looking at this”.

“If public hospitals are now going to be more expensive for insurers than private or high-tech hospitals, it could lead to a fracturing of the health insurance market and a completely segmented market, private versus public,” he said.

“Two sections of society would be receiving healthcare under very separate systems. Uninsured would be in public hospitals and insured in private hospitals. Obviously this would require the private hospitals to have an appetite to cater for the type of emergency medicine associated with public hospitals. But look at Bupa. They’ve done it in the UK,” he said.

There is considerable disquiet in Fine Gael over the minister’s proposals.

He met health insurers last week and established a forum to address the issue of rising health insurance premiums.

Sweeping changes to the current status quo, whereby 20 per cent of beds in public hospitals are designated as ‘private’, will require changes to legislation and will have to go through the Dáil.

The possible advent of private-only insurance products and an even more pronounced two-tier system is unlikely to sit well with TDs.

Patrick Brennan
Director of Corporate Business
Irish Health Insurance

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