- Posted by irishhealthinsurance
- On March 31, 2013
Purpose of Risk Equalisation
- Risk Equalisation (RE) is a process that aims to equitably neutralise differences in insurers’ costs that arise due to variations in the age profile of the insurers
- Involves transfer payments between health insurers to spread some of the claims cost of the high-risk older and less healthy members amongst all the private health insurers in the market in proportion to their market share
- In the absence of an effective risk equalisation system, there is a threat to the existence of a community rated market when significant differences in risk profiles exist between competing insurers.
History of Risk Equalisation
- Previous (RE) Scheme was due to come into effect on 1st January 1996
- Stay on payments was imposed by Courts until it ruled on constitutional challenge to (RE)
- In July 2008 Supreme Court ruled it unconstitutional based on an interpretation of existing legislation
- (RE) replaced with an interim measure of levies and age related tax credits in 2009
- The levy has increased since then by almost 80% to €285 per adult and €95 per child.
New Changes under Health Insurance Amendment Act 2012
- Levy will increase again under (RE) by up to 22% in March 2013.*
- The legislation creates a Risk Equalisation Fund administered by the Health Insurance Authority.
- Supports the community rated market by providing credits in respect of those over the age of 60 that help to meet their higher claims costs
- The health credits vary by age, and for the first time by gender and Level of Cover
- A hospital bed utilisation payment of €75 is paid in respect on each night spent in private or semi-private accommodation by an insured person.
- Other measures are included to protect community rating and prevent market segmentation
- More powers given to HIA – e.g. provision for conviction of persons and organisations who contravene the provisions of the act
- Minister can now make new regulation without being required to present drafts to Oireachtas
- New classification structure to differentiate between advanced and non advanced products
- Changes to Age Related Tax Credits (ARTC)
- Extension of HIA notification period for introduction of any new product or any price/benefit amendment from 10 days to 31 days
- Extension of the period of time an insurer must maintain the price or benefit change to a plan from 31 days to 60 days.
Structure of how Plan type and gender now considered for first time in calculations for (RE) Levy
|Contract Type||Non Advanced||Advanced|
|60 – 64||€375||€250||€425||€275|
|65 – 69||€900||€650||€1,050||€775|
|70 – 74||€1,450||€975||€1,700||€1,150|
|75 – 79||€2,050||€1,550||€2,425||€1,800|
New Health Insurance Levy
|Community Rating Levy||Non-Advanced||Advanced|
Increase in Levies through (ReS):
€5 for Non Advanced Products &
€65 for Advanced Products
Example of how insurer is compensated
- 65 year old paying a premium of €1,000 per annum for Advanced Product.
- Insurer is paid €1,000 from customer
- Insurer pays HIA levy of €350
- HIA pays Insurer Tax Credit of €1,050
- Total amount received by insurer €1,700
For more information on how these changes effect you please contact us at info@IrishHealthInsurance.ie or 01 403 0700.