What Affects the cost of Health Insurance?
People often ask about the cost of health insurance premiums and why these costs increase from time to time. The simple answer is that as more people claim on their health insurance having received more advanced and more expensive treatments, the cost to the insurer rises. Here we look at three factors that can impact on the price of premiums in more details.
The cost of claims
- Advanced medical treatments, particularly in the areas of oncology, orthopaedics and cardiac care are good news for patients
- Advancements in medical technologies can significantly reduce the time it takes to recover, whilst improving patient outcomes
- However, new and better technology means that the cost of providing these advanced treatments has increased significantly and this directly impacts the cost of claims
- At laya healthcare, the cost of claims climbed by 37 per cent between 2013 and 2016
- Medical inflation outpaces general economic inflation the world over. In 2014 it was estimated that medical inflation stood at 8.3% compared to 7.9% in 2013
- This means that whilst we are seeing a general decline in the cost of consumer goods (economic inflation), we are equally experiencing increases in the cost of hospital services and pharmaceutical drugs, together with a rise in the cost of medical professional fees
- This rise in medical inflation results in a rise in the cost of claims
Increase in the number of claims
- More people claimed on their health insurance in the past year than in previous years. Laya healthcare alone experienced an increase of 40 per cent in the volume of claims in 2015
- So whilst more people are being looked after and whilst better practices, high-spec technology and improved treatments are all translating into better outcomes, they are driving medical costs higher and this can have a negative impact on premiums
- There has been a significant increase in the cost and volume of claims from public hospitals in recent years, largely driven by the introduction of the public hospital bed charges, which changed in the way public hospitals charge private health insurers. Before, health insurers were charged 10 times the overnight accommodation rate if their member was accommodated in a semi-private or private room. Now, all privately insured patients are being asked to sign a Public Hospital Waiver Form when being admitted to hospital via A&E, effectively waiving their right to be treated publically and in so doing agreeing to be charged €813 a night, that’s 10 times the cost, regardless of whether they secure a semi-private or private bed or not.
- Sounds unfair, right? Well for many it can be, and the most important thing is to know your rights and entitlements as a private patient when being admitted to a public hospital and to ask one key question before signing the waiver form: “what additional services and benefits will I receive if I sign and waive my right to be treated publicly”.
Government Policy Decisions
- The Health Levy was introduced in 2009 and increased by 178% for adults and 179% for children in the eight years to 2017. From April 1st 2017 the two levy rates for adults are €222 and €444; and two rates for children are €74 and €148. The rate applied is dependent on the level of insurance cover purchased with those on more advanced policies paying the higher levy. Reduced rates can apply to some policies depending on health credits gained due to age and general health. Everyone pays the same amount, regardless of what they are paying for their level of cover. The Health Levy has played a big part in pushing up premiums in recent years. Higher premiums are making people turn their backs on private health insurance.
- Public bed charges, first introduced by the Government in 2014, cost health insurers approximately €200m a year, four times the initial cost estimate. The charges have directly contributed to an increase in claim costs in public hospitals, and this has a knock-on impact on the cost of health premiums. Simply explained, public bed charges are incurred when private patients admitted through A&E in a public hospital are asked to waive their rights to be treated publicly, meaning that the private patient’s insurer pays up to €813 for each night of their stay rather than the €80 it would cost if they were treated as a public patient. That’s over 10 times the cost for potentially no additional services of benefits. It’s important that you understand your rights as a private patient. If you’re being asked to pay extra, we advise you to ask what additional services and benefits you’ll receive if you waive your rights to be treated publically. It’s important to make an informed decision before you sign.