# Young healthy people should take out only basic cover and upgrade if they get sick



## Brendan Burgess (30 Jan 2014)

_I have moved this from another thread to keep the debate separate from the key practical point made in the other thread._

I have long argued that as young healthy non smokers pay the exact same price as old unhealthy smoking alcoholics, it's very bad value for the healthy and great value for the unhealthy. 

Therefore young, healthy people should not buy health insurance. 

The waiting periods for existing illnesses rise at 55, so age 44 is a good time to take out cover. 

I have discovered today, that if you upgrade from basic insurance to a top policy, the upgrade has a two year waiting period.

So people in their 40s might consider taking out health insurance, and then upgrade it if they do get ill.  They would have a two year waiting period instead of a 5 year waiting period.  In the meantime, they would of course be covered at basic level.


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## Brendan Burgess (30 Jan 2014)

[broken link removed]

Age at time of upgrade:    Maximum waiting periods
Under 65:       2 years
Over 65:      5 years
Maternity benefits:   52 weeks*


Current Market Practice*

*Inpatient benefits*

As of 1 Jan 2012, Aviva Health, GloHealth and laya healthcare only apply the waiting periods above to *higher inpatient benefits*,  for illnesses that developed before you switched plans and for  maternity benefits. Vhi will apply waiting periods to higher inpatient  benefits for illnesses that develop after you switch and for illnesses  that developed before you switched plans.


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## promoter (30 Jan 2014)

Brendan Burgess said:


> I argue that young healthy people should not bother with health insurance at all. But maybe they should take out the most basic cheapest policy and then upgrade if they get sick. This cuts the waiting time to two years from five years.


 
Doesn't this approach destroy the principle of intergenerational solidarity, increasing the cost for older people and eventually pricing people out of the market.


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## 44brendan (30 Jan 2014)

Perhaps it does, but given the current high cost of HI for the average family, this would be very low on a list of reasons to keep cover. Equalisation as a concept sounds great, if you are on the right side of it. However when funds are tight and necessity for retention of health cover on healthy kids is questionable, choices need to be made. This brings back the rationale for Universal Health Cover. Given todays announcement re premium increases, more families will be making the choice to cut back on cover. i.e. the healthy majority who help to finance those who make most use of their cover. In turn this will lead to further price increases. How long can this cycle continue, without some level of Government intervention??


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## promoter (30 Jan 2014)

I think "equalisation as a concept sounds great" is putting it a bit mildly. It's the fundamental basis on which HI operates. Without it you're on a very quick slide towards collapse of the insurance market and a move towards self payment which very very few of the insured can afford. How much private healthcare can you buy with €1,000?

There's absolutely no question that at an individual level it makes perfect sense for the young and healthy to pull out of private HI. My point is simply that unfortunately, this policy quickly affects wider society and those individuals won't have a market to turn to down the road.

What government intervention do you feel would assist: permitting insurers to charge more for late joiners?, moving to a full insurance model with subsidies for low incomes or something else entirely?


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## STEINER (30 Jan 2014)

Brendan Burgess said:


> So people in their 40s might consider taking out health insurance, and then upgrade it if they do get ill.  They would have a two year waiting period instead of a 5 year waiting period.  In the meantime, they would of course be covered at basic level.



I think it is too late when one is ill to upgrade and wait two years for extra cover.  A person should have a reasonable policy in place to give benefits that would suffice in the event of serious illness.


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## tvman (30 Jan 2014)

I agree it's not (economically) rational for a young person to buy health insurance. The only way for risk equalisation to work is to make health insurance mandatory and force the young to subsidise the old and sick. Now that health insurance companies have lost the subsidy of cheap  beds in public hospitals the market is collapsing in slow motion. Every time a young person cancels a policy it becomes a little more expensive to provide cover to the remaining customers and prices have to rise, pushing more young people out, pushing prices up etc. etc. until only the old and sick have want to buy cover (but won't be able to afford it).

This problem is common in insurance markets, its a form of adverse selection.


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## Romulan (30 Jan 2014)

I'm in my 40s and feel like I'm on a slow train crash called health insurance.

I've always had it, mostly as a company benefit but latterly at my own expense.
Now, having paid in for years (blessed with good health TG) and reaching the age where I may need it, I'm reaching the break point.

I'm feeling pretty angry about it I have to say.

I have sat down and reviewed a few times and it's head wrecking.


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## PaddyBloggit (30 Jan 2014)

+ 1 here Romulan.

The reported 20% increase by Laya on top of the VHI announcement is making a complete mockery of health insurance.

Laya should change their name to Layan .... looking after you always NOT!

Mine is due for renewal in February and like you I'm mad as hell about the whole thing as well.


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## Brendan Burgess (30 Jan 2014)

> Mine is due for renewal in February and like you I'm mad as hell about the whole thing as well.



Can you cancel it now and start a new policy before the price increases? 

Or use the Laya design your own policy facility 

Laya  allows you to cut the premium by designing your own policy!

I did, and cut my cover and my insurance premium from €3,500 with Aviva to €600 with Laya.


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## PaddyBloggit (30 Jan 2014)

I'll get in by the skin of my teeth Brendan but the whole issue of health insurance costs continually increasing is gone beyond ridiculous.

I'll escape this year but next year it'll be the same old story. It's a lot of money for 365 days cover.


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## Ryan (30 Jan 2014)

..


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## PolkaDot (31 Jan 2014)

If you get sick and then try to upgrade your cover, is the waiting period not longer for a "pre-existing" illness?


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## Brendan Burgess (31 Jan 2014)

PolkaDot said:


> If you get sick and then try to upgrade your cover, is the waiting period not longer for a "pre-existing" illness?



This is the point I am trying to make. It appears that the waiting period is only two years for the upgrade,compared to 5 years for new insurance. 

Brendan


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## Nermal (31 Jan 2014)

tvman said:


> I agree it's not (economically) rational for a young person to buy health insurance. The only way for risk equalisation to work is to make health insurance mandatory and force the young to subsidise the old and sick.



Why? The old don't subsidise insurance for the young in any other insurance market. Why is should intergenerational solidarity only be invoked when it favours the old?


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## JoeRoberts (31 Jan 2014)

Nermal said:


> Why? The old don't subsidise insurance for the young in any other insurance market. Why is should intergenerational solidarity only be invoked when it favours the old?



 In addition, I don't buy the risk equalisation argument.

 VHI are paying out more as they have an older profile of subscriber, but seem to forget that most of those older subscribers are long term members, maybe with 40 yrs subscriptions. So VHI had the profit from them when they were young but did not create proper reserves for these people to cover their old age with proper medical inflation factored in. By not making reserves, they kept premiums artificially down, making the market difficult for competition. Other providers now have to pay for this.


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## TippGal (31 Jan 2014)

Everything ia always VHI fault!!! Even the Laya price increase is VHIs fault apparentyl! Makes me laugh


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## Sophrosyne (1 Feb 2014)

In relation to health insurance, at what age is an individual considered "old"


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## Brendan Burgess (1 Feb 2014)

At age 55, the initial waiting period for new illnesses rises from 26 weeks to 52 weeks. In other words, if you are 54 years old and you get sick on week 27, you are covered. If you are 55 years old, and you get sick on week 51 you are not covered.

Before 55, there is a waiting period of 5 years for existing illnesses. This increases to 7 years when you are over 55.

If you develop an illness which will require ongoing treatment in hospital, you should probably take out health insurance, irrespective of your age. 

Likewise, smokers should take out health insurance, irrespective of age, as the non-smokers will subsidise their premiums.


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## sustanon (1 Feb 2014)

I don't think I would want to risk having to wait 26 weeks if diagnosed with a serious illness. Everyone should have health insurance as a matter of responsibility to themselves or their families. Pre-existing condition clauses should be removed.


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## Sophrosyne (2 Feb 2014)

JoeRoberts,

I totally agree. *This is exactly what needs to be examined.*

I joined VHI when I was 19. This year I will be 62 and paying an over 50’s loading on my premium.

In my lifetime, I claimed only once from VHI, the refund amounted to £27.

My *net* premium increased from €1,430.74 in 2011 to €2,631.88 in 2014, i.e. a net increase of 80.46% in 3 years.

Would young healthy 20 somethings of today *irrespective* of the state of their health at age 50 + tolerate such an increase?


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## Brendan Burgess (2 Feb 2014)

Sophrosyne said:


> JThis year I will be 62 and paying an over 50’s loading on my premium.



I thought that everyone paid the same price for health insurance? How come you are paying a loading?


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## Sophrosyne (3 Feb 2014)

Brendan,

I guess I put this badly because I am so annoyed at the way private health insurance is developing.

When I queried, what I considered the unjustifiably high increase in the *gross* premium for 2013 (42.11%), the following is part of the email response I received from VHI's Customer Service Department:

"As you are over the age of *50* years, your *Gross* Premium is higher than that of a member under the age of *50* years but the tax credits provided by the ARTRS scheme ensure that you pay the same *Net* Premium as any other member subscribing to the same plan.

In order to support community rating of health insurance, the Government introduced a system called Age Related Tax Relief (or ARTRS) in 2009 providing age related tax credits in respect of those over the age of *60* that help to meet their higher claims costs. Tax relief and tax credits are provided at source and deducted from the gross premium for each member. "

I emailed back to say that I queried how VHI justified the *gross* and not the net increase. I also asked what if I were aged between 50 and 59 and could not avail of community rating.

I got a “silly beggars” reply directing me to  which is now taken down.

VHI does not regard me as an individual but rather an age group. In determining my *gross* premium it takes no account of my 43 years subscriptions to Plan C, latterly Plan C Option and my claims history.

That is why I agree with JoeRoberts.


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## Sophrosyne (13 Feb 2014)

Brendan,

When you say:

“I have long argued that as young healthy non smokers pay the exact same price as old unhealthy smoking alcoholics, it's very bad value for the healthy and great value for the unhealthy.”

You are looking at this solely from the point of view of the contributor rather than the health insurance provider.

VHI charges and receives progressively higher premiums for individuals aged *50* and over.

Individuals aged *60* and over benefit from the Age-Related *Tax* *Credit*, which reduces their net premium to that which would be payable by the under 50s.

When, for whatever reason, premiums increase, the net premium increases at the same rate for *all* age groups.


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## BazzaDP (13 Feb 2014)

Yes but that Tax Credit is paid for by the Levy - which is charged to all  individuals who have health insurance. As I understand it the Levy is revenue neutral. Someone under 50 ends up being a net contributor to the Levy (as they get no corresponding tax credit to offset it), someone 50 - 60 ends up about even and someone 60 plus ends up being a net benefitor from the levy and therefore subsidised by others.

The whole point of community rating is to level the prices - which either requires the young over paying and the elderly under paying (via a levy type system) or requires a massive tax injection for the elderly (which means everyone in the country pays rather than just those on health insurance and would be regarded with those without insurance as unfair).

The only slight consideration here is that there are two levy rates depending if you have advanced or non-advanced cover. The idea presumably being that the (mostly younger, healthier) people on super cheap cover don't end up overly subsidising those (mostly elderly, sicker) on super expensive cover. But not sure it's enough of a difference/incentive to be honest.

However I'm not sure I buy Brendan's basic argument. Just because the younger are not getting as good a deal as the elderly does not mean you should opt out completely. It's like saying I pay more for my cinema ticket as I don't get a pensioners discount therefore I won't go see any films until I'm over 60.

Insurance is always an offsetting game and that's the point if it. Everyone who wants insurance puts some money in a pot and those that need to claim take the money out of that pot. You can argue the premiums you contribute should be risk rated, but ultimately, there's always winners and losers out if insurance. Should lucky people not buy insurance cause they are carrying unlucky people? Yes health insurance is less risk-weighted than other insurance, and yes younger, healthier people would get a cheaper price if it was allowed to be more fairly risk rated, and yes there might be better ways of deciding the levels, but that doesn't mean it's still not beneficial to have it in case the worst happens. Only when the premiums you pay in are greater than the claims you *can* make is the value argument so clear cut and, despite all the premium rises, we're not there (yet)!

Decide if cover is right (and affordable) for you and then get it at appropriate level of cover you want and can afford or don't get it if you feel it's of no value to you.


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## TippGal (13 Feb 2014)

@ Sophrosyne I dont get why you are querying the gross amount and honing in on that. Isnt it the net amount we pay at the end?


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