# Anybody understand the new changes in health insurance



## Duke of Marmalade (19 Nov 2008)

[broken link removed]  I'm confused by this initiative.  A universal levy applied to companies plus extra tax relief for older people.  VHI welcomes it and calls it broadly cost neutral.  Quinn damns it as anti competitive.  Is it that the companies can use the tax relief to offset the levy and charge older customers the same *after* tax amount as younger customers, thus preserving community rating?


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## StevieC (19 Nov 2008)

Its a work around on the supreme courts decision on community rating. Basically Quinn and Hiberian were cherry picking the younger (in more likelyhood healthier) customers by offering cheaper rates for younger people instead of a flat rate.

This should level the playing field for all the health insurer companies and mean that VHI can compete with the newer companies that entered the market while at the same time ensuring that older people dont have to pay excessively more for health insurance as they will get tax reliefs as they get older. The government will charge a levy on the health insurers to fund the tax relief.

It looks good on paper. I hope that it works as long term it will benefit us all even if younger people like myself have to pay a bit more now.


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## jpd (19 Nov 2008)

I don't quite understand the logic - the insurance companies are not allowed to charge older people more than younger people. 

So it seems that everyone is going to pay € 160 more and those over 50 will be able to claim some or all of the extra cost back from the revenue.

So the under-fifties will subsidise the over-fifties - yippee, I'm over fifty so thanks a lot to those under-fifties with health insurance amongst the askaboutmoney readers!


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## StevieC (19 Nov 2008)

jpd said:


> I don't quite understand the logic - the insurance companies are not allowed to charge older people more than younger people.
> 
> So it seems that everyone is going to pay € 160 more and those over 50 will be able to claim some or all of the extra cost back from the revenue.
> 
> So the under-fifties will subsidise the over-fifties - yippee, I'm over fifty so thanks a lot to those under-fifties with health insurance amongst the askaboutmoney readers!


 
The supreme court decision basically did away with community rating so that meant companies could charge based purely on age. Hence why this initiative is being brought in to soften the blow that would have occured to older customers.


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## Duke of Marmalade (19 Nov 2008)

StevieC said:


> The supreme court decision basically did away with community rating so that meant companies could charge based purely on age. Hence why this initiative is being brought in to soften the blow that would have occured to older customers.


U got that wrong Stevie. The SC disallowed RE but CR still stood as legally binding and there was no blow to older customers - the loser was the VHI. 

It seems to me the government have cleverly brought in RE by the back door. Everybody pays a levy but the over 50s get tax relief. But it only makes sense if the following is true.

1) The companies can hold on to the tax relief - after all it is deducted at source.

2) CR is now interpreted as applying to the NET rate after levy and tax relief.

So when VHI welcome this as broadly neutral to their costs they must mean that tax relief will cancel out the levy and that the NET rates will be unaffected by this move and will remain the same for all customers.

Poor old Quinn is not so lucky though. He will have more levies than tax reliefs and will have to increase NET rates across the board.

In other words, if I read this correctly, we have risk equalisation after all.

V V clever.


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## Brownie10 (19 Nov 2008)

So does this mean that you are better off without health insurance if you are under 50 and then purchase when you turn 50 (or are close to it?)??

in Australia, if you don't have private health insurance and earn above a certain amount you pay an extra 1% in tax. This meant that if you were above the income threshold it nearly cost you the same - you either paid the extra tax or a HI premium.

Also if you take out HI for the 1st time over the age of 30 you pay an extra levy for each year you are over 30 every year. This encourages you to take out HI before 30 and to keep it for life.


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## Duke of Marmalade (19 Nov 2008)

Brownie, my understanding is that the NET rate will stay the same no matter what your age i.e. NET Community Rating.  I also understand we are introducing an Australian like penalty for delaying entry into the system.


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## Brendan Burgess (19 Nov 2008)

Here is the Hibernian press statement in response to it:

*Hibernian Health responds to Department of Heath announcement*​ *concerning changes to the Health Insurance market*​ 

*19th  November 2008* – Hibernian Health has responded to the proposals released today by the Department of Health on the issue of changes to health insurance in Ireland. 

  The new measures will see a substantial levy of €160 per adult applied to health insurance customers; in addition changes to tax relief at source (TRS) on health insurance premiums are planned. The changes to TRS will only be of benefit in relation to policies for those over 50.

  Commenting on the decision Jim Dowdall, newly appointed MD of Hibernian Health said “These proposals are blunt in nature and short term in outlook. They are clearly a means to prop up the finances of the VHI at the expense of its competitors and they appear to take no account whatsoever of the need for continued and expanding competition in the health insurance market. We believe these changes amount to a form of state aid. This does not serve the consumer well. The changes are complex and unfortunately will penalise all consumers in particular the lower economic segments.”

  He continued “Ultimately these plans are a risk equalisation replacement mechanism through the back door. By applying this change to TRS cash flows the Government has taken the decision to support the VHI and their market dominance as well as their anti competitive behaviours.”

  He concluded, “The Government has failed to date to consult with stakeholders in the health insurance market. This failure to consult, despite requests for substantive engagement on this issue, could result in the implementation of a health insurance system that is once again open to challenge”.

  Hibernian Health has re-emphasised the following facts:



Hibernian Health is committed to Community      Rating. This principle is embedded in the current legislation which means      all adults access the same premium. Differentiation of premiums by age by      introducing differentiated tax relief unnecessarily undermines the      principle of Community Rating.
 


This      proposed levy equates to an approximate increase of 30% on a standard plan      which represents €479 for a family of two adults and 3 children. 
 



Hibernian Health has no plans to increase      prices
 


VHI in their annual accounts for 2007 posted a      surplus of €112 million, does not carry solvency requirements and yet      appears to expect / demand a state subsidy using a threat to Old Age      Pensioners as a means to coerce the Government. Carrying through on their      threat would have contravened the existing regulations which made the      threat meaningless 
 


Hibernian Health is committed to long-term      participation in this market. We welcome customers of all ages and seek to      work actively with the Minister for Health and Children  on all regulatory requirements which      facilitate open and fair competition


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## Duke of Marmalade (19 Nov 2008)

Thanks for that _Boss. _I'm still not absolutely sure how it works.


			
				Hibernian said:
			
		

> Ultimately these plans are a risk equalisation replacement mechanism through the back door


That's what I think is intended. If so, bravo to Mary Harney and stuff the Supreme Court. The bleatings of those who sought to exploit Community Rating by targetting young healthy lives are hollow.


			
				Hibernian said:
			
		

> Differentiation of premiums by age by introducing differentiated tax relief unnecessarily undermines the principle of Community Rating.


If I am right and the same NET rate will apply across the community then this statement is clearly disingenuous.

VHI were on RTE hailing this as a victory for society and the principle of community rating. I heartily agree with that.

Let's get one thing straight here - Quinn and Hibernian are cheaper than VHI not because they are more efficient but because the have exploited community rating as I described above. This move by the government helps defuse that cynical ploy. 

_Disclosure: I am over 50._


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## kitty81 (19 Nov 2008)

I work for Vhi and todays decision means the concept of Comm. Rating stays intact if the Gov's decision is implemented i.e premiums will NOT become risk rated.  To be honest, it was looking like a fairly ugly picture for over 50's if this wasn't introduced......


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## NovaFlare77 (19 Nov 2008)

kitty81 said:


> I work for Vhi and todays decision means the concept of Comm. Rating stays intact if the Gov's decision is implemented i.e premiums will NOT become risk rated. To be honest, it was looking like a fairly ugly picture for over 50's if this wasn't introduced......


 
I worked for BUPA Ireland. This decision looks like it's a kick in the teeth to the average, middle income family because of the €160 per adult/€63 per child levy, assuming the insurers pass it onto the consumers.

Kitty, can you tell us if Vhi will be passing this levy onto its customers?

And let's be very clear here. The ONLY way that premiums could have become risk rated is if the Health Insurance Acts were changed to allow it. Even the recent supreme court ruling, which struck down risk equalisation, confirmed that community rating stayed in place. Everyone on any given plan paid the same rate. 

As for the ugly picture being painted for over 50's, can you elaborate on this? Were over 50's being faced with massive premium hikes if this move didn't go through? (Bearing in mind these are community rated products and the price increase one customer gets has to apply to all customers). Indeed, how does this resolve Vhi's arguments that they are paying out more money per "older" customer than the other two health insurers? That's still going to happen, isn't it? If I understand this initiative correctly, the levies received will directly fund the higher tax reliefs available. So VHI's claims costs will still be of a similar pattern to the last number of years. Won't the "death-spiral" still continue?

The main point that people were putting forward after the Supreme Court ruling was that the other two health insurers would launch products that would have younger people flocking in their droves and leave the older people out in the cold and therefore increased. 

This could have been resolved by updating the Minimum Benefits regulations so that it included benefits and services that would be relevant to all generations, including the older. And to close the loop, the Minister could have introduced regulations governing the marketing of health insurance products to ensure they were being marketed openly and fairly. The health insurance acts allow this.

It should also be pointed out that when VIVAS launched, their products appeared to be very much aimed at the younger age market (eye laser surgery, teeth whitening, new maternity benefits). But 4 years on, they are still the smallest player in the market. The younger age market didn't migrate to them in any fashion that could have caused the market to de-stabilise.

Instead the Government, deciding that some window etching needed to be done, felt the hammer and chisel would be the best tool...

EDIT: Oh, to answer the original poster's question, my understanding of how this works is that the levy is collected from the insurer for each member they have. This levy is paid directly to the Exchequer which will then pay for the increased tax relief that the over 50s get. What I don't know though is what happens if an over 50 is on a product that costs less than the tax relief available? e.g. Plan B is currently €665 (give or take). An 82 year is entitled to tax relief of up to €1,175. Does the 82 year old pay anything?


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## tommied (20 Nov 2008)

Hello All,

My reading of this is that community rating will now apply to the NET amount - ie. the amount payable by a customer. 

Therefore if a member is on plan B and currently pays 500 euro, then following these changes, he/she will still pay 500 euro (lets ignore any premium increases talked about from 1/1/09 for now).

Where things diverge is if the mbr is over or under 50. 

if under 50 , then the old 500 euro will now be 660 (500 + 160), with NO tax relief (20% still applies but as under 50, no new reliefs will apply).

if over 50, lets say 51) then the amt payable will be 500 + 160 - 200 = 460. You can see that if 81 then a different tax relief will apply.

This is a very simple example, but you can see the calculation starting point (ie. the NET amount paid) is different to that used previously. Prior to this scheme, a total amount was published and then 10% discount applied (or not) and then 20% tax relief. After all these calcs, the final NET amount was rrived at. Now, one starts with the NET amount and works back !!!

T


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## Duke of Marmalade (20 Nov 2008)

_tommied_ that is correct, the community rating is at the net level, that is the only thing that made sense and is confirmed in today's paper.

Of course, "tax relief" is somewhat of a misnomer as it is granted at source and quite independent of your tax status, even if paying no tax as many elderly do there will be substantial "tax relief" applied to subsidise the premium. 

So let us see this for what it is - levies balanced by "tax reliefs" from the Revenue to the *Insurer*, not the insured. 

I presume the amounts are calculated to be broadly neutral, but will have a different impact on different insurers depending on their age profile, money being transfered from insurers with a young membership to insurer(s) with an older membership. Risk Equalisation by any other name.

Yes, Quinn/Hibernian premiums should go up but they were artificially low to begin with as these companies gambled that risk equalisation couldn't be made to stick.  The corollary is that VHI premiums should fall though I note they use the expression "cost neutral".


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## ubiquitous (20 Nov 2008)

Back to the Supreme Court, so. And then Europe....


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## Nermal (20 Nov 2008)

I look forward to a similar scheme being introduced for car insurance, to benefit younger drivers at the expense of old. Or will that never get past our gerontocracy?

The business of insurance is the business of discrimination. Either allow it or forget having a private health system, otherwise we will be lumbered with expensive and pointless government meddling in this sector for ever.


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## rmelly (20 Nov 2008)

Nermal said:


> I look forward to a similar scheme being introduced for car insurance, to benefit younger drivers at the expense of old. Or will that never get past our gerontocracy?
> 
> The business of insurance is the business of discrimination. Either allow it or forget having a private health system, otherwise we will be lumbered with expensive and pointless government meddling in this sector for ever.


 
I guess the 'blue rinse brigade' (only kidding) are a much more powerful vested interest than young drivers...I remember paying over £3000 (yes, punts) for motor insurance.


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## Duke of Marmalade (21 Nov 2008)

Nermal said:


> I look forward to a similar scheme being introduced for car insurance, to benefit younger drivers at the expense of old. Or will that never get past our gerontocracy?


 
I think there is a very strong case for that and indeed I think that is the NZ model. The current model clearly fails when quite "innocent" young people are made pay for the higher preponderance of boy racers in their age group.  Its not as if high insurance premiums act as a deterrent to the boy racers. 

I see no strong argument against community rating of at least third party motor insurance.


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## Sherman (21 Nov 2008)

Nermal said:


> Or will that never get past our gerontocracy?


 


rmelly said:


> I guess the 'blue rinse brigade' (only kidding) are a much more powerful vested interest than young drivers


 
Hit the nail on the head. We are now seeing the true impact of the post-war 'baby boom' generation - not only are they the most affluent generation in Irish history, they are also the most electorally powerful, being both numerous and more likely to vote than any other segment. And boy, do they intend to flex their muscles...


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## paddyjnr (24 Nov 2008)

I'm a bit confused about claiming tax back on VHI, Could someone tell me if my mother who is 69 and is retired and pays her own VHI be able to claim back for it even though she does not work or hasn't done so for a number of years. If so how would she go about it?


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## scuby (24 Nov 2008)

deleted-re-typed


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## scuby (24 Nov 2008)

jpd said:


> So the under-fifties will subsidise the over-fifties - yippee, I'm over fifty so thanks a lot to those under-fifties with health insurance amongst the askaboutmoney readers!


*your welcome !!  next time you go to the pub buy me a pint  *



StevieC said:


> The supreme court decision basically did away with community rating so that meant companies could charge based purely on age. Hence why this initiative is being brought in to soften the blow that would have occured to older customers.



*You can thank Bupa for that one, make a reported 400 million and run. Don't they have a business in Oz, where rick equal is in place ! they agree with it there and not here !!  they must make money out there *



> NovaFlare77 said:
> 
> 
> > I worked for BUPA Ireland. This decision looks like it's a kick in the teeth to the average, middle income family because of the €160 per adult/€63 per child levy, assuming the insurers pass it onto the consumers.
> ...


 *mmmh not sure what happens there ! could be another money spinner for the Gov, take the excess tax relief   *


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## Duke of Marmalade (25 Nov 2008)

NovaFlare77 said:


> EDIT: Oh, to answer the original poster's question, my understanding of how this works is that the levy is collected from the insurer for each member they have. This levy is paid directly to the Exchequer which will then pay for the increased tax relief that the over 50s get. What I don't know though is what happens if an over 50 is on a product that costs less than the tax relief available? e.g. Plan B is currently €665 (give or take). An 82 year is entitled to tax relief of up to €1,175. Does the 82 year old pay anything?


I understand this thing now. The community rating applies to the *net* charge. In the above example, presuming the levies balance the tax reliefs, Plan B will still cost €665 net (ignoring the 20% relief) but VHI will be *legally bound* to increase the gross cost to the 82 year old to €1,840. I reiterate this is a very clever gotcha to Quinn/Hibernian and those smart asses on the Supreme Court.


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## NovaFlare77 (25 Nov 2008)

pat murphy said:


> I'm a bit confused about claiming tax back on VHI, Could someone tell me if my mother who is 69 and is retired and pays her own VHI be able to claim back for it even though she does not work or hasn't done so for a number of years. If so how would she go about it?


 
Tax relief on health insurance premiums is automatically deducted at source. So the price your mother is paying already includes the tax relief; she doesn't need to do anything.


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## WaterSprite (25 Nov 2008)

pat murphy said:


> I'm a bit confused about claiming tax back on VHI, Could someone tell me if my mother who is 69 and is retired and pays her own VHI be able to claim back for it even though she does not work or hasn't done so for a number of years. If so how would she go about it?



Tax relief is included in the price that the health insurers charge so there is nothing additional to claim back.


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## NovaFlare77 (25 Nov 2008)

Duke of Marmalade said:


> I understand this thing now. The community rating applies to the *net* charge. In the above example, presuming the levies balance the tax reliefs, Plan B will still cost €665 net (ignoring the 20% relief) but VHI will be *legally bound* to increase the gross cost to the 82 year old to €1,840. I reiterate this is a very clever gotcha to Quinn/Hibernian and those smart asses on the Supreme Court.


 
Well, no, VHI *CAN'T* charge older people anymore than they would charge anyone else. 

Ignoring tax relief, community rating means everyone on any given product for the same period of time must pay the same price (with allowances for group rates, student rates and child rates). The Health Insurance Act clearly states this (in so far as any Act states anything clearly). So VHI can't increase the cost for older people because that would contravene the Act.

My understanding of all this is that whereas before we had a situation where everyone paid the same rate (because everyone got the same discounts and tax relief), we will now have a situation where older people will pay less than younger people because they will get more tax relief.


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## Duke of Marmalade (25 Nov 2008)

NovaFlare77 said:


> Well, no, VHI *CAN'T* charge older people anymore than they would charge anyone else.
> 
> Ignoring tax relief, community rating means everyone on any given product for the same period of time must pay the same price (with allowances for group rates, student rates and child rates). The Health Insurance Act clearly states this (in so far as any Act states anything clearly). So VHI can't increase the cost for older people because that would contravene the Act.
> 
> My understanding of all this is that whereas before we had a situation where everyone paid the same rate (because everyone got the same discounts and tax relief), we will now have a situation where older people will pay less than younger people because they will get more tax relief.


You have definitely got this wrong, sorry. Your error is in misinterpreting the words "tax relief" as applying to the *customer*. The tax relief goes to the *insurer* through the deduction at source mechanism, it belongs to the insurer and not the customer, after all it has nothing to do with the customer's tax position. 

Otherwise you would be right and the insurer would have to be paying 80 year olds instead of charging them. The terminology is deliberatly misleading to try and get round those Supreme Court prima donnas but it serves to be greatly confusing and that's why I framed this topic as a question.


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## NovaFlare77 (25 Nov 2008)

Duke of Marmalade said:


> You have definitely got this wrong, sorry. Your error is in misinterpreting the words "tax relief" as applying to the *customer*. The tax relief goes to the *insurer* through the deduction at source mechanism, it belongs to the insurer and not the customer, after all it has nothing to do with the customer's tax position.
> 
> Otherwise you would be right and the insurer would have to be paying 80 year olds instead of charging them. The terminology is deliberatly misleading to try and get round those Supreme Court prima donnas but it serves to be greatly confusing and that's why I framed this topic as a question.


 
I've re-read the DoH press release and you're definitely right about it being misleading!

From the press release:

*‘The tax relief and the Community Rating levy, like the existing tax relief at source on health insurance, will be administered through the health insurance companies. The companies then price their policies for customers. We believe that these measures will give companies the incentive to compete to win older as well as younger customers and to keep health insurance affordable across all customers."*

So if your interpretation is correct (because really that could be interprested in a number of ways), it's not really tax relief, unless it's some kind of corporation tax relief. That is, for every member over 50 years old, the health insurer will get €XXX back...

The crafty buggers....


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## Duke of Marmalade (25 Nov 2008)

NovaFlare77 said:


> I've re-read the DoH press release and you're definitely right about it being misleading!
> 
> So if your interpretation is correct (because really that could be interprested in a number of ways), it's not really tax relief, unless it's some kind of corporation tax relief. That is, for every member over 50 years old, the health insurer will get €XXX back...
> 
> The crafty buggers....


Yes, that's my read. Crafty yes, but hats off to them. The Supreme Court were really really pompous and self important to rule risk equalisation illegal. RE is what the government and the Dail wanted ergo it was in spirit legal. So maybe the legal draftmanship wasn't up to scratch. Do we really need a Supreme Court, IMHO no, sack them and save a few bob.


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## Duke of Marmalade (14 Dec 2008)

Further complication. If your employer is paying your VHI (say), is the BIK on the Net cost, the Gross cost before 20% tax relief or the Gross Gross cost before 20% tax relief and over 50 tax relief?

Net amount of course - sorry for any confusion caused.


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## NovaFlare77 (14 Dec 2008)

Duke of Marmalade said:


> Further complication. If your employer is paying your VHI (say), is the BIK on the Net cost, the Gross cost before 20% tax relief or the Gross Gross cost before 20% tax relief and over 50 tax relief?
> 
> Net amount of course - sorry for any confusion caused.


 
BIK is currently on the gross premium, i.e before the 20% tax relief. If you're correct about the application of the over 50s "relief" then there is no complication as this money goes into the insurer's coffers and not to any one specific member/policy.


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## TomOC (14 Jan 2009)

If I renew my policy before 18 Jan 09 will zmy premium not include the 160 Euro levy?  If so it may make sense for many to renew premium early?


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