>>Is VHI good value?

Brendan Burgess

Brendan Burgess

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If I have a house with rebuilding costs of £200k, I will pay half the premium of someone who insures their house for £ 400k. I will pay 10% of the premium of someone who insures their house for £ 2m.

With 20 years of accident free driving, I pay £ 500 to insure my 5 year old Honda Civic. My friend who drives a new sports car who has a conviction for drunken driving pays 10 times as much as I do.

But if you are a healthy, non smoking, non drinking, 20 year old, you will pay exactly the same premium as an 80 year old smoking alcoholic. The difference in risk between these two people is huge. I would guess that, if health insurance was deregulated the 20 year old would pay about 20% of the premium he is currently paying. Of course, the 80 year old would pay much more.

Why not introduce community rating for car insurance? We will all pay £1500 insurance a year irrespective of our age, the car we drive, our attitude to alcohol or our claims experience.

Permanent Health Insurance is the closest to health cover. An 18 year old male, non-smoker, office worker can get £300 per week Permanent Health Insurance from Friends First payable after 13 weeks
ceasing at age 65 at a fixed premium of £20.00 per month. A 59 year old female, smoking horticulturist will pay £611.87 per month for the same level of cover.


Is this good social policy?

That is a separate argument from the question of value. Personally, I am happy to contribute to society through taxes. I don’t mind my taxes subsidizing public hospitals. But I don't like voluntarily contributing to funding smoking alcoholics to be treated in the Blackrock Clinic.

My strategy

I paid VHI for years without considering what lousy value it was. I paid for whichever plan would get me private care in St Vincents Private Hospital. ( I like watching the golf).

I had one claim in 30 years of cover. I had an emergency minor operation and was hospitalized for a week. If I had not had private health insurance, I would have been operated on anyway and I would have been in a public ward. Would that have been a disaster? It would probably have been good for me on balance.

If I had invested the premiums over the 30 years, I would have a huge fund now.

I stopped paying VHI a few years ago. This year I had about £1000 in medical expenses due to an accident. I paid these bills myself out of the VHI premiums I have saved.

What happens if I need a quadruple bypass? I would not be in a high risk category, but this is a real risk. I am happy to accept this risk. Depending on my financial position at that stage, I might have to remortgage my house. I am prepared to take that risk.

What I would like is a risk adjusted medical policy with a £ 5,000 excess. In other words, I will pay the first £5 000 of claims myself. And if I get hit with a whopper, I will claim. With annual premiums of £700 for VHI, I won't be long in building up my £ 5000 fund. Others might be more comfortable with a lower or higher excess.

When I am 54 or if I develop a medical condition, I will start paying VHI again. I know that the cost of the existing complaint will not be covered for 5 years, but the long term treatment will be covered.

The tax position

VHI attracts tax relief at 20% of the premiums.

Medical expenses in excess of £100 attract tax relief at 42%. So my medical expenses this year have only cost me about £500.

Some alternatives to VHI

If they scrapped community rating, it might become prohibitive for older people. But why not a scheme whereby a level premium is paid throughout your life ? If I join at 55, charge me a huge premium. But if I have overpaid during my younger years, give me the benefit through lower premiums later.

Or at least adjust the premiums for smokers.
 
Re: VHI

Two examples... (real cases)

I'm sure there are hundreds more.

(A) A young man, in his prime (non-smoker) is knocked down by a guy in a stolen car. You don't need details but particularly nasty injuries. He has to spend the next ten months in hospital, having spent 3-4 weeks there already.


(B) Under public health services there is a 3 year waiting list for hip replacements. Under private health insurance the wait is 6 months, still very long but when compared to the public health service??

Investing money in the stock market is risk taking. Not taking out VHI/BUPA because you might end up paying more than you should if you don't fall ill is not taking a risk, it's sheer maddness.

You say needing a triple heart bypass is a real risk for you. Look at the carnage on our roads every year. That's probably an even bigger risk. Can you even begin to imagine the medical expenses incurred by case A above. How much outpatient treatment is he going to need when he leaves hospital - and before he was hit by the lunatic he was fit as a fiddle.

Ask About Money is supposed to be an advice based site for the consumer. I know you qualify your reasoning below as my strategy but it can't be read any other way than advice.

You are possibly putting people in serious financial danger and as a result thier health in serious danger, by not quanitfying your comments and strategy with the potential downside of your action.

Last year your medical bill was £500, or half of what you medical bills came to. What would be half of the bills for case A above?? What does nearly a year in hospital care cost these days?

I don't know the answer, but I don't need to because my Health Insurance will cover it.

Do you know the answer? You should.

Investing in the stock market has a limited risk. The worst that could happen is you lose your entire investment.

What the worst case scenario of not having VHI/BUPA in place?

Immesurable.

Your objections seem to be on principal and yet you say you would have a tidy lump-sum had you invested you contributions over the past 30 years. You also ask is it good value?

My contributions, at the moment, cost me £20 per month. What is that going to do for me elsewhere?

£240 p.a. is unbelievably god value!!

Dangerous comments Brendan.
 
Re: VHI

I disagree with Devils view that even discussing this topic is dangerous. Such discussion will surely lead to individuals thinking further about this issue and making a sensible, educated decision that suits their own circumstance. Let's not be afraid of discussion.

Having said that, I too disagree with Brendan's premise. I fear that while the risk of being faced with astronomical bills may be relatively small, it is worth insuring. I would guess that at times of serious illness, the last thing you want to have to worry about is money/remortgaging etc.

I agree that community rating is unfair and unjustified. I reckon it was devised by grey 50-year-old male civil servants. However, in the absence of an alternative in the Irish marketplace, I will continue to be a VHI member. To some extent, the issue is 'hidden' from me as my employer pays my VHI subscription automatically (though this benefit is BIK'ed).

The one benefit of VHI & other health insurers is they actually have some leverage over the medical profession. They have used this leverage in recent years to bring in fixed costs per procedure for certain routine procedures.

Regards - RainyDay
 
Re: VHI

Yup. In a decision to purchase, the key issue is not whether the insurance could be cheaper if the market were differently organised but rather, given how the market is organised, and given the price of the insurance, is it worth that price to me to avoid the risk?

"Perhaps one could, by contract or promise, transfer the equity, but I don't see how this would cause a change in the land registry's concept of ownership of the property."

Yup again. In fact, when there was only the VHI it was effectively a monopsony (opposite of monopoly - many sellers but only one buyer). Just as a monopoly tends to force prices up above their open market level, so a monopsony tends to force them down below their open market level. The prediction was that the introduction of competition in the health insurance market would break down this monopsony and would be followed by an overall rise in healthcare costs, and this indeed has happened.
 
I can understand Brendan's point which was discussed at length on the old board but I think it is a risky strategy to advise for people in general.

I am particularly concerned about the idea of remortgaging your house to get cash for medical expenses! I find it hard to believe that a bank would remortgage to pay medical bills for someone who may represent a repayment risk (eg if the expensive treatment doesn't work!). In many cases, this could leave a spouse in a very difficult situation with an ill partner, possibly no longer able to work, AND the pressures of a monthly mortgage.

To present this alternative without advising some other fallback plan (eg significant life assurance to cover the costs of remortgaging if you die or a permanent health policy that will kick in with payments after 12 weeks or whatever) in case it all goes horribly wrong is, in my view, irresponsible.

tedd
 
I wholly concur with tedd on his point on irresponsibility.

Rainyday, I am not at all against this discussion nor did I suggest that discussing it was dangerous.

I feel that as Brendan is offering the above as an alternative to taking out VHI/BUPA it was potentially dangerous and certainly irresponsible not to disclose the very real downsides to his advice.

Dev.
 
Brendan,

Your non-payment of VHI strategy is perfect for the Bilbo Bagginses of this world, "who possess (apparently) perpetual youth as well as (reputedly) inexhaustible wealth." ;)

Marion :hat
 
Hi Devil's Ad - My apologies - I jumped to the wrong conclusion.

Regards - RainyDay
 
Devil's Ad

It's good to get a response. I thought I was being ignored there for a while.

I asked a question Is VHI good value?

I don't think it is. No one has disagreed with me yet.

If the general public wants to overpay for medical insurance, that's fine for them.

Most people don't bother with VHI and they rely on the public health service.

Your two examples: I don't understand the relevance of A. He will be paid out of his personal injury claim.

The hip replacement. We have evolved over millions of years without hip replacements. There are some things which we can't insure against. Marriages breaking up, mental illness, old age etc. Yes, you can take out insurance for a hip replacement or a triple bypass. Is it worth it? I don't think so.

Ask me when I am 55 and I will tell you it's great value.

Brendan
 
VHI

Brendan

I wanted to see the replies before adding mine.

I have a young family and consequently am a member of the VHI. I think that it is very expensive, but I also think that it represents value for money. Value for money because in my view it is essential as our health service is appalling. I have had 2 previous occasions where I have had to use the VHI, both, while not emergencies, were quite distressing. The peace of mind we had knowing we were in the VHI was invaluable.

I think that it is like a lot of things in life, it depends on personal circumstances and experiences.

I think that it is wrong that we feel that we have to pay to receive adequate health care, maybe even immoral as it creates a two tier society, however, until we have an adequate health service I will continue to pay the premium.

Brian
 
Re: VHI

Hi Brendan,

No one has disagreed with me yet

If you look at the end of my first reply you will see me disagreeing. "£240 p.a. Unbelievably good value."

Your two examples: I don't understand the relevance of A. He will be paid out of his personal injury claim.

He was hit by a stolen car and an un-insured driver. I know there is a way to be paid compensation when involved in an accident with an un-insured driver, but how long do these things take to finally get a payment, meanwhile you are relying on the public health service and are simply not getting anywhere near the treatment you would be getting if you had VHI/BUPA.

Plus the extra stress of going through a lengthy settlement case.

The hip repalcement is just one of probably thousands of procedures where there is a waiting list 10 times longer on the public health service.

My main problem is the alternative. You still have not provided an answer that offers an alternative one tenth as good as having VHI/BUPU in place.

Nor did you answer my question, where else could I put the £20 a month I currently pay for health insurance, to ensure if I'm ill in the future I will be able to look after the costs? As this is one of your alternatives.
 
Re: VHI

Hi Devil's Ad

I missed that last line - sorry.

However, it still does not explain why it's good value. The premium is out of all proportion to the cost of claims for a young and healthy person.

You can put your £240 a year into an equity based investment and most of the time, you will be far richer when you are 50 than if you had paid Vhi all those years.

You are not excluded from private healthcare if you are not in the VHI. You can pay for it yourself. Most of the time your fund will be sufficient to pay your bills. Some of the time, your fund will not be sufficient and you will have to find the cost elsewhere or rely on the public health service.

But don't forget, heart surgeryand hip replacements are relatively recent developments. Even our wealthiest grandparents got along fine without them.

I just don't like overpaying for anything. And in particular, I don't like overpaying for health insurance to sponsor those who don't look after their health - through smoking or other drug abuse.

Brendan
 
A simple question - I think

Is it fair that smokers and non smokers are charged the same premium by the VHI ?

Brendan
 
Re: A simple question - I think

Simple answer - No

Complex answer - where do you draw the line? Should those who don't take regular exercise pay more? Should those who drink more than the recommended levels of alcohol pay more? Should those who work in stressful high-powered jobs pay more?

And even more controversially, should those with family history of heart disease pay more?

Regards - RainyDay
 
Re: A simple question - I think

Hi Brendan,

However, it still does not explain why it's good value.

Let me expand.

I would pay a lot more than £20 per month for the peace of mind it gives me in the knowledge that should anything major happen to me I will be looked after. Hence it's unbelievably good value.

£240 a year in even the best performing equity based fund around would not be nearly enough to cover any kind of serious or semi-serious medical emergency. After 10 years I might just have enough to have an ingrowing toenail looked at!

As for our grandparents not having heart surgery available, in that case they should stop reseaching cures for disease as we get on fine now without a cure for cancer/AIDS/Parkinsons, if they find a full and proper cure for any of these the procedures would probably be expensive and thereby push up the price of insurance.

To re-quote UDS (because I couldn't possibly put it better)

In a decision to purchase, the key issue is not whether the insurance could be cheaper if the market were differently organised but rather, given how the market is organised, and given the price of the insurance, is it worth that price to me to avoid the risk?

A resounding yes.
 
Re: A simple question - I think

Hi Devil's Ad

What is your opinion on the smokers' question?

I know it's a different question from the original, but it is important. If it's good value for smokers, it must be bad value for somebody else.

But maybe we have different ideas of value. £ 240 is not much to you or to me. However, I just don't like paying £240 for something, which if properly priced, would cost me about £100.

And from the Government's strategy for health announced today, it seems that everyone will get a world class health service whether or not they are in the VHI. Seems crazy to me.

Brendan
 
Re: A simple question - I think

"If it's good value for smokers, it must be bad value for somebody else."

It all depends on what you mean by "value", but in my terms this is not so. It may be good value for non-smokers and even better value for smokers.

Brendan, let me put another question to you, and perhaps a more relevant one than the smokers question. Women consume more of the health services than men. Should a woman be charged a higher premium? I suggest that this is more relevant, because smokers have a choice about whether to smoke, and views about what premiums to charge smokers may be coloured by moral views about smoking or by social policy objectives of discouraging smoking. But age and sex are a given.
 
Re: A simple question - I think

Again I agree with UDS.

It may be good value for non-smokers and even better value for smokers.

However, what I actually pay each month in relation to what I would be willing to pay for the exact same sevice/product is the only issue relavent in determining my attitude to its value.

I would be willing to pay more, a lot more, for the level of cover and peace of mind which I have - whether or not I could get it cheaper if smokers were charged more and hence I would be charged less is irrelevent.

However, I just don't like paying £240 for something, which if properly priced, would cost me about £100.

That's all well and good if there is a viable alternative. But there isn't. To me you are putting your health at risk for the sake of £240.

And from the Government's strategy for health announced today, it seems that everyone will get a world class health service whether or not they are in the VHI.

I hope there's a touch of irony in that statement. Do you honestly belive they will actually deliver on all these promises? The timing of such an announcement is a little too convenient for my liking.

How many months are we away from a general election? Or weeks if Mr. Gildea heads off back to Donegal and refuses to vote in any more government votes.
 
"As the VHI has not calculated the annual costs incurred by it in paying for treatment for smoking related illnesses,it is not known whether non smokers insured through the VHI are presently subsidising the costs incurred by the VHI in the treatment of smokers suffering from smoking related illnesses….

The Committee notes that the White Paper in rejecting the imposition of a "premium loading for smokers" does not address or consider the issue of whether non-smokers presently pay higher premiums for health insurance than would be necessary as a consequence of the expenditure incurred by the VHI in the provision of treatment for tobacco related illnesses suffered by its insured smokers or the victims of environmental tobacco smoke."

Source: http://www.irlgov.ie/committees-99/c-health/Rep-H&S/Page4.htm (www.irlgov.ie/committees-99/c-health/Rep-H&S/Page4.htm)

Brendan,

I agree on this point with regard to smokers and VHI. Let's not forget that <!--EZCODE BOLD START--> Smokers make a choice - to smoke or not and I really do not see a conflict between it and community rating.


Approximately half of all patients at St James's Hospital, Dublin are there due to smoking-related illnesses, Prof Luke Clancy, respiratory consultant has told the Oireachtas Committee
Prof Clancy went on to say that these figures were not exclusive to St James', but typical of most hospitals.

Of course, we do not know if these patients are VHI members or not or indeed the percentage of these which are VHI members or not.

Consequently, I would be in favour of higher premiums for those who not only abuse their own hearts and lungs but those of others (passive smokers) as well, if it were shown by empirical data that I am subsidising costs incurred by the VHI due to smoking. This is the relevant issue to be considered here.

Marion :hat
 
Where will it all end...

Why single out smoking? Why not a loading for those who choose to engage in any sort of activity which involves a health risk (e.g. extreme sports, highly stressful and/or physically dangerous career, recreational drug use, driving a fast car, living in a an area of high pollution, going out in winter with no coat on :lol etc.) :rolleyes

I'm a non smoker by the way! ;)
 
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