Lifetime Community Rating (LCR) What Does It Mean and What Are My Options?

Lifetime Community Rating (LCR) – What does it mean and what are my options?

What is LCR? This is a change to the existing community rating system. At present, everyone is charged the exact same regardless of age, gender or medical history. From 1st May, anyone aged 35 or over taking out health insurance as a new member will have to pay a permanent age loading that will be dependent on their age, i.e. the older you are, the more you pay.

Why is it being introduced? There are three possible reasons behind this. Firstly, community rating is only sustainable long-term if you have a steady stream of young people joining as they subsidise the older members who claim more often. As 300,000 mostly younger people have exited the system over the past 6 years, our community rating system is under serious pressure. LCR will give a much needed boost to the market as you should have a larger base over which to spread the claims burden which should mean lower annual price increases for everyone. Secondly, by encouraging more people into the private system, it eases the burden on the public system. As we know, there are currently thousands waiting on either their first appointment to see a consultant and for surgery through our public system and this includes both adults and children. Finally, there is an inequity in the current system which sees a newly joined 54 year old treated the same in terms of price and waiting periods as a similarly aged individual who joined 30 years ago when they were 24 and possibly funded the system without every claiming. With LCR, those who join earlier will be rewarded by avoiding the age loadings.

How will it affect me? First of all, if you already have health insurance or if you are under 35, this will have no affect on you. If you are 35 or over and you take out health insurance as a new member on or after 1st May, then a 2% loading will apply to your premium for every year over 35, e.g. a 39 year old will be charged 10% extra for their health cover whilst a 44 year old will be charged 20% extra and so on. This is a permanent loading that will apply to your cover each year, not just in year one.

Will I get credit for previous health insurance cover held? Yes, the legislation allows you to get full credit for cover already held as an adult either on someone else’s policy or on a policy in your own name. For example if you are 50 years old joining on 1st June 2015, you should be liable for a loading of 32% (50-34 x 2). However, if you had cover some years back for 10 years, then your loading will be 12%. The onus will be on the customer to prove to the insurer that you actually had this cover in place previously. Your previous insurer(s) should have records of this and all health insurers are working on a data-sharing mechanism to help customers source information regarding previous cover.

What if I had to drop my cover previously due to redundancy? The legislation allows for some credit towards the loadings for this. For example, if you have to drop your insurance cover since 1st January 2008 by virtue of redundancy, the insurers are allowed to give you up to 3 years credit off the age loading. It’s not clear yet how the insurers will validate this, but you will have to provide some evidence of having lost your job.

How will the loading be calculated? The loading will be calculated on the gross premium cost. For example, imagine a plan costing €1,000 gross per adult for the year. With tax relief at source, you will receive €200 tax relief and will therefore only have to pay the insurer the net cost of €800. However, if you are 44 years old and you join this plan as a new member on 1st July 2015, you will be liable for a 20% age loading (44-34 x 2). This will be calculated on the gross premium which will increase the cost to €1,200 gross. When you deduct your €200 tax relief, this leaves a net cost of €1,000 per annum going forward. If you join before 1st May 2015, you will avoid these loadings completely.

If I currently hold a cash plan, will I get credit towards health insurance if I join in the future? No, unfortunately cash plans don’t count towards the age loadings.

If I take out the cheapest plan possible prior to 1st May 2015, will I get caught if I upgrade to a much higher plan in the future? No, once you have a health insurance plan in place prior to 1st May 2015, the age loadings will not apply. However, if you upgrade your cover in the future, you need to be aware of the ‘Upgrade Rule’ which applies across all health insurers. It basically means that if you upgrade to a higher plan in the future, all insurers are entitled to restrict your cover for any existing medical conditions to your previous level of cover for at least 2 years. In other words, don’t upgrade your cover when you’ve been diagnosed with a medical problem that you need to get treated now!

What if I return to Ireland and wish to join health insurance – will I have to pay the loadings? No – once you join health insurance within 9 months of returning to Ireland, you will not be liable for the loadings. Once again, the onus will be on the member to prove this to avoid the additional charges.

Should I join now or wait for universal health insurance (UHI) to be introduced? UHI means that everyone will be required by law to take out private health insurance. Government policy is to introduce some form of UHI but this is likely to be 5-10 years away and there’s no certainty that it will be introduced – new Governments don’t always introduce the plans of their predecessors. Even when it is introduced, there is no guarantee that some level of age loading won’t apply to avoid discriminating against those who join now to avoid the loadings. In summary, UHI is a long way off and we’re stuck with the current system for the time being.

If I have a medical card, will I be exempt from these age loadings? No, if you are 35 or over and take out health insurance as a new member after 1st May 2015, the age loadings will apply. For those looking for the lowest cost cover to avoid the loadings, what are the best deals?

For an individual:

- VHI Start Plan €449 per adult - covers most public hospitals - Laya Assure Vitality €430 per adult - covers all public hospitals (a further 10% discount is available if you purchase this cover online with Laya) - Aviva Select Starter €425 per adult - covers most public hospitals - GloHealth Base Plan €409 per adult - covers most public hospitals

For a Family (2 adults & 2 children):

- VHI Start Plan €1,096 per family - covers most public hospitals - Laya Assure Vitality €1,152 per family - covers all public hospitals (a further 10% discount is available if you purchase this cover online with Laya) - Aviva Select Starter €1,056 per family - covers most public hospitals - GloHealth Base Plan €1,178 per family - covers most public hospitals

Are these low cost plans worth buying at all – what do they cover? Firstly, it’s important to note that there’s only so much cover you will get for €400. They cover the public hospital charge of €75 per night (€750 max every 12 months). This applies to all adults and children for public hospital treatment unless you have a medical card. They also cover the private charge in public hospitals of €813 per night (up to 180 days per annum for most treatments). If you use your cover to go privately in a public hospital, then this charge will apply which is fully covered by these policies. The biggest myth amongst consumers is that they believe that public treatment is free which is not the case. Even for this point alone, these plans are worth considering.

If I want to buy quality cover for public and private hospitals, what are the best deals? If you want health cover that will really work for you, i.e. cover both public and private hospitals, then you can buy cover from as little as;

- VHI One Plan 150 €892 per adult - Laya Flex 175 Explore €899 “ - Aviva First Focus €896 “ - Glo Net More 100 €890 “

If I can’t afford to buy private health cover now, what are my options? Unfortunately, there are many consumers now who can’t afford private health insurance and may find themselves permanently priced out of the market after 1st May 2015. The age loadings are compulsory in that the health insurers must apply them equally to all consumers. For those consumers who can’t afford health insurance but want cover towards everyday medical expenses, they should consider a health cash plan. For example, HSF Health Plan have a range of plans to suit all budgets. Whilst these are not substitutes for full private medical cover, they do provide refunds on a whole range of routine expenses such as Dental, Optical, GP, Consultants’ fees, Physiotherapy and many more. They also give cash allowances for day-case and overnight stays in hospitals. For example the HSF FDA scheme gives €80 cash- back for up to 40 nights spent in hospital in any one year which means you would be fully covered for the public hospital in-patient levy. Please note that membership of a health cash plan does not count when it comes to avoiding the health levies if you decide to upgrade to a full health insurance plan in the future.

What are the best offers right now for child cover? Aviva Health and Vhi Healthcare are the only insurers with special offers in the market right now for children under 18. Aviva are charging children under 18 €140 per child on their Select and Select Plus plans whereas VHI is offering ½ price cover for children on a number of their plans, e.g. you can insure a child on their Parent & Kids excess from €138. GloHealth is the only insurer offering free cover for children under 3 years of age on some of their mid-range plans. Unlike the other insurers, this is a permanent feature of their product offering.

Are the insurers launching any other offers to entice people to join? Yes. Aviva Health has introduced a new online GP app through their association with a company called Babylon. This is available exclusively through Aviva on a limited number of plans and gives eligible members 3 free online GP consultations which you access through your smartphone. This service is supported by Irish based GP’s and includes prescriptions and referral letters where relevant. GloHealth are offering free travel insurance to all members who join their Net One plan. Laya Healthcare are including a new ‘CareOnCall’ service into its suite of Assure products which gives members access to a GP, Nurse or Physiotherapist over the phone. Before joining or switching, check with your preferred insurer to see what offers they may have.

I am under 35 – should I consider joining now? This is really a personal choice as the new age loadings will not apply to anyone under 35. You need to ask yourself three questions; a) Are you happy relying on the public system and potentially having to pay the public hospital levy of €75 per night (10 nights max or €750 in any 12 month period) unless you have a medical card? b) Are you comfortable with the prospect of possibly being put on a public hospital waiting list for non-essential surgery and not having some control over when or where you are treated? c) Do you think that the offers currently on the market are likely to be repeated post 1st May 2015? If you’ve answered yes to these questions, then health insurance is not for you right now. You may wish to consider a health cash plan which will cover you for those high cost primary care expenses on a private basis. Alternatively, you may wish to set aside some funds on a regular basis to cover the cost of any essential treatment in the future (self-pay). What about comments in the media advising young people not to take out health insurance? Everyone has a view and you’ll need to make your own mind up on this one. Each consumer has different priorities when it comes to healthcare and differing attitudes to risk. As someone who has been dealing with consumers on health insurance for nearly 30 years, it’s a personal choice for everyone. I would love to tell you that you can fully rely on the public system and that private healthcare is only for those who want private rooms but sadly, this is not the case. I deal with young people all the time facing waiting lists for sports injuries and other routine surgeries. I also deal with the unfortunate cases of those who’ve had to cancel their cover and now find themselves facing pre-existing exclusions when they re-join. The only way around this is to either buy private medical cover or build up a wad of cash which you can draw down if needs be (self-pay customers).

Will employers be affected by these age loadings? Yes, and most employers are oblivious to these changes. For any employers who pay health insurance for their workforce, they will need to decide whether they are going to absorb this cost for any new employees that they recruit post 1st May 2015 who have no cover and are 35 years old or older.

Dermot Goode Analyst: www.totalhealthcover.ie

All prices quoted are net of tax relief at source and are correct as of 1/3/15 as per www.hia.ie (Health Insurance Authority). However, prices and benefits are subject to change and consumers should confirm all details directly with the insurer in question. PHI Consulting trading as Total Health Cover is regulated by the Central Bank of Ireland.