Critical Issues in Managing Supplemental Private Medical Indemnity Insurance in Ireland and the UK. Aisling Kennedy 19 March 2002

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1 Critical Issues in Managing Supplemental Private Medical Indemnity Insurance in Ireland and the UK Aisling Kennedy

2 Public health system National health system provides treatment free of charge Funded from general taxation (PAYG) In-patient treatment Specialist out-patient treatment Primary care Ireland All covered Co-payment of 33 per day/max 330 p.a.* All covered UK All covered All covered 30% covered (those on 100% covered low incomes + elderly) Drugs Limited cover Cover subject to copayments *except for those with primary care cover

3 Purpose of supplemental insurance Choice (doctor/hospital) Comfort (private room) Convenience ACCESS! Waiting lists for in-patient treatment: UK: Ireland: 1 million+ 35,000 approx.

4 Supplemental insurance Voluntary private insurance Policyholder retains right to use public system No reduction in tax/social insurance contributions

5 Supplemental insurance Ireland UK In-patient/day-patient Full cover Full cover** treatment Out-patient specialist Limited cover* Cover varies** consultations/ investigations Primary care Limited cover* Usually not covered Drugs Not covered Not covered *Cover subject to per item limits and a significant aggregate annual excess such that only a small proportion of costs are reimbursed **treatment of chronic conditions is excluded

6 Extent of supplemental insurance Ireland UK 12% 50% 34% in % in million insured 7 million insured

7 Supplemental insurance Ireland Tax relief on premiums (at standard rate) No insurance premium tax; employer-paid premiums not subject to social insurance contributions Private beds in public hospitals charged at less than full economic cost Regulated market UK No tax relief 5% insurance premium tax; employer-paid premiums are subject to social insurance contributions No subsidies for private insurance Free market

8 Supplemental insurance - Ireland Community rating premium rates not linked to risk factors (i.e. cannot vary by age, sex or health status) Open enrolment no underwriting; insurers cannot refuse to provide cover Lifetime cover guaranteed renewability Statutory minimum benefits Risk adjustment mechanism

9 Community rating - Ireland Male Claims Cost Female Claims Cost Age

10 Estimated proportion with supplemental insurance - Ireland 50% 40% 30% 20% 18 and under and over Age

11 Regulatory framework - Ireland Health Insurance Act, 1994 Health Insurance (Amendment) Act, 2001 Establishment of Health Insurance Authority Original risk adjustment scheme rescinded Authority to determine whether/when risk adjustment is necessary in future Introduction of lifetime or age adjusted community rating insurers can charge additional premium loadings to those joining at age 35 or over

12 Supplemental insurance Insurance may be provided as an employee benefit: 85% of UK market; largely white-collar workers 20% of Irish market; principally multi-national employers Little managed care

13 Critical issues Impact of public policy decisions Impact of economic trends Medical inflation (double digits) Physician fees

14 Critical issues - Ireland Only two insurers, one with 85% market share Potential introduction of risk adjustment mechanism (in what form?) Intent to move towards charging full economic cost for private beds in public hospitals Market demand for primary care/out-patient cover

15 Critical issues - Ireland Health Strategy 2001: Target for 2004 max. 3 months waiting time for in-patient treatment Revised contracts for hospital consultants (new consultants to work exclusively for public patients for a number of years) Private patient admissions in public hospitals may be suspended if max. waiting times for public patients are exceeded Forthcoming general election Opposition proposal for compulsory health insurance system

16 Critical issues/market developments - UK Regulatory concern in relation to consumer information industry investigations by the Office of Fair Trading Lack of growth in the individual market Multi-annual premium guarantees Increase in/more specific rating categories Significant increase in current and prospective public funding; mooted public supply reform

17 Critical Issues in Managing Supplemental Private Medical Indemnity Insurance in Ireland and the UK Aisling Kennedy