Health Insurance Age Related Penalties – Some Figures

There seems to be a widespread attempt by the insurance companies and the government , assisted by the media – to scare people into getting health insurance before May 1st .
This date is when a  system of  ” lifetime community rating”  will apply to new health insurance policies taken out . There are a few exceptions – but in the main it means that if you are taking out health insurance after this date and you are 35 years of age or older, your annual premium will increase depending on the age you are when you start – by 2% for each year over 34.

How much extra will it cost you? (Or will it be cheaper to wait?)

We have done some calculations to compare the total lifetime cost of health insurance under these new rules for people delaying starting health insurance .  We based the calculations on an annual policy costing €1000 a year at current prices and we worked out the total lifetime cost of health insurance (based on current  average lifespan in Ireland of 81). (We have ignored inflation in the calculations and have assumed  it will affect new and ongoing  prices in the same way)

Someone aged 34 who rushes to get a policy before this “deadline” of May 1st – will pay €1000 a year – or €47000 over their expected lifetime.
If the same person waits until next year when he is 35 – he will pay 2% extra (€1020 a year) .  This works out at a lifetime cost of €46920.  This works out at €80 less than taking out insurance a year earlier!
Delaying starting the health insurance until he is 40 will result in an annual premium of €1120 (a 12% increase) . But – because he has not paid any premiums for the previous 6 years the total lifetime spend will be €45,920 which is €1080 less than if he took out the policy before this “deadline”.
Waiting until 45 will mean the annual policy will be  €1220 and he will  spend €43920 up until age 81. (€3080 LESS).

Hopefully – you get the picture….. rushing to get health insurance will not save you any money if you are 35 or under.
If you were happy to go without health insurance  , then getting it now just because you think it will save you money will be wrong.

For people older than 35 who never took out health insurance but who are maybe thinking of starting it up in the next few years  – it is not as clear cut . But rushing into getting insurance now will not always save you money compared to waiting.
For example  a 45 year old taking out insurance just before the deadline – annual premium €1000 ; total lifetime spend = €36000.

If he starts health insurance next year when he is 46 – the premiums will have risen to €1240 and his lifetime spend will be €43,400  (€7,400 more) .
If he delays starting insurance until  age 57 – the annual  premiums will be €1460 but  his lifetime spend will be €35,040 . Which is less than the total cost if he started when he was 45 . (Of course he could have become ill and died in the meantime!)

The rules on waiting times are going to be relaxed  –  the the waiting
periods to be served for everyone before a claim can be made will be  26 weeks initial waiting period and 5 years for a pre-existing condition that commences before a person
buys private health insurance.
Currently – someone aged 65 or over, taking out health insurance for the first time
has an initial waiting period of 2 years and 10 years for pre- existing

On top of all this –  there is always the question of whether health insurance is really worth it ? Would you not just be better off keeping your money and going with the public health system and maybe paying for the odd scan or private consultation out of your savings?

The whole idea of health insurance in Ireland is controversial.  In a country where everyone is  entitled to access in-patient and out-patient services in publicly funded hospitals –  there is still a very high take up of private medical insurance . There are some hospital charges, unless you have a medical card. The charge for overnight and day in-patient services is €75 per day – but it is capped at €750 in any 12 consecutive months. All treatments , scans, operations , procedures etc are provided  free.
A&E visits are free if you are referred by a GP or if you have a medical card. Otherwise a €100 fee is charged.

The main benefit of health insurance seems to be the ability to get faster treatment. The current government’s  plans for universal health insurance , if it happens , is supposed to do away with “queue jumping” and the speed of treatment will be based on medical need.

The level of private health insurance take up in Ireland  is very large – about  44% of the population are covered by it.
In the UK – about 7.2 million, or just  11.7% of the population had private health insurance in 2010. In the UK it is seen more as a luxury item rather than a mainstream  purchase.

Out of interest – In 2013 – one of the main insurers – Aviva – made a profit of €18 million in Ireland. In 2014 they made €12 million. They , and the other insurers will be grateful for the extra customers this  lifetime community rating deadline will bring them to add to their profits whist the health servicse budgets are struggling to cope.

One thought on “Health Insurance Age Related Penalties – Some Figures

  1. Interesting article, thanks! But, I would aregue that your numbera are a bit flawed. In your example, why doesn’t the person take out cheap health insurance now (e.h. GloHeath at €394) and upgrade it in a few years, avoiding the penalty. In that case, it IS cheaper to take out insurance now, rather than wait. A low-cost policy won’t give the same cover as one for €1,000, but if you’re only taking it out to avoid the levy, then it is better than nothing 🙂

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