One of the biggest changes to be implemented ever in the Health Insurance market happened back in 2015, but still needs to be carefully considered today. On that date, we saw the introduction of Lifetime Community Rating (LCR), which was a mechanism brought in to encourage younger people to take out health insurance, to help control premium inflation.

In the years prior to this, the hefty increase in health insurance premiums was caused partly by lots of young people giving up their health insurance cover, probably with a view to re-entering the market as they got older and were more likely to require the cover. This caused issues in the market, which until then operated on the basis of Community Rating. This previous principle meant that everyone paid the same amount for their Health Insurance plan, irrespective of age or when they first took out Health Insurance.

However community rated markets depend on a continuing entry of younger people into the market. Younger people claim less on average and, accordingly, their continuing participation keeps premiums down for everybody. Conversely, if people wait until they are older before taking out private health insurance, premiums will increase for everybody as older people are more likely to claim and insurers take this into account when setting their premium levels.

Lifetime Community Rating was introduced in 2015 to encourage people to take out and continue private health insurance at a younger age, thereby helping to control premium inflation across the health insurance market. The introduction of Lifetime Community Rating provided for late entry loadings on the premiums of those who buy health insurance for the first time at the age of 35 years and older. Today, that means that if you delay taking out your health insurance (and as a result are more likely to make significant claims), you will pay more for the insurance than people who took it out at a young age. This loading will be applied to your health insurance premium every year for up to 10 years. 

In practice, Lifetime Community Rating introduced a 2% loading for every year older you are above age 34 when you take out Health Insurance cover. For example, if you are 35 when you take out a policy for the first time, you will pay an extra 2%, if you are 36 you will pay an extra 4% and if you take out cover for the first time at age 44, you’ll pay 20% more every year for your cover.

The need for advice

There are a number of conditions and rules around Lifetime Community Rating, and we’ve touched on some of them below. Advice should be sought from a health insurance expert in relation to these – we of course suggest that you talk to the Health Team in Lyons Financial Services. These include,

• There are several situations in which credit will be provided, such as for previous periods of health insurance and for some periods of unemployment.
• People who are migrating to Ireland have up to 9 months to take out health insurance, without a loading applying.
• If you had private health insurance previously, but let it lapse, the level of loading is reduced by the number of previous years health insurance cover.
• The maximum loading that can apply is 70% of the total premium. A loading of 70% only arises on very rare occasions, where a person aged 69 or older is purchasing private health insurance for the first time and then for a maximum period of 10 years.
• An individual insurer cannot make an exemption for you from the LCR loading – they cannot waive it.
• Switching from one insurer to another or from one policy to another does not affect the applicable loading. Loadings, if any, will continue to apply and insurers are required to supply each other with proof of an individual’s prior cover.

Has Lifetime Community Rating worked?

On the surface, it has worked. Private health insurance peaked in Ireland in 2008 at 50.9% of the population. But as a result of the economic downturn, it declined sharply over the following years, falling to 43.4% by 2014.

In the run-up to Lifetime Community rating in May 2015, around 50,000 extra people purchased health insurance to avoid the loadings to be introduced, with increased coverage for those aged between 35 to 69 years rising by up to 2.5%.

However, one unintended outcome is that many of those aged between 34 to 54 years have bought lower cover plans, leaving most having to pay additional costs if they need access to services.

Lifetime Community Rating introduced a new level of complexity into the Irish health insurance market. Where complexity exists, so does the need for advice. We suggest that you speak to the Health Team at Lyons at 01 801 5808 to discuss the best route forward for you in relation to your health insurance need