Level Health, the Irish health insurer that launched a year ago, has submitted a detailed complaint to the European Commission in Brussels about the operation of the State’s decades-old subsidy scheme for older and higher risk citizens with health coverage.
The so-called risk equalisation scheme (RES), introduced in Ireland in 2003, benefits State-owned VHI the most.
Level Health argues that the scheme – in its current form – is suppressing competition, limiting consumer choice, and contributing to higher private health insurance costs over time.
VHI’s position is artificially augmented and strengthened by the RES, to the detriment of the few other businesses willing to compete in the Irish market, according to Level Health, which filed its complaint last month.
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“We’re not against risk equalisation,” Level Health chief executive Jim Dowdall told The Irish Times in an interview. “There’s a need for it in the market. But the nature of it is completely flawed.”
The main problem is the fixed rate levies that apply to policies, which, he argues, penalises younger people, in particular, looking to take out health insurance.
[ Health insurance watchdog plans to increase levy by 10%Opens in new window ]
The stamp duty levy on the majority of adult policies currently stands at €469, and is set to rise to €517 next April.
“Younger people, who typically opt for lower levels of cover, might pay €900 or €1,000 for a health insurance plan. But about 50 per cent of that is levy related,” says Dowdall.
By contrast, the levy accounts for under 5 per cent of the most expensive, bells-and-whistles plan in the market, which costs, according to Health Insurance Authority (HIA) data, about €10,150 a year.
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Under a risk equalisation scheme, health insurers whose customers have a higher risk profile than the market average, obtain payments from a risk equalisation fund. The fund is part of the Irish “community rating” health insurance system, where everyone pays the same premium for a given policy, regardless of age or health.
The Department of Health is known to be eyeing a 10-year extension of the plan when the current scheme expires in 2027.
Extending an outdated scheme until the late 2030s, without a full review, risks locking in existing market imbalances and preventing effective competition for another decade, according to Level Health.
The company’s complaint outlines a series of alleged breaches of European Union law, including abuse of dominance and the granting of special and exclusive rights, the granting of unlawful state aid, and infringement of the freedom to provide services. All would defy the Treaty on the Functioning of the European Union, the rule book for how the union operates.
Level Health is not the first player in the market to resort to European institutions to take issue with the Irish risk equalisation scheme.
Bupa’s former Irish unit – which, in 1996, became the first company to take on VHI – lost a challenge in 2008 with the EU’s second-highest court in Luxembourg against the commission’s approval of the plan. It followed a failed challenge through the Irish courts. Bupa Ireland has evolved into what is now Laya Health, following a series of ownership changes.
Laya and Irish Life Health – and the latter’s predecessors, Vivas Health and GloHealth – have each made submissions or complaints to the commission over the past 15 years about the way risk equalisation operates in the State.
Level Health, which is 50 per cent owned by Aviva Insurance Ireland, has attracted around 25,000 customers and generated more than €30 million in premiums in its first 12 months.
“Our intention is that we’ll be at over €100 million in premium in the next two years and that we’ll reach €350 million in premium three years after that,” said Mr Dowdall. “We’ve got big ambitions for the business.”
