Health insurance companies will have to provide discounts to young people in their 20s under legislation to be introduced by Minister for Health James Reilly.
At the same time people who wait until later in life to take out health insurance will face financial penalties.
The Minister told health insurers in recent days that he would introduce a concept known as lifetime community rating, as well as compulsory discounts for those aged between 20 and 25, from next year.
Exodus
The introduction of discounts is aimed at halting the exodus of young people from the health insurance market.
More than 200,000 people have dropped out of the health insurance market since it peaked in 2008. However, for the industry the major concern has been that the fall-off has been largely in the younger end of the spectrum.
In 2009 there were 310,000 people aged between 18 and 29 covered by the main private health insurance companies. By 2012 that figure had fallen to 230,000. A further 50,000 in the 30-39 age group also dropped their cover.
A spokesman for the Minister said yesterday that lifetime community rating was intended to encourage people to join health insurance schemes early and to retain their private cover.
At present in Ireland a concept of single-rate community rating applies, which means that the age of entry of a person to the health insurance system does not determine the level of premium to be paid.
Under the proposed new system of lifetime community rating those who take out insurance later in life will effectively face a loading on their premium.
Higher premiums
Dr Reilly has not yet designated the cut-off age at which higher premiums will apply.
However, there is expected to be an initial grace period introduced to allow people buy health insurance without penalty.
The Department of Health said yesterday that the Minister was "committed to maintaining an affordable and competitive health insurance market that meets patients' needs, and is keen to create the best possible environment within which more people will seek to take out and keep health insurance in the transition to a competitive, market-based system of universal health insurance".
