Health insurance for younger employees

Roisin Lyons of Lyons Financial Services outlines the reasons why builders merchants should encourage their younger employees to take out health insurance.

Young people are the lifeblood of any health-insurance system. Under the system of community rating that has operated in Ireland for years, everybody paid the exact same for their health insurance, irrespective of age. The reality is that younger people are healthier, and as a result, claim far less than their older counterparts. So, younger people are far more profitable than older people to health insurers.

But, the problem is that it has been devilishly difficult to encourage young people to take out health insurance, at the time when they are profitable for insurers. The main reason being that it traditionally was not viewed as good value for money as younger people did not claim very much. And, then you add on the money pressures that younger people have paying their mortgages and raising their families etc., so it’s probably not surprising that this group was hard to attract.

Lifetime community rating

A number of initiatives were tried to attract more young people into the market. First of all, we’ve seen product innovations from insurers offering specific benefits (such as maternity cover, children’s cover etc.) aimed at younger people. But, the big change happened in May 2015, with the introduction of lifetime community rating (LCR). This initiative changed the system so that anyone taking out health insurance above the age of 34 is now charged a higher rate than other subscribers every year into the future. The older you are taking out health insurance, the higher your loading will be, each and every year. So, as a result, the system now encourages people under the age of 35 (that healthy and profitable cohort) to enter the system earlier than they might have before, in order to avoid the loading.

Overall, there is no doubt that LCR has worked. The figures from the Health Insurance Authority show that more people under the age of 35 are signing up for health insurance, and because they are more profitable, this is helping to lower the premiums of older customers.

At least 240,025 people aged between 25 and 35 now have health insurance – this age group being critical in the efforts to keep premiums as affordable as possible. The premiums that they pay and their lower levels of claims help to balance out the shortfalls from older people who claim more and are more expensive for insurers.

TAX BENEFITS

Tax relief is provided on all plans. For direct policies this is given at source, for company-paid schemes, the company pays the gross premium, the employee claims back the tax relief in form of a tax credit from revenue and is charged BIK. There is no tax benefit for the employer.

The Health Insurance Authority chief executive Don Gallagher said: “The private health insurance market is clearly in a recovery phase. The sustainability of the market, and the overall affordability of premiums, is supported by the increase in the total number insured and the younger average age of those insured. Our community-rated system requires a steady flow of new and younger lives becoming insured. This helps support the intergenerational solidarity that is implicit in community rating where premiums are not risk-rated for expected future health status or current age. The increase in the numbers insured under 50 years of age is very welcome as this is a key target group for LCR.”

FINDING THE BEST DEALS

Employers in the hardware and builders merchants sector can utilise companies such as Lyons Financial Services, who, through their relationships with the health insurers, are best placed to be aware of the best deals on offer – some of which are not really publicised widely! Such companies are in a position to negotiate the best deal for your company. In some circumstances, they can offer unique group discounts for your employees and additional benefits such as bespoke wellness programmes which are very well received and can be organised at a time that suits you, to tie in with employee benefit days.

To make contact with the Lyons team, email health@lfs.ie or call 01 801 5808. Please identify yourself as a member of HAI to avail of the group arrangement.

This Business Support article featured in the September/October 2017 edition of The Hardware Journal.