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Community rating in the absence of risk equalisation: lessons from the Irish private health insurance market

Published online by Cambridge University Press:  01 May 2012

Brian Turner  and
Edward Shinnick
Brian Turner*
Affiliation:
Lecturer, Department of Economics, University College Cork, Cork, Ireland
Edward Shinnick
Affiliation:
Senior Lecturer, Department of Economics, University College Cork, Cork, Ireland
*
*Correspondence to: Brian Turner, Lecturer, Department of Economics, University College Cork, Áras na Laoi, Western Road, Cork, Ireland. Email: b.turner@ucc.ie
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Abstract

Ireland's private health insurance market operates on the basis of community rating, alongside open enrolment and lifetime cover. A risk equalisation scheme was introduced in 2003 to bolster community rating. However, in July 2008 the Irish Supreme Court set aside this scheme, on the basis of the interpretation of community rating in Irish legislation. This decision has significant implications for the Irish private health insurance market. This paper reviews the development of the market, focusing in particular on community rating. The breakdown of community rating in a market with multiple insurers with differing risk profiles is discussed. Applying this to the Irish market, it can be seen that the Irish Supreme Court judgment has significant implications for the application of community rating. Specifically, while community rating operates within plans, it no longer operates across the market, leading to high-risk lives paying more, on average, than low-risk lives. It has also led to greater opportunities for insurers to engage in market segmentation. This may have relevance for the design and operation of other community rated markets.

Type
Articles
Information
Health Economics, Policy and Law , Volume 8 , Issue 2 , April 2013 , pp. 209 - 224
Copyright
Copyright © Cambridge University Press 2012

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