• Implications for Employers

Brief update on healthcare providers  
  

• Some ideas on how to control insurance costs?

Effective management of your employee benefits budget is essential in the current climate. Each and every benefit should be reviewed carefully to determine the value for money you are currently getting and also to measure the competitiveness of your benefits.

Two benefit areas which have the potential to deliver significant cost savings are the areas of Private Health insurance and Group Risk.

Private Health Insurance

The private health insurance market has experienced considerable change over the past year. The extraordinary levels of price inflation in this market are driving organisations to review their private health insurance plans for employees. Significant savings can be achieved through a review of your organisation’s health insurance provision and often do not require a change in provider.

Below is an example of a Private Health Insurance review case study which Mercer undertook on behalf of a client:

Health Insurance (Miscellaneous Provisions) Bill 2008 enacted - what does it mean for corporate clients? 

The Health Insurance (Miscellaneous Provisions) Bill was enacted just before the Dáil recess in July. The primary objective of this Act is to strengthen the legislative provisions to ensure that access to health insurance cover is available to all employees without differentiation in respect of age and health status.

The main features of the Act are as follows:

• Lifetime community rating - the possible introduction of late entry premium loadings for people who join after age 30.
    
• Health insurance contracts which are shorter or longer than one year are prohibited unless there is a good and sufficient reason for doing so.
    
• Insurers must submit contracts to the Health Insurance Authority (HIA) 20 days in advance of offering them to potential customers. The HIA will also maintain a register of contracts which will be available to the public.

The introduction of the new age-related tax credits for individuals aged 50 and over funded through the levy payable by each health insurance provider. This levy was announced in November 2008 - €160 per adult and €53 per child. There is speculation that this levy may increase in the upcoming budget.

Age-related Tax Relief

For now, the current 20% tax relief on health insurance premiums will remain in place for all ages, although the recent Commission on Taxation report has recommended that this be reduced.

What are the implications for employer funded private health insurance schemes?

• Recent price increases have confirmed that the levy has increased the cost of insurance for employers.   
   
• Prior to the act, employers could self insure if they could guarantee that they would have in excess of 10,000 lives in the scheme within six months. The Act now prohibits the establishment of a restricted membership undertaking. 
    
• Insurers will now have the ability to add a premium loading to individuals that join health insurance plans after age 30. This will undoubtedly have an impact on employer funded schemes.

What should I do?

The process of selecting a private health insurance provider for your organisation is no longer a straight forward task. The complexity of the changes along with the recent changes in the corporate market mean that you must invest the time required to select the most appropriate provider and plan for your organisation. If not, you are likely to incur unnecessary costs and run the risk of providing a health plan that is uncompetitive and which does not meet the needs of your workforce.

Mercer’s healthcare consulting business can help you navigate through all of the recent changes to the health insurance market and ensure that your organisation is on the correct plan at the most competitive cost.

Brief update on VHI Healthcare, Hibernian Aviva and Quinn Healthcare

VHI Healthcare

In response to corporate demand, VHI has continued to expand their range of plans for this sector to meet the benefit and cost requirements of clients.

• VHI Corporate plan range now includes 11 plans
  
• Price increases on corporate plans have been higher than anticipated
  
• Reductions in day to day medical benefits on all corporate plans
  
• Further price reductions on VHI Plan B and B Options

Hibernian Aviva

Hibernian Aviva’s campaign to axe the levy has proved unsuccessful and as a result they have passed on the full cost of the levy to policy holders (gross price of €160 per adult and €53 per child) along with the 12% on average price increase effective in October.

Hibernian Aviva has also launched 4 new plans along with a new corporate plan to compete directly with VHI’s Company Plan Plus Level 1 and Quinn Healthcare’s CompanyCare.

Quinn Healthcare

Quinn Healthcare’s price increase in January of 16% on average was directly influenced by the introduction of the levy. Had the levy not come into play Quinn claim that their increase would have been in the order of 8%. Quinn have also improved benefits on their corporate range. They have introduced an Employee Assistance Program across all corporate plans and now make a contribution towards infertility treatment.

What do I need to do?

In the current economic environment, cost containment is critical. A number of decisions will need to be made to ensure that you are receiving the best possible value for money from your health insurance investment and that your employees fully understand the implications of these proposed significant changes.
  

Price inflation in private health insurance in Ireland is set to continue to spiral. Organisations need to consider new innovative ways of funding this important employee benefit.
   

A look to the United States provides us with a view of trends we can expect to see in Ireland in the coming years. Mercer’s Annual Employee Benefit survey in the US shows that if employers made no changes to their employee medical plans in 2010, they would see cost rise by nearly 9 percent. But, with more than half of all employers experiencing layoffs over the past 12 months - and nearly a third anticipating lay-offs this year - doing nothing is not an option for most employers. The survey findings also indicate that respondents plan to shave three percentage points off their annual renewal rates through a variety of costsaving actions, holding overall cost growth to 5.9 percent next year.

   
Another annual health cost survey by The Kasiser Family Foundation, in the US, found that 21% of 3,200 respondent companies actually reduced benefits or increased cost sharing in 2009 because of the economy. 15% of respondents raised the employees share of premiums.
   

Some ideas on how you can control health insurance costs?

Now is an opportune time to review your health insurance requirements for the remainder of 2010 and beyond.

Group Risk

The market for group risk has become extremely competitive in recent years.We would recommend that organisations re-broke their risk benefits every two years but given the recent downward pressure on rates, this frequency may need to be increased.
 

Below is an example of a Group Risk review case study which Mercer recently undertook on behalf of a client:
 

You will see from the above examples that a review of your private health cover and group risk could deliver significant savings to your organisation.