Private health insurance.
Private health insurance existed prior to the establishment of the VHI, but was limited in scope. Some private medical insurance schemes run into financial difficulties.
The Health Act 1953 established three groups of persons entitled to health services. Persons unable to provide health service for themselves and dependents are entitled to access to health services free of charge. A second group was entitled to more limited services free of charge or at a modest charge. The third group estimated to comprise about 15 percent of the population could obtain free public hospital cover, only if they could show that meeting the cost would cause undue hardship in the circumstances.
In 1955 an advisory committee was established to examine the feasibility of voluntary private health insurance. The committee advised that a scheme of voluntary health insurance against the cost of hospital maintenance, medical, surgical and maternity services would be practical. It would not be practical to include general practitioner services nor dental services. It is recommended that the scheme be administered by a State body.
The Finance Act 1955 introduced income tax relief on contributions to voluntary health insurance policies.
The Voluntary Health Insurance Act 1957 provided for the establishment of the VHI. The legislation granted the VHI an effective monopoly on health insurance schemes. Limited schemes could be provided by some existing societies and trade unions. The VHI’s number of policyholders increased steadily from approximately 25,000 in the first year of operations exceeding half a million in 1970.
Initially it offered three schemes A, B and C at varying annual subscriptions. Group subscriptions were offered. Group membership schemes were promoted heavily, both to individual businesses and to whole sectors of employment
In 1960s, expansions in the level of cover were offered with extended hospital maintenance cover. Gradually, the cost of hospital maintenance was added to the basic cover, plugging a significant gap in cover. There was an increase in the upper age level from 75 to 80.
In 1967, cover was extended to prescribed drugs and medicines outside hospitals, expenses for newly born children, home nursing and improved maternity benefits. The drugs and medicines scheme was expensive and was withdrawn in 1980s.
The maximum hospital cover was increased from 30 to 40 weeks in 1967. The upper age limit for cover was removed. Restrictions on cover for pre-existing illnesses were modified after five years membership and removed after 10 years.
The nature of the cover offered changed and developed further through the 1970s and \’80s. In the 1970s, the hospital scheme covered normal hospital cover and the home scheme covered drugs, medicines, home nursing and medical appliances.
In 1979, the eligibility for public hospital services under the Health legislation was broadened so that free hospital maintenance and treatment was available for all except those in upper-income groups. The latter groups were required to pay professional fees it created in pubic wards.
In response to the broadening of statutory hospital cover, the VHI revised its plans A, B and C. A flat cover was available together with the possibility of purchasing additional cover.
Membership exceeded one million by 1983.
In the late 1970s a number of private hospitals were founded. Many other older private hospitals existed which provided more limited services. Vincent\’s Private Hospital was founded by the Religious Sisters of Charity in the mid-1970s. By 1986, there were three new private hospitals. The Galvia in Galway, Blackrock Clinic and the Mater Private Hospital. VHIs most popular B plan provided less than half the cover in these hospitals and level D and E plans were created for wider cover.
The costs of hospital services were substantially increased due to financial pressures in the mid-1980s. The charges for private and semi-private rooms in public hospitals, more than doubled. Wider availability and more modern technologies and facilities pushed costs upwards.
The VHI board as a state-controlled company was limited in permissible cost increases notwithstanding the enormous increase in hospital charges. By the late 1980s, the VHI faced a significant financial deficit. The Department of Health commissioned a study on the VHI\’s future in 1988. It identified the limited access to private funding and limits on government funding as problems.
Subscription increases and benefit reductions were proposed and undertaken together with a new agreement with private hospitals. The prescribed medicine scheme was withdrawn. Costs were reduced by agreement with private hospitals providing for direct reimbursement by VHI. The financial position of VHI improved and was solvent by the beginning of the 1990s.
The hospital sector was becoming increasingly commercialised in the 1990s. Religious orders withdrew from private hospitals due to falling numbers of members. At this stage half of the country\’s “private” beds were in private and semi-private hospitals and half in public hospital.
The Finance Act 2001 encouraged the building of private hospitals.Tax allowances were made to incentivise construction of such hospitals although n practice few were built. Concerns were raised that the great availability of beds would not ease pressure on public hospitals, but would increase the level of demand for beds generally.
The Health Insurance Act 1994 followed from EU requirements to open up competition in state-owned sectors. BUPA Ireland, a UK insurer establish itself in the Irish market 1996.
The legislation required health insurers to apply the principles of open enrolment community rating, lifetime cover and minimum scales of benefit. Community rating require that the same level of premium and cover applied regardless of age and health status. The risk equalisation scheme required companies with a higher proportion of younger less risky patients, to transfer funds to companies with older patients with higher risk categories (largely the VHI).
A government White Paper on health insurance recommended: full risk equalisation and the incorporation of VHI Healthcare as a body with full commercial freedom. It recommended investment of €60 million by the State in VHI Healthcare. The Health Insurance Amendment Act 2001 implemented the proposals in relation to commercial freedom and community rating.
The legislation allowed for covering GP, dental, outpatient and ancillary services. It provided for risk equalisation with a three-year exemption from risk equalisation for new insurers. It provided for a late entry premium which could be charged to persons taking out health insurance for the first time after the age of 35 or with a significant lapse in cover. It permitted reduced premiums for persons under 23 years of age in full-time education.
The legislation established the Health Insurance Authority. It is independent in the exercise of its function. It monitors the health insurance market and advises the Department of Health on matters relating to health insurance.
The Authority monitors the operation of legislation and enforces compliance. It carries out certain functions in relation to health insurance levies, and age-related tax credits as well as the risk equalisation scheme. It may take action to increase awareness for members of the public of their rights as consumers of health insurance. It maintains statutory registers of health benefit undertakings and health insurance contracts.
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