Competition in the Irish Private Health Insurance Market

Australia
Ireland
Risk equalisation
Yes, including
restricted membership
undertakings
Yes, excluding
restricted
membership
undertakings (except
for 1)
Operated on a State
by State basis
Operated on a
National basis
Implicit risk selection
or targeting through
product design/pricing
Yes – all members of
a table in the same
category must pay the
same, although
different premiums
can be charged for
the different member
categories, which are
single, couple, family
and single parent
family. There are
many different tables
of benefits.
Yes
Comparison of risk equalisation systems
1.11 Both Ireland and Australia operate schemes to support community
rating. The schemes in some way and to some degree counteract the
effects on insurers of the different risk profiles they have. In both
Australia and Ireland, risk equalisation applies to the great majority of
the health business written by the insurer.
1.12 In practice, no risk equalisation scheme will equalise risk profiles
totally and any scheme will only partially achieve this objective.
1.13 In Australia the scheme is operated on a state basis so that
equalisation takes place between all insurers operating in a particular
state. The Irish scheme operates nationally. The Irish system
effectively operates on a half yearly basis whereas the Australian one
operates on a quarterly basis.
1.14 The Irish scheme is referred to as a risk equalisation scheme whereas
the Australian system is referred to as a reinsurance scheme. Under
both schemes insurers with a lower risk profile pay amounts over and
above their normal claim payments into a fund which then pays the
amounts out to insurers with a high risk profile to help offset their
higher claims. The amounts paid into and out of the fund by each
insurer are calculated according to a set formula. The formula ensures
that all the money paid into the fund by those insurers contributing to
it is paid out to those insurers who benefit from the fund.
144