Competition in the Irish Private Health Insurance Market

6.24 The provision of renewal notices actively facilitates switching as it
provides consumers with all the information they require to seek
quotes from competing insurers on one simple form.
6.25 Where employers are subsidising the cost of their employees’ health
insurance, they have a motivation to minimise employment related
costs as well as to act on behalf of their employees as consumers. It
appears from interviews with insurers that employers’ behaviour in this
position is at least as price-sensitive as consumers, if not more so.
6.26 Inertia acts as a powerful brake on switching. Where PHI cover is
automatically renewed without prior notice by a health insurer, a
consumer may not make the effort to examine alternative health
insurance providers and packages. Accordingly, the opportunity for
switching at renewal time is dampened.
6.27 Consideration should also be given to other means of facilitating
switching in employer-paid or employer-subsidised group schemes. To
give an example, an employer could offer a number of PHI plans to its
employees but restrict switching to two or three occasions per annum.
This form of group scheme provision during specified “open seasons” is
used in the US by the federal government in its capacity as an
employer, and by numerous corporations. The creation of “open
seasons” for switching has two main benefits. Firstly, employer and
PHI firms’ administrative costs would be reduced, as the cost of
facilitating switching would occur only twice or three times a year,
rather than randomly throughout the year. This would make the
provision of multiple plans more attractive to employers. Secondly, the
establishment of set switching periods would provide PHI firms with a
set-piece opportunity to strongly encourage switching during these
periods and would allow group scheme members to compare and
contrast PHI plans during the switching period. This would promote
competition between PHI firms at the company level and promote
transparency between competing plans.
Waiting Periods
6.28 PHI firms require their customers to serve waiting periods upon
commencement of their policies. This means that, except for accidents
and injuries, customers will not be fully covered until a certain time
period, which is set by statute, has elapsed. Maximum waiting periods
are set under the Health Insurance Act 1994, as amended. The
purpose of waiting periods is to discourage “hit and run” behaviour,
where consumers make claims on their policies shortly after joining,
and then terminate their membership. Such behaviour has the effect of
raising premiums for all consumers. There are two main categories of
waiting period. The first category covers medical conditions or illnesses
which occur after a consumer takes out a PHI policy, 90 and the second
category covers pre-existing medical conditions or illnesses, regardless
of whether consumers were aware that they had a pre-existing
90 The maximum waiting periods for this category are 26 weeks for persons under the age of 55, 52
weeks for persons aged between 55 and 65, and 104 weeks for persons aged over 65.
92