Community rating, reflecting the principle of intergenerational solidarity, is a fundamental cornerstone of the Irish health insurance system. This means that people who are old or less healthy do not have to pay more than the young and healthy, whereas in other health insurance systems the level of risk that an individual presents directly affects the premium paid.
It also means that premiums for younger or healthier lives are typically higher than their expected claims would require, whereas for older or less healthy lives, premiums are typically lower than the expected claims would require. It is also useful to note that older people who have been paying health insurance premiums for many years will have supported the older generation when they were younger and could reasonably expect to benefit in a similar way as they themselves now become older.
Community rating needs to be supported by a scheme that subsidises the cost of health care for older and less healthy people across the market of health insurers, where one or more companies have a greater share of older or less healthy customers. Otherwise, companies would have a clear incentive to attract and retain only healthy customers who were less likely to make claims. This support system is called Risk Equalisation.
Lifetime Community Rating (LRC) was introduced from 1 May 2015 and modifies community rating so that the premium that individuals pay for health insurance increases with the age at which they enter the health insurance market. It was introduced to encourage people to take out health insurance at a younger age and thereby help in controlling premium inflation across the market. Since 1 May 2015 there are ‘late entry loadings’ for those aged 35 and over who did not buy health insurance prior to then. The loadings are set at 2% per year starting at age 35, up to a maximum loading of 70% at age 69 and over.
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