14 February 2008

Risk Equalization in Eire

For Americans, reading about "risk equalisation" in the Irish insurance market can only evoke a snort of disbelief. It's a concept so foreign I'm not even going to Americanize the spelling.

So what the bloody hell is "risk equalisation" you ask?

According to Medical News Today, risk equalisation is how competition in the health insurance market works to the benefit of all health insurance subscribers. It operates alongside community rating, open enrollment and lifetime cover. Here are the definitions:
  • Open Enrollment entitles persons of all ages, irrespective of health status to avail of health insurance.
  • Community Rating ensures that younger and older subscribers pay the same amount for similar health insurance cover and that subscribers pay the same amount for similar cover throughout their lives. This means that people can continue to afford health insurance right into those decades of their lives when they are most likely to need it.
  • Risk equalisation payments involve transferring funds from insurance companies which have a disproportionate share of young, healthy subscribers to companies which have a disproportionate share of older people who are more prone to illness.

"This allows for an equitable market, enabling companies to compete on a equal basis, but also protecting customers through removing the incentive to engage in preferred risk selection," according to the story.


This would protect individuals and families at the cost of profit. It's nuts. Probably communist.

Most EU countries have supplemental insurance that a lot of people buy -- about 50 percent in Ireland. (And yes! Those private insurance costs are factored into the total costs you read about where the U.S. looks so bad.) Evidently the EU court doesn't want to model their insurance market on ours. Odd, eh? Ours is so robust. Very profitable industry.

No doubt the insurance industry will continue its assaults on the notion of protecting the consumer in this wild-eyed manner. Sooner or later, by hook or by crook, "risk equalisation" will be a boogey-man of the past.

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