Report on the Health Insurance Market: By Millward Brown Lansdowne

To The Health Insurance Authority

41111027/DF/JMM/SD

Table of Contents

Background & Methodology ............................................... i - ii

Executive Summary ........................................................ iii -vii

Main Report

Section 1. Consumer Survey .............................................. 1.

1. Impact of Economic Downturn and PHI Holding ...................... 1.

2. PHI Holding -I .................................................................... 3.

3. PHI Holding -II .................................................................. 6.

4. Private Health Insurance Work Schemes .............................. 10.

5. Drivers and Satisfaction Levels among Those with PHI ........... 13.

6. Those Without Health Insurance ......................................... 20.

7. Claim Experience ............................................................. 24.

8. Cost ................................................................................ 26.

9. Switching and Discontinuation ............................................ 28.

10. Health Insurance Authority ................................................. 39.

Section 2. Employer Survey ................................................ 43.

- i -

Background and Methodology ▪ The HIA has conducted consumer research biannually since 2002

▪ This presentation reviews the findings from the 5th research project.

▪ The 2011 research has been conducted to gauge consumer (and

employer) attitudes towards private health insurance, identify trends and assess the impact of the economic climate on customer perceptions.

▪ The 2009 questionnaire was altered as specified by the HIA; amendments

are highlighted in this presentation

▪ A nationally represented sample of 1011 interviews were conducted face-to-face between November 2nd -27th 2011

▪ Interviews were carried out using a hand held computer device, HAPI. One of its advantages is that it allows automatic routing of questions

▪ In order to ensure a representative sample of the adult population in the Republic of Ireland (aged 18+) quotas were set around gender, social class and region.

▪ The raw data was weighted to reflect the national population. Each chart

in the report shows the unweighted base and the weighted percentage.

▪ Data for preceding years have been taken from published reports as previous research was not conducted by Millward Brown Lansdowne

▪ When reading figures presented in the report it is important to note that

the margin of error for a sample of 1011 is +/- 3.2%. For a sub sample such as the number of respondents with PHI insurance (424 of the sample) the Margin of Error is +/-5%

▪ Specific questions were asked of policy and non policy holders with a group of questions towards the end of the survey being asked of the entire population

- ii -

Topics included;

▪ Incidence of Health Insurance

▪ Reasons for not having Health Insurance and the possibility of taking out Private Health Insurance in the future

▪ The number of adults and children on the policy, duration of policy

▪ Questions around switching (- incidence and consideration)

▪ Pricing

▪ Past actions and future intentions

▪ Work schemes

▪ Claim experience

▪ Complaint experience

▪ Attitudes towards PHI

▪ Impact of economic downturn

▪ Awareness of the Health Insurance Authority (HIA)

- iii -

Executive Summary

Section 1. Consumer Survey The recession continues to impact on policy holders, 43% now say that

they have not experienced pay cuts or job loss in the past twelve months. People who do not have health insurance have been impacted more noticeably than policyholders..

The intentions of policy holders have stabilised this year, more than 8 in

10 do not plan to change their policy this year (compared to 7 in 10 at the time of the Authority‟s last survey in 2009) – with far fewer people saying „don‟t know‟ than in the previous survey.

Work Based Schemes As in 2009, respondents considered private health insurance to be the

second most important employee benefit (after a pension). The percentage of people in the survey saying that PHI is the most important employment benefit has risen from 18% in the 2009 survey to 29% in this survey.

One in three people are now part of a work group scheme, up slightly in

two years but following falls in the proportion in the previous two surveys.

The incidence of employers contributing „none‟ of the cost of PHI has

risen to almost 60% (of people with work schemes). Provision of choice by work group schemes has increased from 1 in 5 in

2009 to 1 in 3 – pointing to a generally more competitive marketplace. One in four of those in a work scheme (8% of the market) say they

would cancel health insurance cover if not in a work group scheme. This indicates the importance of work schemes in the effective demand for health insurance.

Satisfaction Levels Overall satisfaction levels with PHI cover are quite high compared with

other financial or utility consumer businesses. However, satisfaction with PHI has weakened a little since 2009.

The level of insurance cover is the key driver of satisfaction and it is also

the feature of PHI that receives the highest level of satisfaction.

- iv -

The numbers believing PHI is a necessity not a luxury has fallen from 67% to 59% - again reflecting the pressures of the recession on peoples‟ spending ability and priorities. Nonetheless, only 20% of people agree there is no need for PHI as public services are adequate (down from 26%).

In order to assess attitudes to private health insurance, respondents

were asked to indicate their level of agreement with a number of statements. “Having PHI means you can skip the queues” was the most endorsed of these statements.

The drivers for having PHI are the cost of treatment/accommodation and

the perception public services. Both of these are key determinants for the over 55‟s. Being offered PHI by the employer is of much more importance for the under 55‟s and is a primary reason for holding PHI with these groups.

Attitudes to premium increases have changed sharply – the number

who believe they are appropriate has halved to 19%, illustrating the impact recent increases are now having compared to previous years.

Those without Health Insurance Twenty percent of people without PHI have been covered in the past.

This is up from 15% in 2009 and demonstrates the numbers whose health insurance has lapsed in recent years. The overwhelming reason for no longer being covered is „expense/premiums too high/can‟t afford it‟ – now at 50%.

The reasons for never having had PHI are similarly about cost and

affordability – although possession of a medical card is also an important factor in not having health insurance.

There is a slight increase in intention to take out PHI this year compared

with 2009. Claim Experience Claim incidence has increased this year, with 2 in 3 policyholders having

claimed either for inpatient or outpatient services. Almost 6 in 10 of those over the age of 55 say that they have claimed for an overnight stay in hospital.

Satisfaction with claim processing is high (89% in total) but has fallen

back slightly since 2009.

- v -

Switching and Discontinuation The incidence of switching insurers has increased by 50% to 23% of all

policyholders. The great majority have only switched once. A further 20% of those who have never switched have considered doing

so (up from 13% in 2009) indicating increased competitive pressures in the market.

Unsurprisingly, cost remains the key potential driver of switching

behaviour amongst those who have never switched; the importance of cover has fallen back again this year to 24% as a reason to switch amongst this group. Amongst policy holders overall, there is little change in potential switch motivators.

Sixty six percent of those with PHI perceive switching to be easy. Since

2009, the perceived ease of switching is unchanged at an overall level, although the „very easy‟ perception has slipped back.

More people are prepared to switch for financial rather than benefit

gains – nevertheless, people with PHI say they would need to save an average of €441 to prompt them to switch.

One in five PHI holders still think an additional waiting period is required

when switching provider. Knowledge of the fact that an additional waiting period is not required increases likelihood to switch – with 45% of this group saying it would make them more likely to switch.

There has been an increase in the numbers saying that they shop

around for their health insurance (16%, up from 11%). Awareness of the Health Insurance Authority Awareness of the HIA has not changed since 2009 (fully/some

awareness), those saying they have never heard of it has risen slightly to 50%

As in previous years most people cite their insurer as the point of

contact if they have a problem with their PHI, the proportion saying that they would contact the HIA has risen slightly to 14%.

- vi -

Section 2. Employer Survey Eighteen percent of Irish businesses operate an employee PHI scheme.

The sectoral profile of those businesses is similar to the overall sectoral breakdown of businesses in Ireland. Chart A

PHI is notably more prevalent with larger organisations: seventeen

percent of companies operating PHI schemes have 100 or more employees – although these large companies only account for 5% of all companies nationally. The same proportion (17%), arises at the other end of the scale, however these micro-organisations (between 5-9 employees) account for 45% of all companies. These imbalances illustrate the relationship between company size and PHI operation. Chart A

Three in four companies offering PHI currently offer VHI. Aviva and

Quinn are each offered by 22% of companies. Chart B Three in four companies intend to keep PHI subsidies the same (albeit

based on a small sample). Indeed, the level of subsidy has been increased by 19% of companies in the past two years, with almost 7 in 10 saying that they have kept subsidies the same over the past two years, - suggesting a high level of stability from the employers‟ viewpoint. Chart C

The situation with policy cover is similar, nearly 9 in 10 intend to keep

cover the same over the next 12 months. In the past two years 70% have kept cover the same whilst 16% have increased cover levels – indicating a high level of commitment to maintaining PHI cover, even during the years of steepest economic decline. Chart C

Two in three companies review the provision of employee PHI yearly or

more often. A further 1 in 5 do so every 2-3 years. 10% say that they never review PHI provision. Chart D

Almost 7 in 10 companies say they have never considered switching

their PHI provider. Fourteen per cent have actually switched their main provider and a further 18% have considered doing so. Chart E

The vast majority of companies intend maintaining the current PHI

scheme for the considerable future. However, 7% of companies say they are considering discontinuing their health insurance scheme in the foreseeable future. Chart F

PHI is one of the least commonly offered employee benefits (18%)

amongst all companies. Flexible working arrangements, pension and educational support are all far more prevalent. (In the consumer survey, 29% of individuals said that PHI is the most important employee benefit.) Chart G

- vii -

Just under 7 in 10 companies have heard of the HIA. Chart I

- viii -

Main Report on the Health Insurance Market

41111027/DF/JMM/SD

- 1 -

1. Impact of Economic Downturn and PHI Holding

1.1 Impact of Economic Situation Compared with the dramatic downturn in the economy in 2009 there has been a stabilisation in how people have been impacted by the recession. The number who have experienced a pay cut in the past year has reduced, to 35% from 45% in 2009. By contrast, 37% now say they have not been impacted by the economic downturn in the past year compared to only 26% who said the same in the 2009 survey. Chart 1.1.1

- 2 -

Nonetheless the severity of the recession in recent years means the PHI market now operates in a changed economic context. Despite this overall improvement, the pressures on those with PHI are evidenced by the fact that 4 in 10 holders have seen job losses in the household – this finding points to a major reason for the numbers foregoing health insurance in recent years. Chart 1.1.2

- 3 -

2. PHI Holding - I 2.1 Incidence of holding Private Health Insurance (PHI) Incidence of holding PHI (adjusted to HIA definition) is currently 43%, down 3 percentage points in two years and continuing a steady reduction each year since 2005 - when 52% of the adult population held PHI. Chart 2.1.1

- 4 -

2.2 Profile of PHI Holding In terms of the profile of those holding PHI, the 25-34 age group record the biggest contraction in levels whilst the over 65‟s have increased their holding profile – from 15% to 21%. There is no change in the social class profile of PHI holding – almost 6 in 10 holders are from the most affluent ABC1 social group (who comprise just 40% of the population). In contrast, the blue collar C2DE socio economic group comprise just 1 in 3 PHI holders, despite constituting half of the population.

Chart 2.2.1

Profile of PHI Policy Holders(Base: All With Private Health Insurance - 424)

Age

%

SocialClass

%

Region

%

9 9

21 17

2120

2018

16

16

1521

59 59

32 32

8 8

2736

26

21

32 27

15 15

18-24(14%)

25-34(21%)

35-44(20%)

45-54(17%)

55-64(14%)

ABC1(40)

C2DE(52)

F(7)

Dublin(27%)

Rest of Leinster(25%)

Munster(30%)

Conn/Ulster(18%)

65+(15%)

57% 43%

Policy

Holders

Q.1 Are you currently covered by Private Health Insurance?

(%)=Total Population 20011

2009 2011 2009 2011 2009 2011

- 5 -

In regional terms, the profile of PHI holders has recorded a number of shifts – notably the sharp increase in holders in Dublin – which now comprises 36% of holders, whilst there have been falls in holding in Leinster and Munster. When analysed by age and sex, it is notable that younger women (18-44) are considerably more likely than younger men to hold PHI – this may be due to the fact that women of child bearing age have a greater incentive to have additional medical cover. Overall, younger adults (aged 18-34) are significantly under-represented in PHI holding. While the reverse is true of older people, and especially among those people above the normal retirement age. Chart 2.2.2

- 6 -

3. PHI Holding - II 3.1 Length of Time with PHI and Insurer On average, versus 2009, the number of years a person has held PHI has increased by 2 years to 18. Further analysis reveals a movement towards those holding PHI for over 21 years and a reduction in those holding policies for 5-10 years. There is also a consolidation of those who have been with the same insurer for over 20 years – this sector now accounts for a quarter of the PHI market, and points to an increasing tendency to stick with one‟s provider the longer one has been with it. At the other end of the scale, those who have most recently joined their insurer have also increased in importance to 1 in 3 PHI holders. The market is therefore increasingly defined by „long term‟ loyal customers and much shorter term holders, many of whom are likely to have a high propensity to switch. Chart 3.1.1

- 7 -

3.2 Payment Frequency There is little movement in the frequency of payment for PHI since 2009; just over half of policy holders continue to pay monthly with 24-44 year olds being most likely to do so. Chart 3.2.1

- 8 -

3.4 Number Insured on Policy On average, there are 2 adults per policy. When policies are families with children the average is 2 children. Chart 3.4.1

- 9 -

3.5 Shopping Around For PHI Sixteen percent of PHI policy holders say they shop around for their policy. Fewer than 10% of people actively shop around for health insurance policies, revealing a very high level of inertia in the health insurance market overall. Chart 3.5.1

- 10 -

4. Private Health Insurance Work Schemes

4.1 Work Scheme PHI Thirty percent of those with PHI are part of a work group scheme - which is largely unchanged since the last survey in 2009. Just over 40% of those in a work scheme report that it is employer subsidised to some extent – this equates to just over 12% of the total PHI holding population now having some/total employer contribution. Chart 4.1.1

Incidence Of Work Group Scheme Level of Contribution By Employer

(Base: All With Private Health Insurance - 424) (Base: All With PHI Under a Work Scheme – 125)

19 21

27

37 36

5941 36

- 3 7

14

63%33%

4%

YesNo

Don’t know

Incidence of WorkGroup Scheme

Yes%

No%

DK%

2009 29 69 2

2007 33 63 4

2005 45 50 5

2002 49 45 7

2009%

2007%

2011%

All of the cost

Some of the cost

None of the cost

Don’t know

Almost 6 in 10 work scheme PHI holders now state that their employer pays „none of the cost‟ of their health insurance schemes, whilst the numbers stating their employer pays „all of the cost‟ has fallen since 2009 to 14%.

- 11 -

4.2 Payroll Deduction The incidence of employers organising payment of PHI premiums through a payroll deduction system has also continued to decline, although at a slower rate than seen in the previous period. Just over 6 in 10 people with a work scheme PHI policy report such payroll deduction schemes in operation now. Chart 4.2.1

The incidence of employers providing choice of health insurer has increased sharply since 2009, reflecting the heightened competition in the market. Three in ten of those in a work scheme are now offered a choice – up 12 percentage points in two years.

- 12 -

4.3 Impact If PHI Not Organised Through Employer There has been a notable increase in the number of people with work scheme PHI who now say they would not take out PHI if not organised by their employer; rising from 13% to 24% in two years, this reflects the impact of the recession on people‟s disposable income and their reliance on the work scheme to partly or wholly fund their insurance. Nonetheless, 7 in 10 continue to say that they would continue to take out PHI if it was not organised by their employer, underlining the importance health insurance continues to hold for the majority who avail of it via this source. Chart 4.3.1

- 13 -

5. Drivers and Satisfaction Levels among Those with PHI

5.1 Understanding of Health Insurance Cover The steady growth in satisfaction with health insurance cover recorded since 2002 has fallen back in 2011, with a 12 percentage point drop in those saying they are „very satisfied‟ versus 2009. Price increases and changes in cover have no doubt impacted on this turnaround. However, very few people are actually dissatisfied with the service. Chart 5.1.1

- 14 -

5.2 Attitudes to PHI People have a range of views in relation to PHI, by some distance the best endorsed statements are that „having PHI means you can skip the queues‟ (62%), „having PHI means always getting better level of health care service‟ (62%) and „PHI is a necessity not a luxury‟ (59%). This is a similar picture to that in 2009, although the number believing it is a necessity not a luxury is down 8 points, reflecting the pressure on people in relation to their discretionary spend. At the other end of the scale the numbers believing PHI is „only for the wealthy‟ have increased from 39% to 43%. Chart 5.2.1

Only 20% now agree that „there is no need for PHI in Ireland, public services are adequate‟ (down 6 points), and only 15% (down 7 points) believe „only old people and sick people need PHI‟.

Statements About Health Insurance

(Base: All Adults Aged 18+ - 1,011)

10

9

11

9

8

26

25

22

44

50

15

15

17

12

13

14

20

18

23

24

13

13

13

34

36

23

12

28

13

11

33

35

27

26

32

14

25

22

12

10

29

27

32

18

11

24

18

9

8

5

PHI is a necessity not a luxury

Having PHI means always gettingbetter level of health care service

Having PHI means you can skip the queues

Adequate information to enable me to compareplans on offer from different insurers

Consumers are adequately protectedin the PHI market in Ireland

I will always have PHI

PHI is only for the wealthy

PHI is good value for money

There is no need for PHI in Ireland,public services are adequate

Only old people and sick people need PHI

DisagreeSlightly

(2)%

DisagreeStrongly

(1)%

Neither(3)%

AgreeSlightly

(4)%

AgreeStrongly

(5)% Mean

score

2011Agree

%

2009Agree

%

3.56 62 69

3.54 62 69

3.52 59 67

3.31 44 46

3.29 43 43

2.95 38 44

2.92 43 39

2.78 31 33

2.17 20 26

1.94 15 22

- 15 -

5.3 Satisfaction with PHI While there has been a small decline in satisfaction levels generally, opinion remains quite high relative to other sectors. One in three now give a 9 or 10 score in overall satisfaction, resulting in a small reduction in overall mean score. The lowest level of satisfaction remains for „the level of out- patient/non hospital cover on your plan‟ with 27% giving a 9-10 score. Chart 5.3.1

Broadly speaking, these satisfaction scores reflect well on the industry. In many industries a system of Net Promoter Score (NPS) is used: this is the deduction of those who are dissatisfied (score 1-5) from those who are very satisfied score (9-10) with score 6, 7 and 8 treated as neutral. Overall the PHI has a NPS score of +23 which would be considered a very good score when benchmarked across other financial or utility industries. The weakest NPS is for „the level of outpatient/non-hospital cover on your plan‟ but this is still +10 overall.

- 16 -

5.4 Regression Analysis Regression analysis allows us to pinpoint which elements of PHI are the key drivers of satisfaction with holders. The level of cover is the main determinant of satisfaction, followed by the customer service received, current range of products, quality of information and advice and finally the level of out- patient cover. Chart 5.4.1

Despite the drops seen in overall satisfaction, the private health insurance industry is mostly generating its highest levels of satisfaction in areas where it has the highest impact on satisfaction. In this sense the industry is performing best where it has the most impact, while those areas where lower levels of satisfaction are recorded tend not to be so important to determining satisfaction. However, this is not to say that there is room for complacency, especially as satisfaction levels with PHI are in decline overall.

- 17 -

Another notable aspect of satisfaction with PHI is the fact that it increases with age across all statements. The over 55‟s are the most satisfied age cohort across all aspects of PHI. Chart 5.4.2

Level Of Satisfaction With Aspects Of Health Insurance by Age

Current range of

products and

services offered

by PHI provider

%

The level of cover

provided by PHI

plan

%

The customer service you

receive from your PHI provider

%

The quality of

information &

advice you

receive from your

PHI provider

%

The level of out

patient/non

hospital cover on

your plan

%

Total 7.57 7.81 7.72 7.35 7.26

AGE

18-34 7.58 7.85 7.51 7.10 7.33

35-54 7.38 7.59 7.43 7.19 7.01

55+ 7.76 8.01 8.15 7.69 7.47

(Base: All With Private Health Insurance - 424)

- 18 -

5.5 Key Drivers for Taking out PHI Amongst the key drivers for having PHI are the „cost of medical treatment/accommodation‟ and the perceived inadequacy of public services, another significant reason is the fact that it is offered with employment. The reasons given for having health insurance have declined notably this year suggesting that people are finding it more difficult to justify the expense than previously. Chart 5.5.1

- 19 -

There are some discernable differences between age groups in terms of reasons for taking out PHI. For example, „inadequate public services‟ and „cost of treatment/accommodation‟ are significantly more likely to motivate the over 55‟s compared to younger age groups, with 33% opting for each of these as a reason – which is at least 10 points in excess of younger policyholders on each of these primary drivers. No doubt the higher likelihood of requiring healthcare services amongst older age groups underpins these attitudes. In contrast, those under 55 are much more likely to say that it is offered with their employment (22% 35-54 vs. 9% 55+). For this group, PHI can be more of a default setting or automatic option and this is as much a reason for having PHI as their fears of the state of public services or the price of private care. Chart 5.5.2

The other default reason for having PHI is „my parents included me on their policy‟ – this remains the primary reason for having PHI of the 18-34 age cohort – 5 points ahead of being offered it by their employment. However, as this group ages and „fall off‟ parental policies, new motivations for taking out PHI will have to be found to keep them within the system. When asked to rank the importance of the various benefits of PHI, „hospital treatment as a private patient under a consultant‟ remains most people‟s key priority and they rank it well ahead of other benefits such as out- patient care, quality of accommodation or refund of GP fees. These priorities have not changed over the past four years and are clear indicators of patient motivation in seeking to be covered by PHI.

Reasons For Having Private Health Insurance by Age

AnyReason

%

(Base: All With Private Health Insurance - 424)

Age

2009%

18-34%

35-54%

55+%

42 14 23 33

45 17 21 33

26 4 12 19

17 9 13 6

15 23 22 9

20 9 10 20

11 3 7 13

9 28 2 1

5 6 7 5

5 3 7 4

12 7 10 10

24

24

13

9

17

13

8

8

6

5

10

Inadequate standard of public services

Cost of medial treatment/accommodation is very high

Lack of access to public services

Have (or plan to have) children

Offered with employment (fully/partially paid by employer)

I can afford it

My spouse/partner recommended it

My parents included me on their policy

Offered with employment (paid for by the employee)

Friend recommended it

Other

- 20 -

6. Those Without Health Insurance 6.1 Incidence of Being Covered In The Past Twenty percent of those without PHI have been covered at some point in the past; this is up from 15% in 2009 and shows the accelerated rate of dropping PHI in recent years. Amongst those who were previously covered the average number of years holding a policy was 11 years and the largest number (37%), held a policy for just 1-5 years. Chart 6.1.1

- 21 -

6.2 Reasons for No Longer Having PHI By far the predominant reason for no longer having PHI is cost – more than 4 in 10 of those who have dropped a policy have done so for that reason. The other main reasons are also based on economic decisions – i.e. „I lost my job and had to cancel it‟ – 16% and „no longer provided through work‟ – 11%. No longer being covered by parents insurance remains a significant reason as well – this is more of a default option than one based on a proactive decision, but nevertheless illustrates the issue of falling off parental PHI policies. Notable this year is the decline in the number saying they have a medical card as the reason for dropping health insurance – suggesting that this is seen as less of a fallback position for people. Chart 6.2.1

- 22 -

6.3 Drivers to Take Out PHI Again The drivers for returning to PHI are similarly economic: 36% say „If I had more money‟, although this is down somewhat from the height of the recession in 2009 when 43% gave this response. As in 2009 17% say they will never take out PHI again – but this is half the number who gave that response in 2007. Chart 6.3.1

2009%

43

26

17

14

11

9

7

6

1

1

1

1

0

17

7

Drivers To Take Out Private

Health Insurance Again(Base: All Who Were Previously Covered By PHI – 126)

36

16

9

7

9

11

3

4

3

2

4

1

2

17

6

%

If I had more money

If premiums were reduced/if it were cheaper

If I was offered through my employment

If public health servicesdeteriorate

If I have (plan to have)children

If higher premiums were introduced for people who join later

If a family member got sick

If my spouse/partner takes it out

Other

*If I become employed

If the level of Private Health Insurance coverage improved

If I got sick

If I get married

Nothing/I will never get Private Health Insurance again

When I get older

27

22

4

4

5

17

6

4

5

2

3

2

1

20

3

Factors that Encourage Those

Never Had PHI to Get it

2009%

36

24

9

6

12

15

12

5

2

8

5

2

2

17

4

%

(Base: All Who Have Never Held PHI – 450)

- 23 -

6.4 Reasons for Never Having PHI and Triggers to Uptake Expense is the main impediment to never having taken out any PHI, it is the reason cited by more than 1 in 2 of those in this cohort – which is unchanged since 2009. The 35-54 age group are the most likely to opt for this reason. Just one in 10 say that they are satisfied with the public health service. Likewise, the main triggers to uptake amongst those who have never had PHI are based largely on ability to pay and also „when I get older‟ – with all of these factors largely in line with previous years.

6.5 Future Intentions for PHI Overall the likelihood to take out PHI in the next few years has risen since 2009 (from 11% to 14%) – perhaps indicating a more optimistic financial outlook overall than that which prevailed at the height of the recession. However, those saying they will never get PHI have hardened in their views, rising from 14% to 22% in two years. There is still a large section of those without PHI who are unsure as to their future intentions.

- 24 -

7. Claim Experience 7.1 Claim Experience Profile The incidence of claiming on PHI has increased from 53% in 2009 to 57% in 2011. Amongst these policy holders who have made a claim, the biggest increase comes from overnight stays – which is up 10 percentage points to 44%. The increase in day patient claims is less pronounced but nonetheless is now in excess of 3 in 10 policy holders. As would be expected, the profile of claims increases with age - ranging from 19% of 18-34 year olds claiming for an overnight stay, to 60% of those over 65 - with a similar pattern albeit at a lower level for day claims. Women are also notably more likely to claim for overnight stay‟s – with childbirth perhaps accounting for much of this gender differential. Chart 7.1.1

- 25 -

Chart 7.1.2

7.3 Satisfaction with Claims Satisfaction with the processing of claims is generally high and has increased for those who have made a claim versus 2009. More than 7 in 10 claimants express themselves as „very satisfied‟ with the process – up 5 percentage points in two years and certainly very high when benchmarked against typical satisfaction rates across other industries.

- 26 -

8. Cost

8.1 Perceived Cost of PHI Those with a policy, on average, perceive premiums to be twice the amount of those not currently covered – at €1688 (however this refers to „you and any others on your policy‟). This rises to €1840 for the over 55‟s and to just over €2000 if 3 children are to be included. Reflecting the reality of premium rises the average price perception amongst those without PHI has increased from €641 in 2009 to €829 in 2011.The under 35‟s stand out for the large numbers who „don‟t know‟ – much of which will be due to being covered by their parents. Chart 8.1.1

Cost of Policy

(Base: All With Private Health Insurance, n=424)

%

2112

2029

1830

23

39

18

15

17

21

17

15 26

2319

8

21

26

20

22 15

23

19

23

22

14

259

6

4

6

6

9

4

82

4

316

36

126

1321 25

6

18-34(n=97)

%

€1001-€1500

€400-€600

€1501-€2000

€2000+

Don’t know

Average

AGE

€1688 €1621 €1561 €1840

35-54(n=171)

%

55+(n=156)

%

€601-€1000

AverageNumber of Children on Policy

0(n=269)

%

1(n=57)

%

2(n=61)

%

3(n=34)

%

€1575 €1937 €1931 €2062

- 27 -

8.2 Premium Increases Attitudes towards premium increases have changed sharply in recent years. Now 1 in 2 PHI holders believe that „increases are inappropriate and are not justified by the costs of treatment and services‟. This pattern is compounded by the fact that fewer than 2 in 10 believe „the increases are appropriate given the costs of treatment and services‟, this is half the number who agreed increases were appropriate in 2009 and far below the 44% who agreed back in 2002. In previous years of the survey, policy holders were quite evenly balanced in their views towards policy increases, this is no longer the case and policy hikes are now facing much greater negative responses. Chart 8.2.1

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9. Switching and Discontinuation 9.1 Incidence of Switching Some 1 in 4 PHI holders have ever switched provider – up sharply on the pattern of previous years and revealing the levels of competition now evident in the marketplace - primarily driven by price. The great majority of these switchers have only switched once (82%) and most of the movement is away from the VHI (72%), with a further 21% coming from Quinn healthcare and only a small number from other providers. Chart 9.1.1

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A further 20% of those who have never switched have considered doing so – up from 13% in 2009. Chart 9.1.2

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9.3 Reasons for Switching The overwhelming reason for switching amongst those who have done so is for cost savings, underlining the primacy of price considerations over issues of cover in determining switching behaviour. Chart 9.3.1

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9.4 Drivers of Switching For Those Who Have Not Done So The factors that would encourage this cohort to switch are quite clear: cost dominates over cover by almost two to one. Price sensitivity has increased this year whilst cover or products as catalysts to switching have fallen back significantly. Switching for cost savings is very much in line with the other evidence of financial motivations underlying most decisions in relation to PHI up-take. Chart 9.4.1

Anyreason2009

%

Anyreason2007

%

42 54

30 36

25 22

19 22

9 7

7 7

6 6

5 6

29 23

Factors Which Would Encourage Switching Private Health

Insurance Provider(Base: All Who Have Never Switched PHI Provider – 318)

47

24

15

13

4

4

5

3

21

45

7

9

5

1

19

3

1

1

Mainreason

%

Anyreason

%

If there was significant cost savings to be made

If the level of cover was better

If premiums of my current insurer increased significantly

If the range of products was better

If comparisons between plans of different insurers were easier

Nothing/would never switch insurer

If I knew more about it

If there were no waiting periods

Other

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9.5 Overall Intentions Consumer caution nationally is reflected in a high level of intention to remain with one‟s existing plan; this has increased to 81% from 68% in 2009. People generally seem happier to stay with what they have and far fewer of them are in the „don‟t know‟ category than two years ago. This would suggest a stabilising of the PHI market especially as fewer intend to downgrade or discontinue. In contrast almost 10% of policy holders said they downgraded their plan in the past two years. Chart 9.5.1

Private Health Insurance: Past Action vs. Future Plans(Base: All With Private Health Insurance - 424)

6 4 5

93 2

81

68

3

4

9

22

77

-7

2011Previous2 years

%

Upgrade the level of plan

Downgrade the level of plan

No change

Discontinue private health insurance

Don’t know

2011Next

12 months%

2009

Plan over next 12 months

%

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9.6 Ease of switching Perceived ease of switching has declined somewhat this year, despite the increased levels of having done so. However, it is still well ahead of levels in 2007 which indicates a longer term perception that switching is an easier option for policy holders, moreover only 10% actually think switching is difficult – which hasn‟t changed over the 4 year period. Chart 9.6.1

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The perceived amount required in savings to encourage switching is €441 – which is a high enough average threshold at some 25% of the current price being paid; it is higher still for over 55‟s at €526. Such high savings demands prior to considering switching may very well contribute to some inertia in the marketplace – rival companies currently have to meet quite high expectations in terms of cost savings before they can win new customers. Chart 9.6.2

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Despite this average threshold, propensity to switch either for financial or benefits gain has increased markedly this year. Fifty percent now say they would switch for financial gain. Not surprisingly, those with dependent children- who probably have the most to gain financially - claim to be the most likely switchers.

Chart 9.6.3

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9.7 Additional Waiting Period One in five policy holders believe they would have to serve an additional waiting period with a new insurer once they have switched, this figure has returned to the level of 2002 and is likely to serve as an impediment to switching amongst a sizeable minority of PHI holders. Slightly more than that (23%) say that they „don‟t know‟ which may also add to policy holder inertia. Chart 9.7.1

Once prompted with the current situation - that a further waiting period is not required - 45% of holders say this would make them more likely to switch, so clarification of this issue is likely to have an impact on PHI customer mobility The fact that this figure has increased by 8 percentage points in two years would further underline this trend.

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9.8 Reasons for Discontinuing Cover In terms of discontinuing cover – the primary reasons are economic- with loss of job or decrease in salary both rising in mentions this year, whilst public health service or cover related factors are mentioned less frequently. Also notable is the fact that the number of holders who say „would never discontinue cover‟ has also decreased from 25% to 19% - further revealing the effect of economic pressure on people‟s prioritising of health cover. The under 55‟s are evidently the most hit by negative economic factors impacting on their propensity to maintain their cover – for example 50% of them say that losing their job would lead them to quit cover and 32% of 35-54 would do so if their pay were cut. Over 55‟s are much more likely to cease cover due to service or cover deterioration on their policies. Policy holders generally divide along age lines as to what would prompt them to end their cover – with younger holders being much more vulnerable to the economic climate generally. Chart 9.8.1

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Chart 9.8.2

Age

18-34%

35-54%

55+%

50 50 12

19 32 20

14 11 30

6 21 24

7 19 20

7 11 15

4 9 14

22 1 -

10 9 5

1 2 5

8 2 6

Other Factors That Would Encourage Discontinuing Cover by Age(Base: All With Private Health Insurance - 424)

If I lost my job

If my salary/wages were reduced

Nothing/would never discontinue cover

If service levels deteriorated

If the level of cover deteriorated

If public services improved

If the range of products were reduced

If my hours were cut

If my parents no longer paid for it

Other

Don’t know

%

36

24

19

18

17

11

10

8

6

3

5

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10. Health Insurance Authority Overall awareness of the HIA is largely unchanged. As might be expected, awareness amongst policy holders is higher – with 42% having a full or some awareness of the HIA. Chart 10.1.1

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Chart 10.1.2

Seven percent of policy holders have now made a complaint to their health insurer – up from 2% in 2009 – probably reflecting the impact of premium increases and changes in cover in the marketplace. Chart 10.1.3

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The percentage of respondents stating that PHI is the most important employment benefit has risen sharply (up to 29% from 18%) whilst pension retains its primary position as the most valued employment benefit. PHI does not alter greatly across age groups, whereas pensions are valued more highly in line with age. The increases in PHI premiums most likely underlie its increased recognition as a benefit and may well see it rise further in perceived value by employees. Chart 10.1.4

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Section 2: Employer Survey

41111027/DF/JMM/SD

- 43 -

Chart A

Chart B

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Chart C

Chart D

- 45 -

Chart E

Chart F

- 46 -

Chart G

Chart H

- 47 -

Chart I