Ireland's Risk Equalisation Framework is the Cornerstone of a Fair Private Health Insurance Market

Private health insurance markets left entirely to market forces tend toward one outcome: older and sicker policyholders face prohibitive premiums or are refused cover altogether. Ireland has resisted that trajectory for over two decades through the Health Insurance Authority's Risk Equalisation Scheme. With 2.55 million people now insured and coverage continuing to grow despite cumulative premium increases of up to 40% over two years, the framework is demonstrably functioning as designed.

The HIA merits commendation for actively defending and refining the scheme under considerable pressure. The Authority has absorbed criticism over rising levies, navigated EU state aid constraints, and introduced a High Cost Claims Pool to make redistribution more health-status-sensitive — while keeping the market open, competitive, and growing. The case rests on equity, market stability, and long-run affordability.

In a community rated market, every policyholder pays the same price for the same plan irrespective of age, gender, or medical history. The Risk Equalisation Fund (REF) makes this commercially viable by redistributing funds from lower-risk to higher-risk insurers. HIA chief executive Brian Lee has stated that without the REF, older or less healthy consumers could face significantly higher premiums or be refused cover altogether. The REF has held EU approval as permissible state aid since 2003.

Market stability is the second pillar. The REF redistributes risk across insurers rather than concentrating it, which keeps the competitive landscape viable for newer entrants. Level Health's entry in late 2024 — the first new insurer in years — would be considerably harder to sustain commercially without risk equalisation neutralising the adverse selection risk of attracting a younger, healthier book. The HIA's consumer research confirms that 73% of policyholders support open enrolment and 64% support community rating, suggesting the social contract underpinning the scheme retains strong democratic legitimacy.

The long-run affordability argument is the most counter-intuitive but arguably the most important for a C-suite audience. The April 2026 levy increase brings the advanced adult stamp duty to €517, meaning the REF will account for over one quarter of a standard premium. Critics frame this as an additional cost burden. Without it, group scheme employers would face premiums for an ageing workforce that could escalate far beyond current levels.

Commendation need not preclude improvement. Three enhancements would strengthen the scheme. First, the HIA should publish granular REF claims data by age cohort annually, as health insurance expert Dermot Goode has advocated, to build public understanding of where levy revenue is applied. Second, the Government should secure the 10-year EU approval extension under consideration to replace renewal uncertainty with a stable regulatory horizon. Third, the overcompensation test should be reviewed to ensure its 12% return-on-equity ceiling reflects current capital cost conditions.

As private health insurance markets globally grapple with ageing populations, medical inflation, and the political pressures of affordability, Ireland's risk equalisation model offers a replicable template for solidarity-based regulation. The HIA's consistent stewardship of that model through successive premium cycles and sustained political headwinds deserves recognition as a structural contribution to the long-term health of the Irish market.

(The views expressed by the writer are his/her own and do not necessarily reflect the views or positions of BusinessRiver.)