Committee Reports::Report No. 01 - Voluntary Health Insurance Board::19 January, 1994::Appendix

Appendix I

Glossary of Terms

Adverse Selection

Tendency amongst people who are most exposed to insurable risks to take out insurance against these risks. An example would be a person who, recognising that the chances of incurring a serious illness increases with age, decides to join the VHI on reaching his fifties.



Community Rating

Fixing insurance premiums by reference to the average amount of claims paid to all the insured. In the case of health insurance that means dividing the total cost of claims by the total number of VHI members. It is to be distinguished from “experience rating”.



Experience Rating

Fixing insurance premiums for any class of insured by reference to the claims paid out to that class. In the case of health insurance this might be done by charging lower premiums to those less likely to claim such as the young, those with a good medical history, members of certain socio-economic groups, and so on, while higher premiums are charged to those outside these categories.



Moral Hazard

Tendency of an insured person to incur the contingency insured against or at least to be careless about avoiding it. This is more likely to happen in the case of, say, household contents insurance, or credit insurance than health insurance. But it is possible, for example, that some people may persist with an unhealthy lifestyle in the belief that with health insurance effective medical intervention will be readily available to make good the adverse consequences.



Category I

Under the Public Health Acts, those entitled to free treatment in a public hospital including the cost of accommodation, ancillaries (X rays, blood transfusions, etc) and doctors’ fees provided they do not opt for accommodation in a private or semi private bed and they do not opt to be treated by a specific consultant. This category also is entitled to free consultation with doctors and free drugs under the General Medical Scheme. Category I constitute about 40% of the population and are chosen on a means-tested basis.



Category II

Under the Public Health Acts, those entitled to the same as Category I as regards hospital treatment subject to a daily levy of £20 up to a limit of £200 in a twelve month period. Unlike Category I, Category II are not entitled to services under the General Medical Scheme. Up to 1991, this Category accounted for about 45% of the population and were selected by reference to earnings subject to PRSI. However, since 1991, Category III has been abolished and Category II encompasses all those not in Category I.



Category III

Up to 1991, this Category had the same hospital entitlements as Category II except that they were liable for consultants’ fees. About 15% of the population were included in this Category.



Hospital Maintenance

The cost of accommodation, ancillaries, services of nurses and non-consulting professional staff (e.g. junior doctors) in a hospital. In other words, all costs except those of consultants.



Total Indemnity

The concept of insuring against all the costs of an episode of illness. At the moment VHI members have total indemnity for hospital maintenance (provided they stay within the limits specified in the Plan to which they are subscribing). But some consultants charge higher fees for some procedures than the VHI is willing to reimburse. In the case of these consultants’ fees there is therefore only partial indemnity and they “balance bill” their clients.



Balance Billing

Doctors who charge higher fees than those which the VHI will reimburse present their patients with a bill for the difference. This is referred to as balance billing.




Private beds in public hospitals. If patients opt for treatment in paybeds they are liable for charges for maintenance and consultants’ fees. There are 2,360 paybeds in public hospitals at the moment.



Open Enrolment

The practice of accepting all persons who apply for membership without discrimination. The VHI applies few preconditions and thus has virtually open enrolment (e.g. pre-existing conditions are not covered and older age groups have a waiting period before being allowed to claim. Those over 65 are not allowed to join.).



Lifetime Membership

The practice of permitting people to remain members throughout their lifetimes. By contrast, in other countries, some health insurance schemes operated by employers are confined to the period of the insured person’s employment with the company.