equalisation were identified." (WP, 36) The White Paper states that " any loading for smokers
would be unlikely to impact on the behaviour of insured persons or the cost of claims which
may be attributable to smoking induced illnesses. In addition, the Government are concerned
that to penalise any specific lifestyle factor could lead to demands for other risk factors to be
taken into account thereby undermining community rating."
Open enrolment is currently subject to moratoria on payment of benefits for specified
periods following first enrolment as well as in respect of claims arising from a condition that
existed prior to enroling. The general moratorium or waiting period is currently 26 weeks. In
the case of maternity and a person over 55 at the age of enrolment the initial waiting period is
52 weeks. The White Paper recommends extending the initial waiting period to 104 weeks
for persons aged 65 or over. The permitted waiting period is not more than 5, 7 or 10 years
on payment of benefit for treatment arising from a pre-existing condition where the age of
enrolment was respectively under 55, between 55 and 60 and between 60 and 65. The White
Paper extended the entitlement to cover under open enrolment provisions to persons aged 65
and over with a maximum waiting time period of 2 years and a waiting period in respect of
pre-existing conditions at the existing maximum of ten years.
Lifetime cover provides that as insured persons gets older, their health deteriorates or
they sustain a serious injury their health insurance cover may not be terminated by the insurer.
In addition there is a prescribed minimum benefit of 100 days in-patient treatment in a
private psychiatric hospital during a calendar year. The White Paper notes that one insurer
provides for cover up to 180 days.
The remaining part of the policy environment for commercial insurance in the White
Paper is loss compensation or risk equalisation. The White Paper defines risk equalisation as
"a process which aims to equitably neutralise differences in health insurance costs that arise
due to variations in risk profiles. This results in cash transfers from insurers with healthier
than average risk profiles to those with less favourable risk profiles." (WP, 41).
Given the other parameters within which the health insurance market is required to
operate why is the additional constraint or safeguard required? The White Paper states that "
without risk equalisation, each health insurer would have a strong incentive to target low-risk
individuals (preferred risk selection) so as to be able to charge a lower community rate (or
take a higher profit margin) than its competitors. Even with compulsory open enrolment,
health insurers could seek to achieve a better risk profile by, for example, selective marketing
techniques, targeting group occupational schemes, benefit design, or selective quality of
service" (WP, 41).