From May 1, new penalties will apply to those over the age of 34 taking out insurance cover for the first time.

The introduction of lifetime community rating will result in an extra 2% loading on premiums for each year above the age of 34, up to a maximum of 70%.

However, research by consumer network OneBig Switch.ie has found that fewer than one in five (18%) of the targeted 23-34 year olds are likely to take out cover. Just 16% of the 25,000 people surveyed said they would take out a plan as a result of the introduction of the new rules.

OneBigSwitch.ie director of campaigns, Sarah Ryan said the price war was welcome but consumers, especially younger ones, had lost confidence in the health insurance market.

“Although the cheapest plans may be becoming more competitive, consumers are reluctant to spend the money on a system that they believe is unsustainable,” she said.

The survey is based on 25,000 people who signed up with OneBigSwitch.ie for a health insurance campaign.

Over 80% of those who responded said the imposition of lifetime community rating would not encourage them because they could not afford it either way.

“The new policies are a step in the right direction but over 270,000 people have dropped their health insurance since 2008,” she said.

Ms Ryan believes that anyone who could not afford to pay between €500 and €600 for health insurance still might not be able to afford it at €400.

However, almost four in 10 (39%) said they would join up if a health levy was based on Australia’s publicly funded universal health care system.

Ms Ryan said young people in Ireland were not orientated towards health insurance.

Also, many of the people who dropped their health insurance during the recession had not seen a significant change in their disposable income or financial situation.

“Overall, the message we got is loud and clear — there is little or no interest in lifetime community rating.

“I believe we will be sitting here this day next year talking about how it did not work and looking for new ways to get people more engaged with health insurance at a younger age.

“People don’t believe the system is sustainable; they don’t believe it is competitive enough and they don’t believe it is cheap enough. Lifetime community rating as a measure to try and change that is, effectively, falling flat on its face,” she said.

However, Health Minister Leo Varadkar said he expected a “very significant increase” in the number of people signing up for health insurance this year.

There had been an increase in the number of people taking out health insurance during the second half of last year — the first increase since 2008.

Health insurance analyst with www.totalhealthcover.ie, Dermot Goode, said Ireland’s four health insurance providers were rolling a new wave of insurance policies that he described as the “yellow pack” plan.

He warned consumers to approach them with caution as the plans were not comprehensive and might not provide sufficient cover in all circumstances.