More competition for health insurers

There are now well over half a million more people insured than there were when BUPA Ireland entered the market back in 1997: the proportion of the population covered by health insurance has risen from 36 per cent to over 49 per cent. That's over half a million people who are not relying solely on the already over-stretched health services for their health care needs. Over 150,000 of these have joined Vhi Healthcare, a company whose profits have soared since the advent of competition, while its reserves have risen nearly four fold to over €330m in February 2004. This has turned a semi-state company of marginal profitability, which nearly went under in the 1980s, into a vibrant and healthy competitor, even though it continues to enjoy an exemption from EU solvency requirements.

BUPA Ireland now employs well over 200 people in Fermoy in north Cork. This has been achieved without Government grants or assistance of any kind. It was, and still is, underpinned by the reserves of our parent business – itself a not for profit provident society – and the investment it was prepared to make in Ireland. It's a pity that in the current debate about risk equalisation, we have seen the emergence of what the Tánaiste has described as "Anglophobia", and which she finds as regrettable as I do. I thought we had outgrown those kinds of attitudes in Ireland.

Individual members of all health insurance companies have also benefited from competition. We introduced cover on all our schemes for complex procedures, such as heart surgeries, which was previously only available on the most expensive schemes. The previously widespread practice of patients receiving balance bills when they left hospital has been eliminated. The amount and breadth of cover for maternity services has been greatly expanded. New treatments and services such as complimentary medicine and health screening are now covered. Care for the elderly has been expanded with cover for more nursing homes; full cover cancer care packages, new treatments for Parkinsons disease and much more.

In a competitive market these benefit improvements have been picked up by all insurers and new market standards have been set, which encompass significant improvements in customer service.

The level of price increase in the post competition period is, comparatively, much lower than during the pre-competition era when compared to the increases in public hospital charges over the same periods. (Public hospital charges are one of the principle drivers of insurers' costs). This price moderation has happened despite the huge increases in benefits and the annual reviews that now happen in the market to keep pace with innovation and inflation. In driving price competition, we introduced free cover from their date of birth to policy renewal date for newborns as well as introducing student rates.

The continued threat of risk equalisation puts all of this at risk as well as limiting the prospects for future growth in competition. The fact that risk equalisation deters new market entrants has never been questioned and no benefits for its introduction have ever been put forward. Its absence does not threaten community rating as we understand it in this country. It is illegal to sell a product which is not community rated, so the only threat can come from a change in the law, which has never been suggested.

No pricing benefit has ever been suggested and Vhi Healthcare have said prices would not reduce if risk equalisation were introduced. In fact deputy Charlie O'Connor can be quoted from the Health Committee meeting of 23 June as saying that: "in its report to the Minister the HIA stated that it agrees that risk equalisation is likely to raise average premiums".

So, the absurdity of asking a company with a 20 per cent market share to subsidise a dominant competitor with a market share of nearly 80 per cent to the tune of €45m annually, remains. In these circumstances, where the subsidy is well over twice our annual profits, to state that our business would become unviable is not a threat, it is simply to state the obvious.

What is required is more competition, not less. Serious consideration must be given to the break up of Vhi Healthcare to create a more dynamic market. In the meantime we at BUPA Ireland will continue to welcome people of all ages, who can avail of our community rated products and who can switch to us without penalty. Competition has given Irish consumers greater choice; those who choose to remain with Vhi are exercising their choice to do so.

SEAN MURRAY

Marketing Director

BUPA Ireland