Competition in the Irish Private Health Insurance Market

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average claims provide them with a regulatory advantage. This regulatory advantage could enable them to make greater profits, to price below Vhi Healthcare or to do both. The commencement of risk equalisation payments reduces this advantage. 6.62 The commencement of risk equalisation reduces the competitive pressure on Vhi Healthcare, and gives it a measure of additional market power. On the other hand, it increases the competitive pressure on insurers with more favourable risk profiles. In this context, it is worth noting that the existence of a community rated market without risk equalisation has facilitated BUPA Ireland in pricing significantly below Vhi Healthcare and at the same time achieving a surplus that was (as a percentage of premium) far in excess of that achieved by other health insurers, whether in Ireland or abroad, including BUPA Ireland’s parent in the UK. 6.63 The competitive environment would be further affected by the adoption of the recommendations in this report, many of which are aimed at removing certain regulatory advantages currently held by Vhi Healthcare. The adoption of these recommendations would reduce the effect on Vhi Healthcare’s market power of the commencement of risk equalisation payments. Regular Review of RE Scheme 6.64 The competitive constraint imposed on existing insurers is lowered by the commencement of risk equalisation. In view of this and the impact that the commencement of risk equalisation is expected to have on competition between existing insurers, it is important that the operation of the Risk Equalisation Scheme be monitored carefully and that continued consideration be given to the effects that the Scheme is having on competition in the private health insurance market. In this context, it is noted that the Authority will make three reports to the Minister for Health and Children each year in relation to risk equalisation and that one of these reports (the “Annual Report”) will incorporate an evaluation of the effect of the Scheme on the interests of consumers. The report would thus include an evaluation of the effect of the Scheme on the facilitation of competition in the market. This Annual Report will be laid before both Houses of the Oireachtas. 6.65 In evaluating the effect of the Scheme on the interests of consumers and advising the Minister in relation to the Scheme, the Authority will remain open to suggestions from all quarters in relation to how the Scheme may be amended in the interests of consumers and will keep the form of the Scheme under review. 6.66 In particular, reference has been made to the impact of the possible sharing of efficiencies, random fluctuation and seasonality of payments under the Scheme and the suggestion has been made that a prospective scheme would reduce these effects. Any reduction in the level of random fluctuation/seasonality of payments that would result from moving to a prospective scheme would depend on the precise nature of any prospective scheme. It is possible to devise prospective schemes that result in a lower level of random fluctuation/seasonality and greater predictability of payments. However, such schemes would normally result in greater differences between the amounts being 101
transferred and the amounts required to equalise risks than would be the case under a retrospective scheme. This is not surprising, because a prospective scheme would involve predicting some of the parameters that influence the calculation of transfers in advance and, insofar as these parameters differ from experience, the amount transferred will differ from that which is required. 6.67 Nevertheless the Authority recognises the benefits of avoiding sharing of efficiencies and reduced random fluctuation/seasonality and greater predictability of the payments and the Authority will continue to keep the form of the scheme under review in the context of its statutory functions. 102
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A Report to the Minister for Health
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CONTENTS TABLE OF FIGURES _________
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CONSUMER ATTITUDES TO SWITCHING ___
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EXECUTIVE SUMMARY AND RECOMMENDATIO
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As a result it does not have to sat
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Recommendation 7 The Minister for H
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indicates that consumers of PHI hav
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Recommendation 13 The Minister for
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is quite unclear, so far as the Aut
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1.4 For the next number of months t
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other insurers were to enter the ma
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2.6 Private health insurance (PHI)
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2.17 Open enrolment and lifetime co
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• 2001: The Health Insurance Auth
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Figure 2: Annual Change in PHI memb
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of medical inflation and the higher
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VIVAS Health is rising steadily. In
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• Table 1 below shows the annual
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Figure 6: PHI Products BUPA Ireland
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• Work-based group schemes where
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from year to year and also during t
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3. DEFINING THE PRIVATE HEALTH INSU
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Figure 7: Key features of Related H
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price increase unprofitable by a hy
Page 49 and 50:
4.6 Aspects of the exemption from i
Page 51 and 52: and quarterly management accounts t
Page 53 and 54: Table 4: Regulation of PHI Firms 48
Page 55 and 56: 4.31 This is a positive step. Just
Page 57 and 58: obliges Vhi Healthcare to seek appr
Page 59 and 60: 4.41 In the regulatory approval pro
Page 61 and 62: 4.50 However, the Authority is clea
Page 63 and 64: Unfunded Lifetime Community Rating
Page 65 and 66: President of the Society of Actuari
Page 67 and 68: − The main other deterrent at pre
Page 69 and 70: o The former members of the Advisor
Page 71 and 72: materially affected by any seasonal
Page 73 and 74: It may also be noted that the propo
Page 75 and 76: 4.94 There are 37 health insurers i
Page 77 and 78: Interviews with Possible New Entran
Page 79 and 80: have shown that new sales and switc
Page 81 and 82: not binding on incumbents and no in
Page 83 and 84: 5.33 In this context Vhi Healthcare
Page 85 and 86: 5.44 As the former incumbent monopo
Page 87 and 88: 5.52 Vhi Healthcare’s first mover
Page 89 and 90: • Psychological costs 6.5 Transac
Page 91 and 92: 18-24 9% 13% 25-34 34% 19% 35-44 31
Page 93 and 94: 6.24 The provision of renewal notic
Page 95 and 96: The HIA publishes on its website a
Page 97 and 98: Recommendation 10 Following consult
Page 99 and 100: Recommendation 11 The insurance com
Page 101: Regulations were established to aff
Page 105 and 106: Buyer Power and Concentrated Market
Page 107 and 108: The Supply of Private Medical Facil
Page 109 and 110: VIVAS Health claims that Vhi Health
Page 111 and 112: approval on coverage of facilities
Page 113 and 114: Supplier-Induced Demand 7.36 The Vh
Page 115 and 116: Questions Relevant evidence Irish P
Page 117 and 118: to restrict individual choice of pr
Page 119 and 120: 8. CONCENTRATION AND MARKET POWER I
Page 121 and 122: gives us some indication of the com
Page 123 and 124: wishes to retain the flexibility to
Page 125 and 126: largest price increase that is prof
Page 127 and 128: scheme. Employees may be under the
Page 129 and 130: elevant regulatory requirements, ex
Page 131 and 132: Table 7 Vhi Healthcare Financial Re
Page 133 and 134: • There is limited buyer power fr
Page 135 and 136: Breaking up Vhi Healthcare would di
Page 137 and 138: expertise and other staff resources
Page 139 and 140: APPENDIX 1 Other forms of health re
Page 141 and 142: APPENDIX 2 Report of UK Government
Page 143 and 144: Australia Ireland Public hospital U
Page 145 and 146: Australia Ireland Risk equalisation
Page 147 and 148: 1.22 The Irish data is not split at
Page 149 and 150: Conclusion of normal claim payments
Page 151 and 152: APPENDIX 3 Consumer Attitudes to Sw
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Survey Respondent factors promoting
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APPENDIX 5 OECD Review of PHI The O
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not-for-profit insurers has posed c
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114. Private insurers have not impl
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APPENDIX 6 List of Submissions The
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Understanding and Comparing Private
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Benefits Outpatient Cover Cover for
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Dobson, P., M. Waterson and A. Chu,
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Vhi Healthcare (2005), Annual Repor
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Competition in the Irish Private Health Insurance Market

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