Competition in the Irish Private Health Insurance Market

scheme. Employees may be under the impression that they will be
getting a lower level of benefit from the proposed new group
scheme provider if their group scheme switches from an expensive
Vhi Healthcare plan to a cheaper plan from another provider. Or it
may be the case that employees are happy with their current
insurer and level of cover and do not wish to change providers.
Thus individual members within a group scheme could limit the
potential for countervailing buyer power by resisting any change to
their health insurance employee benefit being provided by Vhi
Healthcare.
• In some cases, employee’s contracts state that they are entitled to
a specific Vhi Healthcare plan as part of the terms and conditions of
employment. This creates obvious difficulties for companies who
may wish to change the provider of their health insurance group
scheme as it would require changing the conditions of the
employees’ contracts.
• Another factor which limits the potential for buyer power by large
employer-paid group schemes is the fact that, apart from the 10%
group scheme discount, members of group schemes are entitled to
the same policies at the same price as individual consumers
because of community rating. Insurers cannot tailor a PHI policy for
a specific group scheme.
Threat of Competition from Potential New Entrants
8.34 An analysis of barriers to entry which exist in a market is an important
issue when looking at market power. The main objective of entry
analysis is to determine whether new entry is likely to prevent or deter
the exercise of market power in a reasonable period of time.
8.35 The level of market power a firm with a very high market share has
depends upon the level of barriers to entry and expansion that apply to
the market.
• Where barriers are low, market share is unlikely to translate into
market power, because the firm will be constrained by the potential
for entry;
• Where barriers are high, the converse applies, with a diminished
entry constraint allowing the exercise of market power.
Without barriers to entry substantial market power will seldom, if ever,
be found.
8.36 A significant barrier to entry into the PHI market is uncertainty
regarding the future regulatory direction of the market, in particular
risk equalisation. This uncertainty makes it more difficult for a potential
new entrant to fully assess the market and determine whether entry
would be profitable. However, it must be noted that BUPA Ireland and
VIVAS Health entered the market. The level of uncertainty reduced
following the Minister’s decision to commence risk equalisation
payments and has reduced further following the conclusion of the
recent High Court case.
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