Competition in the Irish Private Health Insurance Market

114. Private insurers have not implemented significant measures to enhance the
cost-effectiveness of care in a majority of OECD countries, ….
116. Insurers face few incentives to manage care, especially for high-risk and
high-cost cases, because their exposure to risk and cost is generally limited in
countries where PHI does not have a primary role, or where it has a minor role in
financing more costly care. Management of care – and its cost-effectiveness – is
not a priority for insurers in many OECD countries.
117. Furthermore, incentives to manage care are challenged by some regulatory
instruments. Mandatory or voluntary pooling, or “risk-equalisation”
arrangements, can help spread the cost of caring for less healthy populations in
primary PHI markets (as in the Netherlands) as well as other markets (e.g.
duplicate PHI in Australia76). They have been introduced in order to counter any
risk selection by insurers in these markets. Yet they carry trade-offs. While they
promote equitable risk pooling across insurers, they do not encourage insurers to
manage care efficiently if they compensate inefficient insurers for their higher
costs. Some OECD countries are seeking to refine these arrangements as part of
an ongoing effort to strike an improved balance between these two objectives.
However, in addition to technical challenges, the development of such systems
also entails policy choices about the priority to be given to the goals of promoting
efficient care management versus the need to compensate insurers for their
different risk profiles.
120. Better regulatory safeguards and improved information disclosure are also
needed to enhance fair competition in a PHI market because of market
imperfections such as information asymmetry and insurers’ incentives to select
risks. Individuals need….
“Regulation can promote access to PHI”
123. OECD countries have utilised a range of regulatory tools to promote access
to PHI coverage across population groups, particularly for those with higher
anticipated health costs. PHI markets without such requirements or targeted
interventions often present access problems for high-risk individuals, as earlier
experiences in the Netherlands and the United States have indicated. Lack of
access…
124. Issuance requirements are one primary tool to improve access to PHI
coverage. Several countries, including Germany, the Netherlands and some US
states, have required insurers to issue at least one standard package to all
applicants. One….
126. First, there are market-wide restrictions on insurers’ ability to consider
health status when calculating premium rates. These can range from prohibitions
on the consideration of risk factors, to restrictions on their use. These
standards….
127. Ireland and Australia, and many US states, in their small group markets,
have accompanied these rating reforms with risk-equalisation schemes which
seek to compensate insurers covering a higher risk population. These schemes
can also help promote fair competition among insurers. Phasing in the
implementation of rating reforms over time, rather than implementation in a
single step, may also help avoid market instability and dramatic shifts of covered
individuals between insurers or in and out of insurance. New York and Vermont
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