Competition in the Irish Private Health Insurance Market

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Implications of the Withdrawal of BUPA Ireland 1.10 On the 14th December last BUPA Ireland announced that it was commencing its withdrawal from the Irish market. BUPA Ireland ceased to sell new policies and announced that it will not renew contracts from February, 2007. In a statement issued on 10 January, 2007 BUPA stated that “it wishes to retain the flexibility to re-enter the Irish market should the situation change.” 1.11 In January, 2007, it was announced that AXA are in discussions with the Government concerning its possible entry into the Irish market. AXA approached BUPA Ireland in order to discuss the purchase of the BUPA business but BUPA declined to enter into talks with AXA. The Minister also stated that another company had contacted her and said that it would be interested in purchasing the BUPA Ireland business. 1.12 The withdrawal of BUPA Ireland from the market, the entry of AXA or another new entrant into the market or the purchase by AXA or another body of the BUPA Ireland business could each significantly affect market dynamics and there is a significant amount of uncertainty in relation to these issues. 1.13 The detailed analysis in this Report was prepared prior to BUPA Ireland’s announced departure. The impact of its departure on this analysis has been assessed at a high level throughout the document. 1.14 If BUPA Ireland does not sell its business as a going concern or a new entrant does not enter the market, BUPA Ireland’s health insurance business will be taken up by the remaining two open enrolment health insurers, Vhi Healthcare and VIVAS Health, to the extent that it does not lapse. 1.15 In this scenario Vhi Healthcare is likely to increase its market share. Furthermore, the competitive pressure on Vhi Healthcare would reduce. Vhi Healthcare will no longer receive risk equalisation payments in the order of €35m per annum. For the next few years, risk equalisation payments from VIVAS Health are likely to be a fraction of the previously projected risk equalisation payments from BUPA Ireland. However, Vhi Healthcare will increase its customer base and improve the risk profile of its business. Vhi Healthcare may review its pricing in the light of these factors. 1.16 The withdrawal of BUPA Ireland is likely to have a dramatic effect on VIVAS Health’s market share and may well lead it to reviewing its marketing and pricing strategy. VIVAS Health will experience a substantial benefit in terms of economies of scale. It is quite possible that it will also experience a major change in its mix of customers by age, sex and health status, which would have an effect on its profitability. VIVAS Health will make its first risk equalisation payment in the second half of 2007 and make full payments in the second half of 2008. Its risk equalisation payments are likely to increase significantly as a result of BUPA Ireland’s departure. 1.17 If a new entrant purchases BUPA Ireland’s business then competition may not be significantly affected by its withdrawal. Also, the effect of the withdrawal of BUPA Ireland from the market would be mitigated if 19
other insurers were to enter the market, even if they do not purchase the BUPA Ireland business. 20
Page 1 and 2: A Report to the Minister for Health
Page 3 and 4: CONTENTS TABLE OF FIGURES _________
Page 5 and 6: CONSUMER ATTITUDES TO SWITCHING ___
Page 7 and 8: EXECUTIVE SUMMARY AND RECOMMENDATIO
Page 9 and 10: As a result it does not have to sat
Page 11 and 12: Recommendation 7 The Minister for H
Page 13 and 14: indicates that consumers of PHI hav
Page 15 and 16: Recommendation 13 The Minister for
Page 17 and 18: is quite unclear, so far as the Aut
Page 19: 1.4 For the next number of months t
Page 23 and 24: 2.6 Private health insurance (PHI)
Page 25 and 26: 2.17 Open enrolment and lifetime co
Page 27 and 28: • 2001: The Health Insurance Auth
Page 29 and 30: Figure 2: Annual Change in PHI memb
Page 31 and 32: of medical inflation and the higher
Page 33 and 34: VIVAS Health is rising steadily. In
Page 35 and 36: • Table 1 below shows the annual
Page 37 and 38: Figure 6: PHI Products BUPA Ireland
Page 39 and 40: • Work-based group schemes where
Page 41 and 42: from year to year and also during t
Page 43 and 44: 3. DEFINING THE PRIVATE HEALTH INSU
Page 45 and 46: Figure 7: Key features of Related H
Page 47 and 48: 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 and 102:
Regulations were established to aff
Page 103 and 104:
transferred and the amounts require
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
Page 153 and 154:
Survey Respondent factors promoting
Page 155 and 156:
APPENDIX 5 OECD Review of PHI The O
Page 157 and 158:
not-for-profit insurers has posed c
Page 159 and 160:
114. Private insurers have not impl
Page 161 and 162:
APPENDIX 6 List of Submissions The
Page 163 and 164:
Understanding and Comparing Private
Page 165 and 166:
Benefits Outpatient Cover Cover for
Page 167 and 168:
Dobson, P., M. Waterson and A. Chu,
Page 169:
Vhi Healthcare (2005), Annual Repor
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Competition in the Irish Private Health Insurance Market

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