Competition in the Irish Private Health Insurance Market

eal incomes is also highly correlated in the medium and long term
with the proportion of the labour force working in the services sector
as well as the proportion working in the professional occupation class.
Statistical evidence shows that there is a clear correlation between
growth in demand for health insurance and GNP growth. 15
2.32 It is recognised that, where the main system for hospital care is a
public health system, then access to and the quality of that public
health system are determinants of PHI demand. There is also general
agreement that “perceptions of the quality of the public system” have
an influence on the demand for health insurance in Ireland. 16
2.33 It is clear from various research works on the demand for health
insurance and the results of consumer surveys commissioned by the
Authority that both the public healthcare system and the price of PHI
are substantial determinants of demand for PHI in Ireland. 17
2.34 In the time series for private health insurance, two distinct periods can
be distinguished; 1982 to 1993 and 1994 to date. In the first,
economic growth was weak and population growth was non-existent or
quite low. In the second period, economic growth has been either
strong or exceptional compared to both Irish historical and
international comparisons and similarly for population growth.
2.35 One noticeable feature of the series is the growth in numbers insured
in the 1980 to 1983 period and again in the two year period 1988 and
1989. The latter period was one of falling population but rising PHI
demand. In 1987, statutory charges were introduced for both
outpatient and inpatient treatment in all public hospitals, except for
medical card holders. At the request of the Government, Vhi
Healthcare introduced a new low cost Plan to cover these charges 18 ,
which accounted for most of the increase in PHI demand in 1988.
2.36 The trend of demand for PHI in the last five years is distinctly upwards
even though the economic growth rate, although still high, has been
below the rate experienced in the late 1990s and the price trend for
PHI has continued to rise at three times the rate of general consumer
price inflation.
2.37 A possible future negative effect on the demand for PHI is the recent
reduction 19 in waiting lists for elective treatment in the public hospital
system that has been brought about by the introduction and operation
of the National Treatment Purchase Fund. 20
2.38 The current main trends affecting the total cost of insurance claims
appear likely to continue. On the increasing side, there is the high rate
15 Nolan and Wiley (2000).
16 See, for instance, Watson, D and Williams, J (2001) “Perceptions of the Quality of Health Care in the
public and private sectors in Ireland”, ESRI and the Amarach (2003) and Insight (2005) health
insurance consumer surveys conducted on behalf of the Authority.
17 Nolan and Wiley (2000), Health Insurance Authority consumer surveys, 2003, 2005.
18 Plan P offered insurance cover for the cost of a public bed in a public hospital.
19 For instance, a survey of waiting times in the public and private systems shows that the difference
has narrowed and in some cases has been eliminated (Sunday Business Post 30 July 2006).
20 The NTPF was established in April 2002. The NTPF was set up initially to deal with adults waiting a
year or longer for an operation and children waiting six months or more for an operation. Data that
was released by the NTPF in June 2006 showed that waiting times for most common procedures had
been reduced for adults and children to two to five months on average.
29