Competition in the Irish Private Health Insurance Market

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to its exemption under Art. 4(c) from the 1973 EU First Non-Life Insurance Directive, Vhi Healthcare is exempt from regulation by the Financial Regulator as an insurance undertaking. This allows it to act on the market in ways that are unavailable to its competitors as regards its corporate governance, structure and prudential obligations. 4.19 Vhi Healthcare is authorised by the Financial Regulator as a multiagency intermediary, and may intermediate in insurance other than PHI underwritten by other firms. It has broker arrangements in place with DeCare Dental and Europ Assistance for the provision of dental insurance and international health plans respectively. Vhi Healthcare may also sell non-insurance products. For example, Vhi Healthcare’s online shop sells products as diverse as foot spas and rugby jerseys. 43 The only solvency requirements which apply to it are those which apply to it by virtue of its capacity as an insurance intermediary. However, its financial affairs are regulated in important respects by the VHI Acts. 4.20 Vhi Healthcare’s health insurance and intermediary businesses fall within the remit of the Financial Services Ombudsman. 4.21 As a statutory body, Vhi Healthcare can only operate in a manner permitted by its governing legislation 44 . For instance, • It is not allowed to establish subsidiary or sister companies, • It is statutorily restricted as regards its financing, • It is only allowed to underwrite health insurance contracts, • Legislation permits Vhi Healthcare only to engage in other health related insurance activities on an agency basis. and • It must notify the Minister of price increases in its health insurance products and the Minister has the power to reject a price increase. 4546 4.22 Under the Voluntary Health Insurance Act 1957, Vhi Healthcare is restricted in terms of the categories of business which it is allowed provide. 47 The Voluntary Health Insurance (Amendment) Act 1996 extended the types of health insurance scheme that Vhi Healthcare could offer. The Voluntary Health Insurance (Amendment) Act 1998 permitted Vhi Healthcare to act as an agent for an international health plan. This allowed it to add medical cover while abroad as an additional benefit to its core PHI product. The Health Insurance (Amendment) Act 2001 allowed Vhi Healthcare to provide health related services, but only with the consent of the Minister. 4.23 The following table, taken from the Financial Regulator’s submission, indicates the variations in regulation of PHI firms: 43 Since Vhi Healthcare is exempted from the EU Non-Life Directives, it is thereby also exempted from the relevant Irish enabling legislation, Art.7(2)(a) of the European Communities (Non-Life Insurance) Framework Regulations, 1994 44 Sources: VHI Act 1957 and Vhi Healthcare documentation. 45 S.2(2) of the Voluntary Health Insurance (Amendment) Act, 1996 46 Since 1996, the Minister has exercised this power once. 47 Section 4 of the Act provides for the provision of “schemes of voluntary health insurance subject to the consent of the Minister in regard to the scope and extent of the benefits”. 51
Table 4: Regulation of PHI Firms 48 Do the Financial Regulator’s Conduct of Business Rules apply to the company? Is the firm required to meet EU insurance capital and solvency requirements? Is the firm required to meet the Financial Regulator’s intermediary solvency requirements? Does the firm require the Financial Regulator’s approval to appoint directors and managers? Vhi Healthcare BUPA Ireland VIVAS Health 49 PHI Business BUPA Ireland intermediary Insurance Intermediary Business BUPA Insurance Ltd (PHI) No Yes Yes Yes Yes No N/A Yes 50 N/A Yes No Yes No Yes N/A No Yes No Yes Yes Health Insurance Business Benefits to Vhi Healthcare of Directive exemptions 4.24 Vhi Healthcare need not divert capital into lower revenue earning areas such as retaining solvency margins or a minimum guarantee fund. Indeed, it can engage in commercial strategies which are not open to other insurers, such as running down reserves in order to keep premium increases at the lowest possible level. 51 According to its 2006 Annual Report, Vhi Healthcare held reserves of €220m, and had a solvency margin level of 23.2%. It aims for a target solvency margin level of 40%. Establishment of associated companies 4.25 The ability to purchase multiple products from a single supplier may be much valued by consumers for a variety of reasons. 52 Vhi Healthcare is not obliged to establish subsidiaries or associated companies for noninsurance activities. Were other PHI firms to provide non-insurance 48 There are separate columns for PHI firms’ insurance undertaking businesses and their intermediary businesses. 49 VIVAS Health does not have a separate insurance intermediary business. 50 The UK Financial Services Authority establishes the capital and solvency standards that BUPA Insurance is required to meet. 51 In its 2005 Annual Report, Vhi Healthcare states at p.9 that it finances the cost of community rating out of its reserves. 52 For example, brand loyalty, perceived lowering of transaction costs, or the ability to use a “one-stop shop” facility. 52
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 and 20: 1.4 For the next number of months t
Page 21 and 22: other insurers were to enter the ma
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 quarterly management accounts t
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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