Competition in the Irish Private Health Insurance Market

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Recommendation 2 In the context of the commencement of risk equalisation payments, Vhi Healthcare should be required to satisfy the relevant prudential solvency requirements as soon as is feasible. The proposed six-year timeframe allowed for Vhi Healthcare to attain the necessary level of reserves should be reviewed with a view to shortening it. Consideration should be given to methods of raising capital other than through the accumulation of surplus. Action By Minister for Health and Children Recommendation 3 Vhi Healthcare should be subject to prudential regulation in its capacity as a PHI undertaking by the Financial Regulator. Vhi Healthcare’s exemptions from the First and Third EU Non-Life Insurance Directives should be abolished. The Minister for Health and Children should seek the removal of these exemptions by the institutions of the EU once Vhi Healthcare is in a position to receive authorisation as an insurer. Action By Minister for Health and Children Recommendation 4 The requirement for Ministerial approval for Vhi Healthcare premium increases under S.3 of the Voluntary Health Insurance (Amendment) Act, 1996 should be removed, once Vhi Healthcare’s exemptions from the Non-Life Insurance Directives are removed. At that stage, consideration should be given to whether it is appropriate to continue price regulation by an independent regulatory body. Action By Minister for Health and Children The Health Insurance Acts 4.39 The Health Insurance Acts (1994 to 2003) and associated regulations legislate for community rating, open enrolment, lifetime cover, minimum benefit and risk equalisation, all of which were described in Chapter 2. They also specify the requirements and process for registration of private health insurance firms and set out the functions of The Health Insurance Authority. Registration of Private Health Insurance Firms 4.40 The registration process for a health insurer is quite straightforward. Any insurance company that is authorised by the Financial Regulator or a counterpart regulator in another EU member state to provide health insurance is entitled to be entered on the register of health insurers. A registered health insurer is obliged to ensure that its insurance products and processes comply with health insurance legislation. This obligation applies equally to all registered health insurers whatever their EU home state for insurance regulation purposes. 57
4.41 In the regulatory approval process, the main substantive issue is that an amount of time and effort may be required to ensure that the proposed products and processes of a new entrant conform to the health insurance legislation. In accordance with its functions, The Health Insurance Authority monitors the operation of the Acts in this regard and maintains the Register of private health insurers. 4.42 All insurers are treated equally under the health insurance legislation. Vhi Healthcare and BUPA Ireland’s participation in the market predated the establishment of the Authority. However, their products were reviewed by the Authority after it was established for compliance with the legislation. Role of the Health Insurance Authority 4.43 As part of the joint consultation process, submissions were invited on “duties that could be assigned to the Health Insurance Authority under existing legislative provisions and additional functions that might possibly be assigned to The Health Insurance Authority.” A number of respondents made suggestions as to the role and structure of the Health Insurance Authority. 4.44 Four respondents suggested either that the Authority should be abolished and its functions taken over by the Financial Regulator, or that the Authority be subsumed into the Financial Regulator. Two main justifications for this course of action were proposed: • Reduce the regulatory burden on PHI firms • End the Minister for Health and Children’s dual role as the responsible Minister for both Vhi Healthcare and the Authority. Reduce the regulatory burden on PHI firms 4.45 A number of submissions stated that the existence of two regulators (the Health Insurance Authority and the Financial Regulator) in the PHI industry was needlessly onerous and led to increased costs of compliance. It was argued that a single regulator for PHI would reduce compliance costs and facilitate market entry. 4.46 The regulatory burden on insurers should be no greater than is necessary. PHI firms (apart from Vhi Healthcare) are subject to regulation by the Financial Regulator in relation to corporate governance, prudential and solvency requirements, and customer care. PHI firms are also required to comply with the Health Insurance Acts and associated Regulations. Compliance with these Acts and Regulations is monitored by the Health Insurance Authority. 4.47 A single regulator would imply a single regulatory authorisation process and ongoing regulation by just one entity. However, the evidence would not suggest that there are extra costs being incurred by registered entities by virtue of the existence of two regulators in this sector. In particular, the process of registering a health insurance undertaking is a very simple and straightforward one and insurers would be required to comply with the requirements of both the health insurance and other insurance legislation regardless of whether there 58
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 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: obliges Vhi Healthcare to seek appr
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
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to restrict individual choice of pr
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8. CONCENTRATION AND MARKET POWER I
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gives us some indication of the com
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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
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• There is limited buyer power fr
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Breaking up Vhi Healthcare would di
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expertise and other staff resources
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APPENDIX 1 Other forms of health re
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APPENDIX 2 Report of UK Government
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Australia Ireland Public hospital U
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Australia Ireland Risk equalisation
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1.22 The Irish data is not split at
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Conclusion of normal claim payments
Page 151 and 152:
APPENDIX 3 Consumer Attitudes to Sw
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Survey Respondent factors promoting
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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
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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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