Competition in the Irish Private Health Insurance Market

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The main other deterrent at present is the non-commercial
status of Vhi Healthcare and the uncertainty over its future
status;
− If uncertainty over the final implementation of risk
equalisation (that is, the establishment of precedents for the
calculation and actual transfer of risk equalisation payments)
and over the status of Vhi Healthcare is resolved in the short
term, the health insurance market in Ireland should still
attract some new entrants, but fewer than if risk equalisation
payments are not implemented;
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There is no satisfactory case for the non-implementation of
risk equalisation payments as long as there is a fundamental
commitment to community rating;
Without risk equalisation payments, the benefits of new entry
are limited in that lower prices and higher profits for insurers
could be achieved for some but older people with health
insurance, less inclined to move between insurers, would lose
from the absence of full risk equalisation;
Losses to elderly people in higher premiums would exactly
offset gains to younger people in lower premiums in an
efficient market, without risk equalisation but with limited
shifting between insurers. Alternatively, younger consumers
might gain less and new entrant insurers gain more in higher
profits, again at the expense of older members of established
insurance schemes;
Only if premium differences encouraged wholesale movement
between insurers at older stages would this be avoided. The
market would achieve risk equalisation. In our view, this will
in practice take a longer, rather than a shorter time,
particularly if new entrant insurers use some of the gains from
a lower risk membership to increase profits rather than
compete aggressively on premiums charged;
We do not accept that community rating can be implemented
by business regulation rules as we regard the recruitment of
younger, lower risk members by new entrants as virtually
inevitable;
The potential sale of Vhi Healthcare, in whole or in part,
represents a significant opportunity for new entrants to the
insurance market. Since existing insurers may face limits on
their purchase of some or all of Vhi Healthcare, a policy of
“wait and see” on Vhi Healthcare is potentially leading to
deferral of entry by some interested in offering health
insurance in Ireland, whether risk equalisation payments take
place or not.
4.81 It can be seen from the foregoing that the consultation process was
the subject of extensive analysis over the last few years. Mr Justice
William McKechnie summarised it as follows: “The consultation process
engaged in by the Harvey group, by the Department of Health who
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