Competition in the Irish Private Health Insurance Market

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TABLE OF FIGURES Figure 1: Long-term PHI open-enrolment trend p.27 Figure 2: Annual Change in PHI membership, 1973-2005 p.28 Figure 3: PHI Membership, 1973-2006 p.32 Figure 4: PHI Market Share, 1996-2006 p.33 Figure 5: Market Share by Age Groups p.35 Figure 6: PHI Products p.36 Figure 7: Key features of Related Health Insurance Products p.44 Table 1: Annual Change in Membership Numbers by Insurer and in the Total Market between 2002 and 2005 p.34 Table 2: Most Popular PHI Plans and Premiums p.37 Table 3: Vhi Healthcare, BUPA Ireland and VIVAS Health Annual Price Increases p.39 Table 4: Regulation of PHI Firms p.52 Table 5: Distribution of PHI “Switchers” by age cohort p.90 Table 6: An Analytical Framework for Buyer Power p.113 Table 7: Vhi Healthcare Financial Results 2002-2006 p.130 5
EXECUTIVE SUMMARY AND RECOMMENDATIONS E 1. E 2. The Irish private health insurance market is community rated. The community rating system is supported by regulations concerning lifetime cover, open enrolment, minimum benefit and risk equalisation. These regulations are necessary for the maintenance of a community rated market. While these regulations also impact on competition, the impact is fair and proportionate and the regulations facilitate competition between insurers. Nevertheless, the Irish market is highly concentrated and there are a number of measures recommended in this report that should be taken in order to benefit consumers by encouraging greater competition in the market. The Minister for Health and Children requested the Health Insurance Authority (the Authority) and the Competition Authority to report jointly on further measures to encourage competition in the private health insurance (PHI) market. Terms of Reference were agreed in March 2006 and a public consultation process was conducted in April. Work on the joint study was in its final stages when the Competition Authority notified the Health Insurance Authority on 18th December 2006 that it did not propose to submit a report jointly with the Health Insurance Authority but instead intended to submit a separate report to the Minister. As a result the Authority has completed a report on its own based on the Terms of Reference drafted in accordance with the Minister’s request. The recommendations of the Authority are set out below. Market Description and Definition E 3. E 4. Chapter 2 describes the Irish private health insurance market. The take-up of private health insurance (PHI) has grown steadily over the years and the coverage of PHI has now reached 51% of the population (48% for the three open enrolment insurers). By international standards, this is a high proportion for voluntary health insurance. Economic research has shown that the important determinants of demand for private health insurance in Ireland are the existence of waiting lists for elective treatment in the public hospital system and perceptions among the public of better care being available for private patients, the long established nature of voluntary health insurance in Ireland, and the community rated nature of the market. Growth in real incomes may also have been a significant driver of demand. This factor is additional to the rapid growth in the labour force and the population in the last ten years, which has resulted in corresponding growth in the demand for health insurance. In the absence of risk equalisation payments, insurers with younger age profiles have a significant regulatory advantage over insurers with older age profiles. This advantage has facilitated BUPA Ireland and VIVAS Health in charging significantly lower premiums than Vhi Healthcare. Since competition was first introduced in 1997, the market share of Vhi Healthcare has declined steadily and as at September, 2006 was 75%. (BUPA Ireland had 22% and VIVAS Health 3%). Vhi Healthcare’s market share has declined at a rate of around 2.5 percentage points per annum. 6
Page 1 and 2: A Report to the Minister for Health
Page 3 and 4: CONTENTS TABLE OF FIGURES _________
Page 5: CONSUMER ATTITUDES TO SWITCHING ___
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 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
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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
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18-24 9% 13% 25-34 34% 19% 35-44 31
Page 93 and 94:
6.24 The provision of renewal notic
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The HIA publishes on its website a
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Recommendation 10 Following consult
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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
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8. CONCENTRATION AND MARKET POWER I
Page 121 and 122:
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
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elevant regulatory requirements, ex
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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
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
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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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