Competition in the Irish Private Health Insurance Market

4.94 There are 37 health insurers in Australia compared to 3 open market
insurers and 12 restricted undertakings in Ireland. However, in most
Australian states, the top two insurers hold more than half the market
between them. The proportion of the Australian population covered by
private health insurance was 43% in 2005 compared to 51% in
Ireland. Most Australian insurers are mutual non profit organizations.
BUPA operates in the market and received risk equalisation payments
of AUS$22.2m in the year to end June 2005.
4.95 The principles of community rating, open enrolment and lifetime cover
apply in Australia but the detail is different to Ireland. Changes in
premium rates or product rules are subject to Government screening.
4.96 The Australian risk equalisation system applies on a state by state
basis. The scheme splits members between those under and over 65
years rather than into the 16 age and sex groupings that applies in
Ireland. In addition expenditure relating to hospital stays in excess of
35 days are equalised. The claims equalised exclude all out of hospital
care. A fixed ratio is assumed in relation to the average claims cost for
those over and under aged 65.
4.97 The Australian system of risk equalisation has been the subject of
criticism within Australia. Among the main criticisms made of the
Australian Scheme are the following:
- The Scheme only has two age bands (over 65s and under 65s) and
this does not accurately reflect the risk profiles of the various
insurers.
- All costs are equalised under the Australian Scheme instead of
merely equalising age and gender profiles or hospital utilisation
levels. This can lead to some sharing of efficiencies.
Both of these issues are already addressed in the Irish Scheme.
4.98 There is an ongoing process taking place in Australia to amend the
Scheme.
4.99 Appendix 2 sets out a brief comparison of the Irish and Australian
private health insurance systems that has been prepared by the United
Kingdom Government Actuary’s Department at the Authority’s request.
They also applied the Australian formula to the Irish risk equalisation
data making approximations where the Irish data is not in the correct
form to carry out the calculations precisely. Their conclusions were
“that transfers under both systems are similar for the larger companies
but vary more for the smaller companies. Although BUPA Ireland would
have paid about 7.5% less in equalisation payments over the whole
three year period if the Australian system had been used rather than
the Irish one, there are individual periods when the Australian formula
gives a higher transfer than the current Irish Scheme.
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