Competition in the Irish Private Health Insurance Market

all of the private hospitals that Vhi Healthcare does. However, there
are examples of product innovation by Vhi Healthcare’s
competitors, e.g. BUPA’s Essential Plus with excess and Health
Manager Starter products and VIVAS “Nurses” and “Teachers”
plans. It should also be noted that the Minimum Benefit
Regulations constrain product design to a certain extent.
5.39 Vhi Healthcare probably has first-mover brand advantages. Health
insurance arguably has some “experience good” elements, even
though the health insurance legislation should give consumers
considerable comfort as regards each company’s insurance product. If
a tried and trusted supplier of health insurance already exists,
consumers will be less willing to experiment with a new brand.
Uncertainty about a new insurer inclines them to stay with the old and
satisfactory brand that they know. Vhi Healthcare and to a lesser
extent, given its shorter time in the Irish market, BUPA Ireland, appear
to be trusted suppliers of health insurance services in Ireland.
5.40 This was evident in the qualitative assessment undertaken as part of
the 2003 HIA Consumer Survey. In focus groups, BUPA Ireland was
considered ‘innovative, young, vibrant, cheaper and efficient’, although
the fact that it was perceived by respondents not to be an Irish
company was mentioned as a negative aspect. The views of Vhi
Healthcare related to ‘security, familiarity, reliability and Irish’, but
some participants also viewed it as a ‘monopoly, rip-off, inefficient and
old fashioned’.
Salary Deduction Mechanisms
5.41 Salary deduction schemes are one means of collecting premium
revenue for health insurers. According to research undertaken by the
Competition Authority and the Health Insurance Authority, a large
majority of group scheme members and more than 50% of all PHI
subscribers avail of their health insurance through the mechanism of
employer based group schemes. Of those PHI subscribers who avail of
their health insurance through employer based group schemes,
approximately one-quarter benefit from the employer paying all or part
of the health insurance policy premium.
5.42 In order to provide consumers with a convenient means of paying their
premiums, new entrants to the market may wish to access company
salary deduction mechanisms. Where health insurers are unable to
access this functionality, a means of paying for health insurance
premiums is, in effect, foreclosed to them. This acts as a barrier to
entry and a barrier to switching.
5.43 The market practice of obtaining health insurance through employer
based group schemes offers an opportunity to new entrants to the
health insurance market but also poses an institutional challenge. The
opportunity is mainly where the employer pays all or most of the
premiums on behalf of its employees. In this circumstance, the
employer has a strong motivation to reduce its employment related
costs and is likely to be more price sensitive than individual
consumers.
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