Risk Equalisation Health Insurance

lazydaisy

How can this possibly be legal?

Mary Hearney, former minister for enterprise now minister for health [intriguining switch there] has decided that Bupa and Vivas must pay millions to the state owned company VHI. She must know that this will drive Bupa out and you will be left with a state owned monopoly of the health insurance sector. Whats the game?

http://home.eircom.net/content/irelandcom/breaking/7047615?view=Eircomnet

Nuttzz

For a so called right wing minister this was a very left wing move and not usual of PD "let the market decide" policy. Personally I'm disappointed with this decision. I think that private business should not have to prop up a state or semi state company

MrPudding

Press Release from Bupa site wrote:

BUPA Ireland Statement in relation to risk equalisation decision
BUPA Ireland notes the decision announced by the Minister for Health and Children to proceed with the implementation of risk equalisation with effect from 1st January. This would involve BUPA Ireland having to provide for an annual subsidy, estimated to be more than twice its annual profits, to the ESB and the VHI. We have always said that risk equalisation makes competition and the BUPA Ireland business unviable. This remains the case.
In order to protect the interests of our customers, the nearly 300 people who work in BUPA Ireland, and our business, we have successfully applied to the High Court for an injunction preventing any steps being taken to implement the Minister's decision pending the hearing of our case, which is due to be heard by the High Court on the 7th February.
Our case is that the legislation and regulations contravene EU law and the constitution.


Ends 23rd December 2005
For further information:
Gibney Communications 01 6610402
Donnchadh O'Neill 087 2056504

I hope they do not leave. I am with Bupa myself and feel they offer a better package. I appreciate that they may be able to offer a better package exactly for the reason that the risk equalisation is to be implemented.

Could it be true that the amount Bupa will have to give will be greater than their actual profits? That seems a bit silly.

MrP

Nuttzz

why the ESB does anyone know?

billy the squid

VHI lowering their over inflated prices would have been a better option. They are complaining that their membership is older, they could attract younger people by lowering the cost of insurance.

this is a nutty idea, but it might work.

Markets don't always act optimally. In the health insurance market, there seems to be an incentive to leave older people uncovered, as they're not as profitable. Harney, with this measure is attempting to get the market to function in a more socially optimised way.

MrPudding

Nuttzz wrote:

why the ESB does anyone know?

Apparently the ESB have their own private health insurance scheme. The problem is it seems that all thier members are getting older so they need to get a handout from a private company. Or something like that.

MrP

jesus_thats_gre

This is already in place in Austria and BUPA are net beneficiaries of the scheme/policy...

MrPudding

Deleted User wrote:

Markets don't always act optimally. In the health insurance market, there seems to be an incentive to leave older people uncovered, as they're not as profitable. Harney, with this measure is attempting to get the market to function in a more socially optimised way.

Maybe in other markets but not here, I don't think. We have community ratings so everyone pays the same regardless of age. If an older person calls uo looking for cover they will be covered and pay the same as I do for the cover.

In markets where community rating is not used there would be an available mechanism to leave older people uncovered, make the premiums prohibitively expensive so the older folk would be unlikely to purchase the cover. That cannot happen here and as far as I know companies cannot refuse to cover a person simply because they are old.

So, yes, there is an incentive to not cover old people. They cost more and are less profitable. But there is no way to not cover them.

The risk equalisation is not to make sure old people have cover, they already do. It is to help two companies be more profitable by giving them a handout from a private company. One of these companies accounts for 70% of the market and the other is a scheme that, as far as I know is only open to employees past and present of a semi state company, namely the ESB.

I don't know, it just doesn't seem right to me. I chose BUPA because I felt it offered the better package. If VHI had offered a better package I would have went with them.

MrP

MrPudding

jesus_thats_gre wrote:

This is already in place in Austria and BUPA are net beneficiaries of the scheme/policy...

Is it not Australia?

MrP

mike65

I guess one attitudes depend on circumstances. I'm a diabetic and if my insurance cover were priced on the cost of me to the health system then I'd proberly be paying thousands a year not 300 (with bupa). Community rating may be too left wing for some but I'm not complaining.

Mike.

Cork

lazydaisy wrote:

She must know that this will drive Bupa out and you will be left with a state owned monopoly of the health insurance sector. Whats the game?

http://home.eircom.net/content/irelandcom/breaking/7047615?view=Eircomnet

BUPA knew about risk equalisation prior to entry to the Irish market.

If they leave - they leave.

lostexpectation

mike65 wrote:

I guess one attitudes depend on circumstances. I'm a diabetic and if my insurance cover were priced on the cost of me to the health system then I'd proberly be paying thousands a year not 300 (with bupa). Community rating may be too left wing for some but I'm not complaining.

Mike.

what's left wing about, ensuring all old people have health cover?

mike65

Nothing at all.

Mike.

flogen

lostexpectation wrote:

what's left wing about, ensuring all old people have health cover?

I think it's more about ensuring that everyone has access to health cover, but in general older generations are the most expensive/least profitable and are thus the focus of this whole thing.

From the outside it seems stupid to expect a company to earn a profit and then passing it onto their competitors, it would be like asking McDonalds to prop up Burger King because they can't do it themselves. In reality such a comparison is null and void because health care is much more volatile than this.
The test is if BUPA will stay after this comes in (if it does). I assume the amount they pay will depend on their profits rather than on VHI's loss, or would that be asking too much? If it is an amount set by VHI or outside of the control of the profitable companies, Vivas will probably be in more trouble that BUPA.
You can't blame BUPA for leaving if they do have to hand over profits, they're here to make money whatever way you look at it, it will just be the consumer who will suffer most from it. Surely there's a balance to be struck, one that involves the VHI restructuring itself so that it's more modern and profitable, I've not looked at the issue in too much depth, but surely there is a way for them to be as appealing to young people (the margin makers) as BUPA and Vivas are?

Cork

flogen wrote:

You can't blame BUPA for leaving if they do have to hand over profits, they're here to make money whatever way you look at it, it will just be the consumer who will suffer most from it

BUPA knew of risk equalisation before they set up here.

It should not be news to them.

Mary Harney is 100% correct on this one.

MrPudding

Cork wrote:

Mary Harney is 100% correct on this one.

Why?

MrP

jd

Cork is right-BUPA knew what they were getting into when they entered the Irish market. Most people getting insurance for the first time are quite young, and hence quite profitable. And oddly, people tend not to change service providers, even if the alternative is cheaper. Maybe BUPA should be made take half of vhi's over 60 customer base?

MrPudding

I started with VHI, it was the only choice. Once Bupa was available I took it as it offered better plans and was therefore more attractive to me. See, there is the key. I went with the provider that was more attractive to me. Should VHI change their packages to make themselves more attractive I will not hesitate to change. That is how things work in the real world.

Personally I am of the belief that if a company is not profitable, for whatever reason, that company should try to make themselves more profitable rather than look for a handout from it's competition.

So if that is my view on Bupa having to give money to a semi-state because they cannot get their act together I am sure you can guess how supportive I am of them having to give money to the ESB fund. Bearing in mind the ESB scheme is closed to everyone except those who are or were employed by the ESB. THey are intentially limiting the people that can avail of their product so I am not surprised they are in trouble.

Why should a monolithic semi-state company with 70% market share & and private members club be bailed out by a private company that runs an efficient business offering packages that are attractive to young and old alike?

MrP

jd

MrPudding wrote:

offering packages that are attractive to young and old alike?

MrP

..because not too many old people are going for it...and that is why they are able to offer the cheaper packages!

MrPudding

Viva asked VHI to contact all their over 65 members and suggest that they look at moving to the competition. VHI declined to do it.

I appreciate that both new players knew that risk equalisation was a possibility. I believe they did not think it would happen when there was only 3 providers and one of them holds over 70% of the market and that is the provider they have to pay.

MrP

lazydaisy

There is nothing to stop over 60s VHI members from switching to either Bupa or Viva. Nothing whatsoever. If they did, then that would no doubt bring on healthy competition where VHI would be forced to drop its prices. And with that attract more consumers.

Why havent more people switched to Bupa and Viva? Why do they stay with VHI?

What an interesting one way street this is, when the airlines were threatened with closure after 911 EU legislates that the state cant subsidize the private sector, and yet lo and behold, the state now forces the private sector to subsidise the state. This move will no dount alienate any other possibility of further health insureres opening up in Ireland and once again very little choice will be given to the people.

Hearney, former minister for finance, now minister for health.... I smell a rat.

jd

lazydaisy wrote:

Why havent more people switched to Bupa and Viva? Why do they stay with VHI? .

Inertia. People don't easily change service providers, especially I guess if theya are older..

lazydaisy wrote:

Hearney, former minister for finance, now minister for health.... I smell a rat.

No rat- the fact that she would normally be unsympathetic to state enterprises makes it interesting though..

mike65

If Mary Harney has been a finance minister I must have missed that era.

Mike.

lazydaisy

Enterprise I meant.

Kappar

Should Health Insurance be different from Moter Insurance? When the shoe is on the other foot there seems to be a problem. Older people are more likley to need health care therefore higher risk -> higher premiums.

Litcagral

Kappar wrote:

Should Health Insurance be different from Moter Insurance? When the shoe is on the other foot there seems to be a problem. Older people are more likley to need health care therefore higher risk -> higher premiums.

The reason health insurance is not treated like motor insurance may be due to the fact that poor health is not necessarily the fault of the sufferer (eg heredity/environmental factors) and even if it is, (eg smoking/drinking/diet etc) it can be much more difficult or impossible to amend.

Motor insurance premiums on the other hand can be reduced by the customer by safe driving, full licence, smaller engine, anti-theft devices,non-sports cars, NCBs etc.

mike65

Quite, if health insurance were modeled as motor insurance is a large % of the population would not able to afford cover. This would'nt matter much if we had a true national health service or government backed universal insurance a la Canada.

Mike.

Kappar

Motor insurance premiums on the other hand can be reduced by the customer by safe driving, full licence, smaller engine, anti-theft devices,non-sports cars, NCBs etc.

Age & Sex?

These seem to be the biggest factor to load someone's policy.

Litcagral

Kappar wrote:

Age & Sex?

These seem to be the biggest factor to load someone's policy.

Good point you can't do much about your age and sex.

flogen

Cork wrote:

BUPA knew of risk equalisation before they set up here.

It should not be news to them.

Mary Harney is 100% correct on this one.

Did they really? How exactly?
I'd imagine that risk equalisation was a Fianna Fail/PD initiative, right? Well, I'm sure they're happy to take the credit for it anyway.
So BUPA, according to their website (see here), were set up in 1996 in Ireland. The FF/PD coalition only came into being in 1997. Now, even if risk equalisation was an election pledge from either FF or the PD's, no one could be sure who would win an election or be part of a future government. Also, if risk equalisation was a policy from day 1, why has it taken the government nearly 6 years to implement?

I'm not opposed to risk equalisation, if truth be told I haven't studied the economics of it enough to come to a conclusion, but I do believe that a more sane compromise is possible. Given the current situation a semi state body will be recieving other peoples profits and thus doing nothing to encourage positive change on their part or proper competition on BUPA/Vivas' side.