Risk Equalisation Health Insurance

MrPudding

I have a bit of a problem here. You see Cork, first you say:

Cork wrote:

Mary Harney is 100% correct on this one.

Then you say:

Cork wrote:

I would agree with the need for competition. Bloated state monopolies are as bad as privatised ones. It is funny that with the introduction of a Cork to Dublin Bus service did Bus Eireann cut their fares on the route.

And then:

Cork wrote:

The problem with the health insurance market is that the young and old are charged the same. This does not apply to the car insurance market.

So, a mechanism is needed to ensure a health insurance company does not cherry pick the younger and more profitable customers.

What does making a forced payout to a

Cork wrote:

Bloated state monopoly

have to do with making sure a company does not cherry pick younger more profitable customers? The answer, I reckon, is nothing.

It does not stop Bupa or Viva being more attractive. There was an arguement that after risk equalisation payment VHI would cut premiums and therefore, possibly, become more attractive. But, alas, they have already said they would not cut premiums so, no dice.

If you want to prevent companies from cherry picking the younger market then here is an idea. Stop them from cherry picking the younger market:rolleyes: Don't make them pay a

Cork wrote:

Bloated state monopoly

simply because it is a

Cork wrote:

Bloated state monopoly

and cannot operate as cheaply as the newcomers.

Now I want to quote this bit again:

Cork wrote:

I would agree with the need for competition. Bloated state monopolies are as bad as privatised ones.

Great sentiment, but I think in your case it is just that. Because then we have:

Cork wrote:

If they leave - they leave.

Hmmm, great way to stimulate competition, force the other players out of the market so we are left with a

Cork wrote:

Bloated state monopoly

That should really sort out the competition :rolleyes:

Earlier is this thread you said that Harney was 100% correct in this. I asked you why. Perhaps you could answer that now?

MrP

Cork

A mechanism is needed to ensure a health insurance company does not cherry pick the younger and more profitable customers.

If one company has an older client profile then it deserves to be compansated.

Many older people have medical cards so the state already picks up much of their health costs.

How much will equalisation cost BUPA? Health Equalisation has been here since 1994. BUPA knew this before setting up. If they cannot then operate with regulations - they have the option to leave.

By citing the "Leave Card" does not istill much confidence. If Bupa leave - I am sure Vivas will benefit. Vivas unlike BUPA did not threaten to leave the market.

great way to stimulate competition, force the other players out of the market

Risk Equalisation was on the books before BUPA even entered the market.

It is not Mary Harneys fault that people don't switch health insurance providers. People may not want the hassle.

flogen

Cork wrote:

A mechanism is needed to ensure a health insurance company does not cherry pick the younger and more profitable customers.

If one company has an older client profile then it deserves to be compansated.

Not when they refuse to change to attract business and decide that they will sit back and let others make profits for them

Many older people have medical cards so the state already picks up much of their health costs.

I may misunderstand the health market here, but doesn't that mean that the VHI as a company don't have to pay for these people?

How much will equalisation cost BUPA? Health Equalisation has been here since 1994. BUPA knew this before setting up. If they cannot then operate with regulations - they have the option to leave.

No, the idea has been here and it's one that I would accept if VHI were making more of an attempt to become a proper company. They probably realised that they stand to make more by having old people than they do if they try and modernise.
BUPA and Vivas seem happy to take older customers on board, I can't see how they're cherry picking.

By citing the "Leave Card" does not istill much confidence. If Bupa leave - I am sure Vivas will benefit. Vivas unlike BUPA did not threaten to leave the market.

Vivas are in threat of being pushed out of the market. They don't need to reassess their position just yet because they don't need to pay VHI just yet, we'll see what they have to say once that happens.

Risk Equalisation was on the books before BUPA even entered the market.

But the conditions of its implementation are all wrong. You yourself said that there needs to be greater competition and that a bloated semi-state body is dangerous to that.

It is not Mary Harneys fault that people don't switch health insurance providers. People may not want the hassle.

That's not BUPA or Vivas' fault either, unless you can prove that they've rejected older customers because they might cost more.

flogen

flogen wrote:

I may misunderstand the health market here, but doesn't that mean that the VHI as a company don't have to pay for these people?

Those people have the cover so they can be guaranteed private beds in private hospitals.
VHI pays for that part.
The medical card pays for the meds,theGP costs etc outside of the hospital.

flogen

Earthman wrote:

Those people have the cover so they can be guaranteed private beds in private hospitals.
VHI pays for that part.
The medical card pays for the meds,theGP costs etc outside of the hospital.

thanks for clearing that up.

MrPudding

Cork wrote:

A mechanism is needed to ensure a health insurance company does not cherry pick the younger and more profitable customers.

And how exactly does giving VHI a handout stop Bupa or VHI cherry picking? If you phone looking for cover you will be quoted and get it. Simple.

Cork wrote:

If one company has an older client profile then it deserves to be compansated.

Why? Why does it deserve to be compensated?

Cork wrote:

How much will equalisation cost BUPA? Health Equalisation has been here since 1994. BUPA knew this before setting up. If they cannot then operate with regulations - they have the option to leave.

According to Bupa more money each year than they have earned in the entire time they have operated in Ireland. I have no independant figures so I do not know for sure.

As I mentioned before they may well have known about the possibility of risk equalisation but probably did not expect it to actually be enforced when there are only 3 players in the market and the main player, who will be the recipient of the payments, holds 80% of the market.

Cork wrote:

By citing the "Leave Card" does not istill much confidence. If Bupa leave - I am sure Vivas will benefit. Vivas unlike BUPA did not threaten to leave the market.

What are you saying? That Viva would be more attractive than VHI? What does that tell you? I'm sure if Viva are left to bail out the VHI on their own they will not hang around long.

Cork wrote:

It is not Mary Harneys fault that people don't switch health insurance providers. People may not want the hassle.

Nor is it the fault of Bupa or VHI. Why should they pay?

Have a look at this:

http://www.vivashealth.ie/pressrelease300905.html

I will take some interesting parts from it.

Vivas press release wrote:

VHI has stated to this Oireachtas Committee on Health and Children in April that it will not reduce premiums from their current levels with risk equalisation, and that any moderation of future price increases will be slight.
BUPA Ireland has stated that it would need to increase premiums by 22% in order to be able to make risk equalisation payments.
VIVAS Health will also, in consequence, need to charge higher premiums if it is made liable for risk equalisation payments, and would need to plan for the introduction of these payments with immediate effect.

Wow. Sound really good for competition.

And here's the science bit:

Vivas press release wrote:

The latest consumer research published last week by the HIA states that a premium difference of at least 30% would be required for a consumer to consider switching. Most customers are reluctant to switch now when competitors' prices are lower than those of VHI. The rate of switching will be truly negligible when competitor premiums are the same as or more expensive than those of VHI. The net result will be more expensive premiums for all and a consolidation of VHI market dominance.

Cool, so the VHI can expect the payouts for ever then. Nice work if you can get it. Run a sh1t company and then get the government to force you competition to pay you.

Vivas press release wrote:

Lack of Coherent Competition Policy

Evidence of the lack of coherent competition policy in health insurance is apparent when one considers:
Under the Risk Equalisation Scheme there is no requirement for the Health Insurance Authority to seek an opinion from the Competition Authority about the likely consequences for competition when deciding on risk equalisation.
Every health insurer in the market is subject to different regulatory and compliance legislation.
Every health insurer is subject to different solvency requirements - while VIVAS Health must save 40% of each premium for its reserving, there is no such requirement for VHI
The VHI has been allowed engage in the supply of ancillary products (such as travel insurance) in a manner not permissible to any other non-life insurance undertaking in the European Union (insurance companies are not allowed to act as financial advisers, VHI is allowed to do so).

A lack of coherent competition policy? Here? In Ireland? Never.

Vivas press release wrote:

The over 65s

Much has been stated about the market for over 65's and price following. VIVAS Health would welcome the opportunity to receive any over 65's - it calls on the VHI to write to its database of over 65s and encourage their switching to new providers.
Mechanisms to balance risks while reducing VHI market share would be less prejudicial to competition in the market than the implementation of risk equalisation. This can be achieved through a proper liberalisation policy and a more appropriate risk equalisation scheme.

A bit too much sense there I think. Why should the VHI have to pretend to be a proper company when you can just make its competition pay for it?


I love this one:

The Competition Authority, in its submission to the HIA on the risk equalisation scheme in 2002 stated: wrote:

In particular, the fact that the market penetration rate is already relatively high, that the former state monopoly retains close links with the regulating bodies and that there exists the potential for excessive politicisation of key regulatory decisions such as when to implement the risk equalisation scheme, all make the Irish private health insurance market less attractive to new entrants. Clearly, even in the context of a risk equalisation scheme much can be done to make private health insurance market more attractive and conducive to competition.

And in conclusion:

Vivas press release wrote:

Conclusion

VIVAS Health believes that commencement of risk equalisation payments at this time while VHI enjoys extraordinary dominance in the health insurance market is inappropriate. No other international market has implemented risk equalisation with such a dominant player.



The triggering of risk equalisation at this time will harm consumers as all premiums will increase and product innovation will be stifled. Risk equalisation will create another barrier to consumer switching and will protect and consolidate the state undertaking's market share.


VIVAS Health does not oppose the implementation of an appropriate risk equalisation scheme once market shares are more evenly distributed and all undertakings are working on a level playing field.


Risk equalisation will signal the end of any new entrants into Ireland with all the innovation and consumer choices they can bring.


VIVAS Health calls for a proper liberalisation policy for the health insurance market to be put in place, for reduction of dominance of the VHI to be treated as a priority and for the creation of an environment that is supportive and conducive to new entrants. Consumers across the economy have benefited through choice and price from the entry of new players, opening competition and challenging the status quo. With the proper regulatory environment health insurance consumers can have the same.

It is actually an interesting press release and I would recommend reading it. I am sure Bupa have something similar on its site.

I just cannot understand why it is being triggered in the current environment. To me it would make more sense to lower the market share of VHI and spread the burden of old folk. I don't know how you would do that but I am pretty sure risk equalisation is not the way. I am sure it would be against the constitution or something to simply move people to another provider in order to even things up.

But where there's a will there's a way.

MrP

LostinBlanch

Mr P

Good post that cuts through a lot of bull that surrounds this argument.

But I'll say again that this is an example of short termism, something designed to play to the grey vote at the next election. You know the ones who actually go out and vote every election? Why does this feel like the late 70's early 80's all over again? Short term policies designed purely to get through the next election and to hell with the consequences after. :mad:

jd

Does anybody have some figures here regarding the cost bases of the various insurers (ie non underwriting).
ie what percentage of revenieue is taken up in non underwriting costs?

MrPudding

jd wrote:

Does anybody have some figures here regarding the cost bases of the various insurers (ie non underwriting).
ie what percentage of revenieue is taken up in non underwriting costs?

I don't. As far as I know Bupa do not release separate books for Ireland, though apparently they know the figures internally.

Something tells me Vivas & Bupa may be slightly more efficient operators than VHI.

MrP

jd

MrPudding wrote:

Something tells me Vivas & Bupa may be slightly more efficient operators than VHI.

MrP

I'd imagine so. I wouldn't like to see risk equalisation subsidise operational inefficiencies. However, I do agree with community rating in principle, so I I agree there is a case for compensation viz a viz risk equalisation. I'm not sure what a fair formula would be, though

MrPudding

jd wrote:

I'd imagine so. I wouldn't like to see risk equalisation subsidise operational inefficiencies. However, I do agree with community rating in principle, so I I agree there is a case for compensation viz a viz risk equalisation. I'm not sure what a fair formula would be, though

What is the connection between community rating (which by the way I support 100%) and risk equalisation?

Interesting article here on the Irish Medical News site. It is from a few months ago but I do n ot think much has changed:

http://www.irishmedicalnews.ie/articles.asp?Category=Pview&ArticleID=13334

There are a number of interesting point in it. I like this one:

Prof Ray Kinsella in The Irish Medical news 5th April 2005 wrote:

Risk equalisation essentially involves the payment from an insurer with a more favourable claims profile – taking account of age, propensity to claim and health status – to one with a less favourable claims profile.

Differences in claims profile can result from two principal factors: risk selection (or “cherry-picking”, as it is known) by one insurer; or from the dynamics of the market structure itself. In Ireland, risk selection is specifically prohibited. There is no evidence whatsoever that either VIVAS or BUPA Ireland engage in risk selection, although VHI had in the past a declared strategy of “cherry-picking”.

So is it the case that the reason VHI accuse Vivas & Bupa of cherrypicking is that they did it themselves in the past. A case of "we did it so they must be doing it." Even though there are now laws which mean it can't, in effect be done anymore.

On the Risk Equalisation / community rating thingie:

Prof Ray Kinsella in The Irish Medical news 5th April 2005 wrote:

The fallacy of community rating in Ireland:

A second factor has to do with the need to maintain community rating across the PHI market. The argument put forward by Government/VHI is that RE is essential to maintaining community rating. There is no evidence (opinion, yes; evidence, no) that either VIVAS or BUPA Ireland are engaged in risk selection that might undermine community rating. Quite simply, the latter is mandatory. And even if, for the sake of argument, there were indicators of an incipient tendency towards risk selection, the issue could be addressed by more proportionate forms of intervention. This is the approach which IFSRA takes in regard to conduct of business to ensure consumer protection in financial services including healthcare cash plans, which are a substitute for PHI – and risk-rated into the bargain!

It cannot be emphasised too strongly that community rating is not an end in itself: it is a means to the end of ensuring that PHI remains affordable for older cohorts of the population. As mandated in Ireland, it is not community rating in the generally accepted European sense at all. Indeed, the evidence is that the multiplicity of options, variations, discounts and exclusions that has developed across the three principal PHI providers, is such that the question of a community rated product has become all but redundant. Moreover, it is neither the only, nor the best, means of ensuring this important social objective. But conferring a by-now misleading name and sacrosanct status on community rating means that the regressive provisions which have been attached to the misnomer can be invoked to justify the imposition of risk equalisation as being “necessary to support community rating”.

So what are the ecomnomic reasons for it? Apparently VHI makes more in one year than Bupa has made in the eight years it has been operating here. I would prefer that VHI looked at itself first to see where it could save money and increae profitability. At the same time I would like to see the government address the huge market share VHI has. If that market share could be reduced and older people spread more evenly between the three insurers would there be any need for risk equalisation?

MrP

jd

MrPudding wrote:

What is the connection between community rating (which by the way I support 100%) and risk equalisation?

How else do you propose to deal with the difference in underwring costs and receipts? While VHI could undoubtedly be more efficient, the issue is the difference between underwriting costs and receipts. AFAIR the VHI could become techically insolvent in 2008 due to the large numbers of older subscribers.

LostinBlanch

jd wrote:

How else do you propose to deal with the difference in underwring costs and receipts? While VHI could undoubtedly be more efficient, the issue is the difference between underwriting costs and receipts. AFAIR the VHI could become techically insolvent in 2008 due to the large numbers of older subscribers.

Well earlier in the thread there was a link to Vivas press release asking VHI to write to older subscribers (you know the ones who are costing VHI so much that they will supposedly go insolvent?) and ask them to contact either Vivas or BUPA about changing over to them. Doesn't sound like they (VHI) are bothered, much easier to cry wolf methinks.

jd

LostinBlanch wrote:

Well earlier in the thread there was a link to Vivas press release asking VHI to write to older subscribers (you know the ones who are costing VHI so much that they will supposedly go insolvent?) and ask them to contact either Vivas or BUPA about changing over to them. Doesn't sound like they (VHI) are bothered, much easier to cry wolf methinks.

I think the problem is people won't change-I'm not saying this is BUpas or Viva's fault, of course.

An alternative perhaps would be mandatory loading for those who postpone taking health insurance until they reach a certain age-I found this-
"In a 1999 White Paper, the government set out the parameters for health insurers with the introduction of competition in the market.

One of the recommendations suggested late-entry premium loading for those taking out private insurance over the age of 35.This has never been introduced."

Any thoughts?>

MrPudding

jd wrote:

I think the problem is people won't change-I'm not saying this is BUpas or Viva's fault, of course.

An alternative perhaps would be mandatory loading for those who postpone taking health insurance until they reach a certain age-I found this-
"In a 1999 White Paper, the government set out the parameters for health insurers with the introduction of competition in the market.

One of the recommendations suggested late-entry premium loading for those taking out private insurance over the age of 35.This has never been introduced."

Any thoughts?>

VHI want the late entry loading.

TBH, I like the idea of community rating and I think late entry loading goes againt this. At the same time it is annoying that people like me pay PHI for myself when I don't cost much. So I am paying for people that do not pay fot PHI until they need it. But hey, there will always be people that take advantage of a system in order to benefit themselves at the cost of others.

I would rather see the market dominance of VHI being broken. I would like to see a fairer distribution of the insured between the 3 main providers, young and old. This will give a level playing field and allow the companies to operate in a fair manner with none having a perceived advantage over the others apart from how they operate and what they offer.

Is it just me or does VHI just seem to want anything that means they do not have to make any changes or become a proper grown up company?

MrP

gandalf

MrPudding wrote:

Is it just me or does VHI just seem to want anything that means they do not have to make any changes or become a proper grown up company?

MrP

You nailed it with that statement. Thats exactly what the problem is. The more I look at this the more I feel that risk equalisation is right but only if all companies involved are on an equal footing.

VHI should be privatised and it would also be prudent to delay the introduction of RE until that has happened.

If done the wrong way and I believe thats the route they are taking with this, competition will be stifled totally and there will be no choice.

LostinBlanch

MrPudding wrote:

I would rather see the market dominance of VHI being broken. I would like to see a fairer distribution of the insured between the 3 main providers, young and old. This will give a level playing field and allow the companies to operate in a fair manner with none having a perceived advantage over the others apart from how they operate and what they offer.

I heard on the Dunphy show this morning that BUPA had stated that they would happily take over the VHI top 3 most expensive schemes! Also someone else on the show said that off the record advice from the European Commission was that RE as proposed would go against EU rules. At least this was the advice two years ago.
They have podcasting for the show click on the link to find out more if you're interested.
http://www.newstalk106.ie/podcasting.html

MrPudding wrote:

Is it just me or does VHI just seem to want anything that means they do not have to make any changes or become a proper grown up company?
MrP

What a semi state monopoly against competition? Surely not. One other thing about competition is that different providers offer different packages forcing others to follow suit. One example is that BUPA introduced complementary healthcare refunds for it's customers, something which VHI never did until BUPA introduced it. Without competition VHI would have no incentive to introduce such different packages. So it's not all about premiums (sp?)

ronbyrne2005

harney says she doesnt want private health patients getting treated quicker than public ones,suprising from her.
i think RE is necessary untill the market is more mature etc,but saying that VHI are inefficient but the unions in there will block any cost cutting attempts and they want a large share of comapny if it goes private.

government should split up the vhi's customers between vhi vivas and buba and let them compete against each other,why wont they do this? because unions wont let them as overpaid job in vhi will be lost as will privatisation windfall.
alternatively they should create a universal health care system ala canada/france and get rid of health insurers who it has been shown in the usa actually add significant additional cost to health care costs of a nation compared to nations where universal systems exist.