Goverment rush through legislation to close off the loophole in the insurance market.

ANXIOUS

They are rushing through legislation, to close the loophole. That would have seen the quinn group not have to pay risk-realisation payments to the vhi. Im just wondering is this completly ethical by the goverment, seeing as how its not the quinn's group fault that the loophole is there. Secondly do you think that the quinn group will be able to pull out of the deal seeing, as the main incentive for them was that they thought they'd be availing of this measure. Could they have tied this into the contract?

ballooba

Quinn would have obviously foreseen this potential scenario. They will have done their sums. There is three potential outcomes I can see.
a) Quinn have factored in Risk Equalisation. They still think it's a good deal.
b) Quinn planned to pull out in event of being subjected (immediately) to Risk Equalisation.
c) Quinn will seek to renegotiate Risk Equalisation.

b) or c) are the more likely of the three. This could go on for a l.....o.....n.....g..... t.....i.....m.....e.

ANXIOUS

ballooba wrote:

Quinn would have obviously foreseen this potential scenario. They will have done their sums. There is three potential outcomes I can see.
a) Quinn have factored in Risk Equalisation. They still think it's a good deal.
b) Quinn planned to pull out in event of being subjected (immediately) to Risk Equalisation.
c) Quinn will seek to renegotiate Risk Equalisation.

b) or c) are the more likely of the three. This could go on for a l.....o.....n.....g..... t.....i.....m.....e.

Yeah, thats what i was thinking. However i have a feeling that they would have grounds for getting out of this contract. Especially if they worded it in such a way as to point out that bupa made it clear they would benefit from this loophole. Dont forget bupa still have that on going case in the european courts about the legality of these payments.

SeanW

I suppose the government decided its arse was even more out the window than usual ...

Villain

If Quinn pull out of the deal and 400 jobs go in Cork, FF and PD's could pay heavily for this in the election. Obviously Harney realised Vivas were right and could have changed the underwriter to get away with the payments too.

flogen

The aspect of the law they're changing is not a loophole, though, it was an intentional part of the original legislation.

The loophole only comes into play when a new owner has the potential to be treated as a new entrant, and the total repeal of the 3 year exemption as a solution to this is a kin to squashing a grape with a steamroler.

So now no new entrants will want to come into the market as they'll be liable for risk equalisation from day 1, and the Quinn Group will certainly not sit back and carry on regardless.

Sure it could mean the loss of 300 jobs, but hey, the VHI are safe and can snatch back all those policies as they had hoped to do before that nasty Quinn fella stuck his nose in - win win for the Government.

As for this being ethical, sure it's not Quinn's fault, but if there's a loophole in the law the Government are allowed to plug it - I just think they've used this opportunity to further stitch up the health insurance market and black out any potential competition.

What I don't think is ethical, however, is the fact that this "loophole" has been known about for some time, and yet the Government wait until after 6 (when Gov offices are closed) to produce the idea, call an emergency session and push the law through with zero debate.
It wasn't on the order of business and this was orchestrated to ensure nothing negative could be said before it had become law.

The PDs are an open and free market party? Please. Once you have a semi-state body in Ireland, it's never a truely free market - just look at the fact that you can't get Government grants for green electricity generating devices.

- And note that I'm not railing against risk equalisation itself - that's another argument and one that I have mixed feelings on but am not overtly opposed to at all - I just think the Government has proven that it has no time for real competition and only cares about its own companies and not the customer.

LostinBlanch

I think that Quinn may be holding fire until BUPAs appeal to the high court decision of December.

But flogen is correct about the PDs kowtowing to vested interests while spouting on about competition and the benefits it brings "supposedly". I'm thinking specifically of the ESB and the huge increase in prices because they were too low to encourage other competitors into the market! Counterintuitive since competition is supposed to drive down costs and prices.

gent9662

If risk eq stands I think the PD's can kiss goodbye to power sharing. Harney is ok becuase she can skip the queues in the taffic and hospital emergency rooms with her aged mother. For God sake maybe she should look at taking a Bupa better eating diet plan and maybe she would see the benefit of proper competition.

Why not have risk equalisation in the public and private sector, I'm an IT Manager on about 50k a year with 7 years experience. I have a friend from college who works for the government in the same job and he is on well over 60k, and that is not performance based, just annual increments through benhmarking, and he gets free lunch, off at 4:30, starts work at 9:30, and has about 34 days holidays!!!

Same bull$hit with risk equalistaion, the government always wins, and the PD's are supposed to be demcratic! More like Autocratic!

gazzer

I have a friend from college who works for the government in the same job and he is on well over 60k, and that is not performance based, just annual increments through benhmarking, and he gets free lunch, off at 4:30, starts work at 9:30, and has about 34 days holidays!!!

Id love to find out where this person works cos i work in the revenue commissioners as a systems analyst. Have 15 years experience and my salary is in the mid 30's.. I start work at 9.30 and finish at 6.00. Pay for own lunch on my half hour break and get 23 days annual leave...

oscarBravo

Discussion of public versus private sector salaries is way off topic for this thread - don't go there.

ballooba

oscarBravo wrote:

Discussion of public versus private sector salaries is way off topic for this thread - don't go there.

I've fallen into that trap before.

I think the current situation of risk equalisation is unworkable. VHI could effectively sit back and watch the dollars come in from RE. They wouldn't have to work for their money.

In a real world situation VHI would have to sink or swim. I'm all for starting everyone off on a level playing field. The current system however favours VHI. Every business seeks to maximise their profit, WHI is doing the same thing, the advantage they have is that they can cry about being a former semi-state.

Businesses profiteering at the expense of the taxpayers and the incompetency of the people who mange our taxes should not be tolerated. Whether it's Eircom, Aer Lingus, ESB, VHI or NTR (who were neever even a semi-state).

I would like to see VHI transfer some of it's older customers to BUPA if they are so laboured with them. Then once all is equal, send them off on their merry way.

ballooba

BTW when I say people who manage our taxes above, I don't mean Revenue or any other specific Department. I mean general bad management.

nesf

ballooba wrote:

I would like to see VHI transfer some of it's older customers to BUPA if they are so laboured with them. Then once all is equal, send them off on their merry way.

Would VHI's older customers ever agree to such a thing and isn't Risk Equalisation that but just in another form (albeit a less efficient one that companies seem to think they can get out of before their 3 year exemption is up)?

ballooba

nesf wrote:

Would VHI's older customers ever agree to such a thing and isn't Risk Equalisation that but just in another form (albeit a less efficient one that companies seem to think they can get out of before their 3 year exemption is up)?

Let's ask them. I don't see why not.

Risk Equalisation in it's present form is a joke. The fact is that VHI probably wouldn't want to transfer their customers to BUPA. That would mean lost revenue for them. The status quo is seriously in their favour.

nesf

ballooba wrote:

Let's ask them. I don't see why not.

Customer Inertia. A lot of older people equate VHI with health insurance in the same way they equate Eircom with the phone. Not everyone is affected by it but you'd be surprised just how resistant to change people can be.

ballooba wrote:

Risk Equalisation in it's present form is a joke. The fact is that VHI probably wouldn't want to transfer their customers to BUPA. That would mean lost revenue for them. The status quo is seriously in their favour.

True to an extent, but what equalisation generally translates to is VHI and an other swapping older for younger customers until their "risk" is equal. BUPA would not, in their right minds, have gone after older customers (they are a business and considering that they can't charge a premium for age or other risk factors it makes sense for them to aim at the least at risk portion of the population). As a business it would have simply made no sense; however, as a country we have a one size fits all premium system. This is where all these problems arise, if you want a complete free and competitive market then remove this restriction, otherwise accept that some degree of risk balancing must happen in order to prevent gouging by groups that purposively target the younger subscriber.

Personally, I'm in favour of equalisation simply because I think that our premium system is worth maintaining. If we had a system where premiums were attached to risk then there would be a lot more pressure on our public health system because of all the older subscribers being priced out due to their risk etc.

ballooba

nesf wrote:

Personally, I'm in favour of equalisation simply because I think that our premium system is worth maintaining. If we had a system where premiums were attached to risk then there would be a lot more pressure on our public health system because of all the older subscribers being priced out due to their risk etc.

I think we may actually both be on the same page then. I'm in favour of Community Indexing (?). I do however think that the current system unfairly favours VHI. There must be a fairer way of evening out the risk. VHI would gladly sit on their butts and let other people make the money for them. let BUPA take some of their customers. I'm sure BUPA would not be adverse to offering them some incentive to change.

As it turns out, of the options I listed above, Quinn actually went with a). However Vivas have today questioned the fairness of RE and I expect that Quinn will further seek to adjust the Status Quo and level the playing field. I assume their European challenge is continuing also.

On a somewhat related note, when are they going to change the name to Quinn Health. BUPA is so British .

nesf

ballooba wrote:

I think we may actually both be on the same page then. I'm in favour of Community Indexing (?).

Yeah, I can't remember the exact name either.

ballooba wrote:

let BUPA take some of their customers. I'm sure BUPA would not be adverse to offering them some incentive to change.

Like some form of quota system where an insurance company must have at least certain percentage of people from each age group as subscribers? I don't see an easy or very efficient way to equalise risk to be honest.

flogen

ballooba wrote:

I think we may actually both be on the same page then. I'm in favour of Community Indexing (?). I do however think that the current system unfairly favours VHI. There must be a fairer way of evening out the risk. VHI would gladly sit on their butts and let other people make the money for them. let BUPA take some of their customers. I'm sure BUPA would not be adverse to offering them some incentive to change.

As it turns out, of the options I listed above, Quinn actually went with a). However Vivas have today questioned the fairness of RE and I expect that Quinn will further seek to adjust the Status Quo and level the playing field. I assume their European challenge is continuing also.

On a somewhat related note, when are they going to change the name to Quinn Health. BUPA is so British .

As pointed out on 2FM news, Quinn's press release on the matter made it clear that he's not going to take this on the chin - and being the richest man in Ireland he can afford to take the Government on a long and expensive court action all the way to Europe if he needs/wants to.

ballooba

flogen wrote:

being the richest man in Ireland

Not that you have suggested otherwise, I think if Quinn is the richest man in Ireland then he deserves to be. He built his empire from a farm and is an example to all those out there who rely on EU subsidies. As far as I know he looks after his staff and his communities well also.

A bástárdised version of his story:
Found rock on land.
Sought deal with Quarry Company. No joy.
Decided to quarry himself with his own trucks. Great.
Insurance for trucks to expensive. Set up Insurance Firm. Great.
No customer for rock. Set up cement factory. Great.
Need more customers for rock. Set up glass factory. Great.
Need more cusotmers for cement. Build hotels with cement.
I like hotels. Let's buy me a really nice on with a really nice golf course in England as a toy.

As they say in 'Rock: "What a ledge!".

Collie D

Quinn new he would be in for the Risk Equalisation after three years and seemed game so why is he being forced to cough up in advance? Let him pay in three years as was originally planned or do they think he's gonna do a runner as well.

Nevermind that Risk Equalisation is as anti-competition as you can get. I couldn't see it standing up in Europe if Quinn decided to take it that far. What happened to a bit of healthy competition, I always thought this was a capitalist country!

nesf

Collie D wrote:

Nevermind that Risk Equalisation is as anti-competition as you can get. I couldn't see it standing up in Europe if Quinn decided to take it that far. What happened to a bit of healthy competition, I always thought this was a capitalist country!

Risk equalisation is the price paid for having community rating when it comes to health insurance. Which is also anti-competitive if you want to get down to it since it means that companies can't offer cheaper insurance to young, healthy people in order to lure them away from their present companies.

stovelid

I have to admit to being in two minds about RE. Some kind of community rating is probably necessary but VHI's position in our market doesn't make it clear cut.

I just don't know what the best way is. Perhaps the quota system that nesf mentions.

However, I'm not really happy about barely debated legislation being rushed through to essentially prop up a deeply uncompetitive semi state company.

Macy

ballooba wrote:

Let's ask them. I don't see why not.

Different cover in different hospitals. And contrary to opinion, people could be happy with the VHI and the service they provide. I know I wouldn't switch, because at least I know the VHI isn't going to leg it once they aren't making enough profits and leave me high and dry potentially having to go through the no cover period.

With community rating becomes risk equalisation. Perhaps there are problems with the calculations, but the principle is sound imo. Personally I'd prefer universal health insurance totally state controlled. Remove the two tier system once and for all.

People talk of the VHI prices, but it's essentially Government that impacts on this - for example Cowen increased several of the charges for private patients in public hospitals in the last budget, yet it's the VHI that get the blame when the price increase filters through a few months down the line.

oscarBravo

Macy wrote:

I know I wouldn't switch, because at least I know the VHI isn't going to leg it once they aren't making enough profits and leave me high and dry potentially having to go through the no cover period.

That's a symptom of the problem that's being created here. One player in a so-called "competitive" market has a number of distinct advantages that make it the market less attractive to potential competitors - resulting in an unstable market that drives customers to what's perceived as the "safe" option. But what makes it safe? The very factors that skew the market in its favour to begin with.

A close parallel is the difficulty faced by Smart Telecom last year. Yes, they had some internal problems, but the fundamental problem was an anti-competitive marketplace, which was cleverly exploited by the dominant player. The most significant result of this is the reluctance of many people to do business with anyone but that dominant player.

Macy wrote:

With community rating becomes risk equalisation. Perhaps there are problems with the calculations, but the principle is sound imo.

I'm bewildered at how often this situation is portrayed as an argument over whether either community rating or risk equalisation are desirable. Community rating is a fact of life - fine. I think it has deep flaws in its implementation, but I don't have a problem with the principle per se. Equally, risk equalisation is a necessary consequence of community rating - but is it being done fairly?

I don't believe it is. The idea of RE is to level the playing field because of VHI's intrinsically higher cost base. But does it take into account VHI's intrinsic advantages?

Create a truly level playing field - all else being equal - by forcing VHI to fully comply with the same regulations other insurers have to, and I'll support the concept of risk equalisation.

Macy wrote:

Personally I'd prefer universal health insurance totally state controlled. Remove the two tier system once and for all.

There's a lot to be said for that, but it's an argument for another day.

Macy

oscarBravo wrote:

That's a symptom of the problem that's being created here. One player in a so-called "competitive" market has a number of distinct advantages that make it the market less attractive to potential competitors - resulting in an unstable market that drives customers to what's perceived as the "safe" option. But what makes it safe? The very factors that skew the market in its favour to begin with.

It's safe because it's a semi state company, and not driven entirely by profit or whims of it's shareholders. The fact that rivals cut and run once they stop making adnormal profits isn't a valid arguement for bashing the VHI imo.

Heinrich

Macy wrote:

It's safe because it's a semi state company, and not driven entirely by profit or whims of it's shareholders. The fact that rivals cut and run once they stop making adnormal profits isn't a valid arguement for bashing the VHI imo.

Was Aer Lingus a semi state company?


Was the Sugar Company a semi state company?

Safe indeed!

Dream on!

nesf

oscarBravo wrote:

Equally, risk equalisation is a necessary consequence of community rating - but is it being done fairly?

This is the crux of it, but not a very well understood thing. Any such mechanism will be imperfect (it's either going to favour one side or the other, or just totally screw the consumer depending). The issue arose over the existence of risk equalisation (i.e. BUPA figured that they could get out of paying it).

Macy wrote:

Personally I'd prefer universal health insurance totally state controlled. Remove the two tier system once and for all.

It should be interesting to watch the effect of the introduction of mandatory health insurance and the varying means of introduction used by different states in the US. There are a few other models used in Asia (one country has a kind of mandatory health pension where you build up a fund during your lifetime from which you can choose to pay medical bills from. You can also will it to someone upon your death, which is interesting. I'll try to dig up links on it over the weekend.)

ANXIOUS

Ive been trying to find more information on RE, can anyone tell me of other countries that operate this practise?

LostinBlanch

Australia,

has one that has been quoted in this argument before. They have risk equalisation and about 20 players in the market. Strange how they could manage to balance the needs of the community as a whole while keeping competition in the market.

Incidentally, did anyone hear the head of VHI on Newstalk this morning? He was going on about how the VHI were so efficient that other companies would have to get up much earlier in the morning to be more efficient than them. Don't know why Claire Byrne didn't ask him why they needed the state enforced subsidy from those same competitors then if they were so efficient. Made my blood boil, that did.

nesf

LostinBlanch wrote:

Don't know why Claire Byrne didn't ask him why they needed the state enforced subsidy from those same competitors then if they were so efficient.

Maybe because it's not a subsidy and his talk was just the standard business PR bull**** that any of them would come out with?

LostinBlanch

Did anyone hear that Sean Quinns comments at some talk in Cavan today. Newstalk are reporting that he accused VHI of deliberately manipulating their balance sheet to trigger RE and drive BUPA out of the market. The head of VHI was "unavailable to comment."

Also Quinn said he offered to take over the VHI and run it properly. He offered Mary Harney a €1 billion pound bond to prove his bonafides and said that he would sell BUPA if she agreed. All this two days before she launched her midnight run to close the reinsurance loophole.