Bupa profits as Irish patients pay higher prices - report

The private health insurer Bupa is generating high profits on the back of charging unnecessarily high prices to Irish consumers.

This is destabilising the wider heath insurance market in a manner that could lead premiums to rise by 600 to 700 per cent for older subscribers, according to a consultancy report published yesterday by the Amicus trade union.

The report, entitled Impact of Failure to Commence Risk-Equalisation Payments in the Private Health Insurance Market in Ireland, also warns that Bupa's State-owned competitor, VHI, faces an inevitable financial crisis because of the Government's continued failure to introduce a "risk-equalisation" mechanism.

Risk equalisation involves a cash transfer from insurers with a lower cost of claims to those with a higher-risk base, due to the fact that they cater for older and/or less healthy subscribers.

The mechanism is allowed under health insurance industry legislation and has been recommended to the Government by the Health Insurance Authority.

VHI is seeking the introduction of the mechanism as it claims the current system leads to higher fees for subscribers.

However, risk equalisation is staunchly opposed by Bupa, which dismisses it as a Government subsidy to a State company.

The Amicus report, which was prepared by the firm FGS Consulting, strongly recommends the adoption of a risk-equalisation mechanism by the Government.

It says Bupa has made windfall profits since it entered the Irish market, and notes that consumers have not benefited from competition.

The report notes that Bupa's cost of claims, at less than 60 per cent since it entered the Irish market, is way below the VHI with 80 per cent.

It concludes that Bupa has forced up VHI's prices because the firm has taken away some of VHI's lower-risk customers.

The report says the VHI now faces an inevitable financial crisis and notes the firm has budgeted for its first-ever loss for this financial year.

"While the VHI may, in the past, have left itself open to the charge of 'crying wolf' too often, there is an inevitable reality to its current financial crisis which must not be overlooked," concludes the report.