Bupa set to bring in new pricing structure

The country's second-largest private health insurance company, Bupa Ireland, said yesterday it was seeking to keep subscription increases for this year to "single digits".

The company also indicated that it is considering the introduction of "differential pricing" which would see it put in place relatively higher subscription increases for those on its more expensive plans.

Bupa is expected to introduce a new pricing structure for its 600,000 subscribers from the beginning of March. The price increases are likely to be formally announced in early February.

Chief executive of Bupa Ireland Martin O'Rourke said yesterday the company was conscious that private health insurance could become unaffordable for some people on lower incomes. Already there had been a number of cases where subscribers had dropped out due to increased costs.

Mr O'Rourke said the company was just starting the process of calculating its pricing structure for the year. However, Bupa wanted to keep increases to single figures. The country's largest private health insurance company, VHI, increased its prices by 12 per cent last autumn.

Mr O'Rourke said that given concerns about the affordability of health insurance, the company was thinking very much along the lines of differential pricing which would favour those on lower incomes. He said 90 per cent of Bupa subscribers paid less than the equivalent cost of the VHI's most popular scheme, Plan B. The current thinking was aimed at introducing lower price increases for this group. Those subscribing to the more expensive plans would face relatively larger increases.

Bupa does not have to seek political approval for increases in subscription levels.

Up to now the Minster for Health has had a right of veto over plans by the State-owned VHI to increase its charges or introduce new products.

However, this system is to be abolished under reforms put forward by Minister for Health Mary Harney before Christmas which would give the company greater commercial autonomy.

The regulator of the health insurance industry, the Health Insurance Authority, has alleged that "price following" was being practised in the sector in Ireland. This is where an insurer with a lower risk profile sets its premiums slightly below those of other insurers with higher risk profiles.

It has also maintained that Bupa was making excessive or supernormal profits in the Irish market.

Bupa has strongly contested these claims. Last month it failed in an attempt to halt the introduction by the Government of a controversial risk equalisation scheme for the sector from the start of 2006.

The company is expected to initiate new judicial review proceedings in the near future against the decision of Ms Harney to introduce the scheme.