BUPA says health insurance market is uncompetitive

BUPA Ireland has said that the Irish health insurance market is one of the least competitive in Europe and that the Risk Equalisation Scheme (RES) is acting as a major barrier to other firms entering the market.

The RES is currently suspended pending the publication of a departmental study, but a draft of the paper circulated in the industry suggests that it be reinstated on a permanent basis.

"Research shows that the Risk Equalisation Scheme, which requires BUPA Ireland to pay over an estimated £5 to £7 million to the VHI, its dominant competitor, is the single biggest barrier to competition on the Irish market," Dr Margaret Downes, chairman of BUPA Ireland, said yesterday. She was speaking at the presentation to BUPA of the Excellence Ireland award by the Taoiseach, Mr Ahern.

Dr Downes said the RES should not be re-introduced in the Irish market as it was not needed nor was it appropriate. "It is anti-consumer, it prevents competition, it erodes cost containment and it frustrates EU requirements," she said, adding that a market of Ireland's size should have five or six competing health insurers.

The RES involves a complex set of regulations designed to prevent new entrants to the market keeping claims down by "cherry-picking" customers. It also aims to ensure that a health insurance company which insures older customers is not financially disadvantaged by providing for transfers when there is a material market imbalance between companies and one has a younger, healthier profile than another.

The VHI has argued that the RES is necessary if Ireland's system of community rating, which ensures the same health insurance premiums for all customers is to be maintained.

But BUPA believes that consumers and market stability are well protected by the free transfer of members between insurance companies regardless of age or risk. If a 90-year old chooses to transfer to BUPA from VHI, they are free to do so, just as a 30-year old is, it says.

In addition, it says its products are community-rated and customers choose BUPA Ireland or the VHI based on the customers' preference, not because they are picked by the insurer.

The RES is currently the subject of a technical, discussion paper sent out by the Department of Health to all relevant parties in the health insurance industry.

The outcome will be incorporated in the White Paper on health insurance which is due for publication sometime in the next two months. However, BUPA said the technical paper was almost unchanged from the previous system with only minor amendments. "The technical paper is not really a change in any meaningful sense. It contains all of the old features. It's almost a case of saying, you're not guilty, do you want to go to jail for two years or 10 years?" says Mr Martin O'Rourke, BUPA chief executive.