BUPA versus VHI - competing on price

PRIVATE health insurance will never be the same after this week's introduction by BUPA Ireland of its new `Choices' package of basic health insurance and optional cash plans. New members are being registered immediately and benefits will commence from January 1st, 1997.

The Government's community rating requirement - by which every subscriber, regardless old age or health must be offered the same premium rate, has been fully honoured by BUPA. But increasing consumer demand for better value and an end to the perceived unfairness of younger members subsidising older, higher risk ones has also been addressed. BUPA has taken the unique step of separating essential medical services from the discretionary convenience and comfort element of private health insurance schemes by setting up an age-related cash benefit plan that can be used - or not - to purchase varying degrees of hospital accommodation. Structuring the package in this manner allows the company to improve the basic medical benefits and reduce costs, says BUPA.

Younger people, people with children (including those in full time education up to age 21) will be the biggest beneficiaries of a switch from VHI to BUPA; older people on higher value VHI plans would be well advised to stay put since BUPA will charge quite a bit more for the over 555 to enjoy the accommodation of the more exclusive private and high technology hospitals.

Older VHI customers on the lower value plans however, will not be penalised by very much if they switch to the equivalent BUPA scheme - and the extra value benefits that are part of the basic health insurance cover should compensate for the slightly higher premiums.

BUPA is naturally interested in attracting existing VHI customers and has made it as easy as possible to transfer allegiances. For example, it will waive the mandatory waiting periods for benefits on the grounds that these new customers already fulfilled them when they first joined the VHI. And BUPA is matching VHI's exclusion period or existing medical conditions.

By setting the cost of the basic health insurance cover (which BUPA claims is the equivalent of VHI's plans A and B combined) to a flat £172.27 for an adult and £55.60 for a child, and by offering additional benefits for that money, BUPA is confident that it will attract customers who have never belonged to any health insurance scheme. The inclusion of optional cash benefits, BUPA believes, will also attract people (and there are thousands) who belong to the popular stand-alone cash plans, like the Hospital Saturday Fund (HSF) and the Hospital Savings Association (HSA).

BUPA `Choices' is essentially a two-part scheme, a core health insurance plan called `Essentials', and the second part called `Cash Plans', an optional cash benefit scheme which can buy you private accommodation in the public hospital, access to a private or higher technology hospital or alternatively, a cash refund to spend as you wish if you decide not to `buy' the higher value accommodation.

The `Essential' plan costs £172.27 per year for an adult member, regardless of your age or state of health. Children under 18 years pay £55.50 per year with the age limit extended for child dependents who attend education up to age 21. Discounted family plans are available where one parent is over age 50 and like the VHI regardless of how many children you have, you only pay for three. By comparison, VHI covers under Plan B costs £263.42 a year for an adult and £95.85 per child to age 18 only.

The BUPA medical care contract virtually mirrors that of the VHI. For the basic £172.27 subscription, the BUPA policy holder is covered for all treatment and care in semi-private accommodation in 63 participating hospitals around the country and in private accommodation in 30 of those hospitals. A total of 74 hospitals are currently participating in the new BUPA scheme, compared to 102 in the VHI, though not all of those are fully participating and require balance billing from patients. There is no balance billing from hospitals under the BUPA scheme.

A major advance on the VHI contract, and one which BUPA hopes will attract many first-time users of private health insurance, is the offer to allow every member the chance to have the full cost of heart surgery procedures at either the Mater Private or Blackrock Clinic hospitals included in the basic £172.27 a year premium. Currently, VHI customers on Plan A are covered for just 35 per cent of the cost of such operations, reckoned at £10,000 per operation. (This cover rises to 90 per cent of the cost for Plan B and C members and is fully covered for Plan D and E members.) This is particularly significant for people on lower incomes who will now be able to jump the lengthy public health service queues for such operations.

Similarly, cancer patients with the basic BUPA cover will now have their doctors fees and inpatient, day-care and outpatient and radiotherapy treatment covered fully. (VHI does not cover such fees or treatments in its basic plan.)

Under the outpatients category of benefits, BUPA has set a lower annual `excess' than the VHI - the excess being the total amount of medical expenses which must be accrued before a claim can be made. Under the BUPA basic plan, an individual may not claim the first £200 worth of expenses (£250 under the VHI) or the first £375 for a family (£450 under the VHI). But once claims are made the BUPA member will be offered the following benefits:

(1) The full £12 public hospital casualty charge (VHI - £10);

(2) out-patient specialist consultant fee of £40 (VHI - £30);

(3) up to £15 of a GP's fee (VHI - up to £10);

(4) up to £15 per consultation for approved alternative medicine therapies such as homeopathy, osteopathy, chiropractic, Chinese medicine/acupuncture (not available under VHI);

(5) cover of up to £13,500 while temporarily abroad (VHI cover ranges from £3,750 for Plan A up to £13,500 for PlanE);

(6) access to hospitals in Britain (including BUPA private hospitals) with a full refund if treatment is not available in Irish hospitals;

(7) three maternity-related consultants' out-patient visits worth £40 each (not available under VHI);

(8) a special grant-in-aid of £300 for approved home births (not available under VHI);

(9) all new-born babies included in the family policy at no extra charge until the next subscription renewal date (VHI charge for the baby from date of birth).

(10) a 25 per cent discount for breast and cervical screenings for women members at the Well Women clinics in Dublin, reducing the price of screenings to £15 (this is claimable under the BUPA out-patients benefit). A 25 per cent discount for similar screenings at the Bons Secours hospitals in Cork and Tralee bring the cost down to £50 which also includes a consultancy (not claimable under VHI).

The second part of BUPA's insurance plan is the cash plan option, and this is where any identikit resemblance between BUPA and the VHI ends. Whereas VHI cover includes the essential hospital and health cover plus a certain level of semi-private or private accommodation which is set by the VHI plan you choose the BUPA scheme allows for a basic health insurance contract which does not differentiate between members, and then allows the customer to not only choose the level of accommodation they want, but also whether they wish to avail of that accommodation on the day.

Four `Cash Plan' options are offered in addition to the Essential health policy: Protection 1, Protection 2, Protection 3 and the Gold Plan, representing per night accommodation worth £30 £60 £90 and £150 respectively. Protection 1 (£30 a night value) allows the member to stay in a private room in 32 of the participating public hospitals and a semi-private room in seven of the private hospitals including Mount St. Vincent's Private Hospital and the Bons Secours Hospitals.

The next most expensive plan Protection 2, with the equivalent purchasing power of £60 a night, will allow the member access to a private room at 62 of the hospitals including St. Vincent's Private Hospital in Dublin, Mount Carmel and the Bons Secours in Dublin, Cork, Galway and Tralee. Protection 3, with the buying power equivalent of £90 a night allows for a private room in all the hospitals except the Blackrock Clinic and Mater Private where you have semi-private accommodation. Only the Gold Plan allows for private rooms at those hospitals (and all the others.)

By being able to strike private room rates of £30, £60, £90 and £150 a night with all of their hospitals, BUPA is able to offer a high degree of flexibility to its cash plan members. The person with the Essential cover and Protection Plan 1, for example, can decide for themselves whether they want to be accommodated in a semi-private room at one of the private hospitals or in a private room in the public hospital which charges £30 a night. Or they can opt to use their £30 a night cash benefit towards a semi-private or private room at one of the hospitals that charges the high per night rate for accommodation and pay the difference themselves.

If the same member decides that they are happy enough with a semi-private or a private room in any of the 64 hospitals that will accept the basic BUPA Essential cover (and no cash plan), they will receive a £30 per night cash refund. The Protection 1 member who opts for the cash instead of the upgraded accommodation and stays five nights in hospital will receive a cheque for £150 from BUPA (£30 x 5 nights). Similarly, the person with the Gold Plan who foregoes his private room at the Blackrock Clinic for a private room at nearby St. Vincent's public hospital would get a cheque for £750 from BUPA (£150 x 5 nights).

The cash benefit is an attractive option for self-employed people who may suffer a loss of income during their illness or to those who may need to defray the extra cost of home help while they are in hospital. Many people will appreciate being able to use the cash to cover travel and hotel expenses for themselves or family members who must travel to Dublin or any other city for their hospitalisation. (The same cash benefits apply to child members with cash plan option.)

As the accompanying tables show, the cost of the separate cash plans varies according to age and the value of the cash benefit. The basic Protection 1 plan, which offers the £30 a night benefit, costs just £22.27 a year for children aged 0-18, just under £60 a year for anyone aged 19-49, £105.60 a year for 50 to 54 year-olds and £122.26 for over 555. Yet even when combined with the £55.60 a year premium for children and £172.27 for adults for the Essential cover, these total premiums are cheaper than VHI's plan B in the case of children (£77.87 versus £95.85) and adults up to age 49 (£231.73 versus £263.42.) The over 50s will pay more for the BUPA combined scheme, though the difference between the BUPA and VHI annual premiums is just £31.11 a year.

The price gap between BUPA and VHI is at its widest for older people who opt for the higher value cash benefit plans. For example, anyone aged 55 or over who buys BUPA's Gold Plan option plus the Essential cover will pay £877.87 a year; VHI's equivalent Plan E costs £744.17, a difference of £133.00.