Risk equalisation in health cover


Madam, - I agree with Dr Norman Stewart (Dec 29th) that compulsory insurance with State subsidy for those on low incomes is probably the best way to finance healthcare. However, the immediate concern is to make the existing community rating system, whereby voluntary subscribers pay the same premium for the same cover regardless of age, work properly.

In an ideal world competition would bring benefits to the consumer without any intervention, but as the old monopoly (VHI) was established long before other companies (Bupa and Vivas) entered the market, it has a disproportionate number of ageing subscribers, and so must set higher premiums to meet higher claims. These premiums are then shadowed by its competitors who make bigger profits because their younger subscribers claim less. Bupa alleges that risk equalisation, a mechanism for redistributing some of this extra profit so that premiums overall could fall - obviously to the benefit of the consumer - is unfair.

In fact, it is simply the elimination of an advantage that Bupa and Vivas have been allowed to enjoy in order to make it easier for them to establish a base.

Dr Stewart rails against the injustice of younger people having to pay more to subsidise well-off older people under community rating.

This kind of anomaly arises with any universal entitlement, but it is still a better option than average subscribers having to pay more, or fall back on the public system, as they grow older and retire on fixed incomes. This is what will happen if community rating is abolished and individual premiums are set purely on the basis of risk, which is the situation that Bupa is ultimately trying to bring about.

This affair illustrates the danger of allowing commercial considerations to dominate in an area where the primary concern should be fair and affordable access. This danger is always played down by the more extreme proponents of competition and deregulation, for whom there is no such thing as an excessive or unfair profit.

I hope that the object lesson of the State being taken to court by a profit-driven service provider is not lost on the Minister for Health, or indeed other ministers with non-commercial portfolios. - Yours, etc,

CHARLES BAGWELL, Straffan, Co Kildare.