Private health insurance market a cartel, claims Fine Gael senator

THE health insurance market was yesterday branded a cartel with prices almost doubling since competition was introduced.

Fine Gael Senator Fergal Browne made the charge when the Oireachtas Health Committee heard that policy premiums had increased by 98% since Bupa entered the market in 1996.

“At the moment you could nearly say there is a cartel operating in the private medical insurance market,” he said.

Earlier, Health Insurance Authority (HIA) chairman Professor Alastair Wood said Bupa had been “shadowing” the VHI’s price increases, with premiums charged by both insurance bodies running ahead of medical inflation.

He expected, however, that the recent arrival of Vivas would help to bring premiums down.

The committee had met to discuss the issue of risk equalisation to level the playing field in the health insurance market. Risk equalisation is a subsidy paid by one insurer to another where one insurer has a lower-risk market with a lower number of claims. In this case, VHI is seeking funds from Bupa.

The VHI, which has 80% of the market, argues that newcomers to the market (such as Bupa) can cherry-pick younger and healthier customers to minimise payouts.

The HIA’s final report on whether risk equalisation should be introduced will be delivered to Health Minister Mary Harney today.

Ms Harney has 14 days to decide whether or not to accept the authority’s recommendation.

Prof Wood said that introduction of risk equalisation was not always appropriate or justified and had the potential to do harm. A fine balancing act was required, he said.

In any event, Vivas would be excluded from risk equalisation for a three-year period.

Vivas is against risk equalisation, believing it will create a situation that would effectively see customers and new players handing over cash to subsidise the State-owned dominant player. “This would be a ludicrous situation and would kill competition overnight,” the company declared.

But Prof Wood believed it was unlikely that risk equalisation would have the effect of driving out one of the insurance competitors. “In our opinion that is unlikely to happen,” he said.

“If risk equalisation is introduced insurance companies can still remain in the market and make a reasonable profit,” he said.

Prof Wood said he was concerned that 25% of the Irish population had neither medical cards nor private insurance, but it was not in the authority’s remit to do anything about the situation.

VHI chief executive Vincent Sheridan claimed Bupa had quite cynically pursued profit in Ireland rather than market share.

He stressed that risk equalisation was essential for consumer competition, and while it might not bring down prices, it would slow the rate of increase.

And, while it was early days for Vivas, the VHI believed that the new company was solely attracted to the Irish market by the windfall profits that they saw Bupa earning.