VHI should seek new members — not subsidies

ONE good thing is likely to emerge from the debate about health insurance, and that is the role of VHI which has come under close scrutiny and is likely to be forced to make substantial changes to its operation.

A market subject to government intervention and in which the State owns the dominant player is always likely to be distorted in favour of the establishment.

When BUPA entered the Irish market, it offered lower premia and undoubtedly attracted younger and more cost-conscious customers, while older and generally less healthy people were likely to stay with VHI.

However, time has moved on and BUPA’s younger customers have got older while many of the VHI’s older customers have passed on. Since BUPA’s arrival, the customer age profile should have evened out considerably thereby making a strong case for reducing and eventually removing the risk equalisation payment. There does not seem to be any justification for continuing risk equalisation indefinitely as it will increasingly end up as a subsidy for inefficiency, and that should be unacceptable in a free market.

There should be no reason why the VHI cannot compete successfully for new customers and quickly end up with an age profile similar to that of its competitors.

The State should withdrew from commercial activities, which are always likely to be performed better by the private sector, and concentrate on matters which are its proper concern. When Ireland was poor, capital was not available to fund commercial activities and State intervention was essential, but this is manifestly no longer the case.

David Roberts

‘Gloundine’

Castlegrove

Mallow

Co Cork.