VHI, BUPA and all that jazz

mike65

The high court has ruled that BUPA must pay the state owned VHI 160 million euro (says BUPA) in 'risk-equalisation' compensation over the next 3 years.

For those not familiar, BUPAs client profile is younger and therefore largely cheaper to look after than VHIs customer base. VHI citing the rules for
"risk equalisation" took BUPA to court and won. BUPA have threatened to quit the market and are going to have talks with the Health Minister this week and may well go to the Supreme court to see to reverse the ruling.

BUPA have built up a base of 500,000 subscribers over the last 10 years, while VHI have continued to grow thier numbers as more of us opt for private insurance.

Today the Sunday Times reports that even if VHI get thier money they will still be upping the rates by 15% per year over the next thre years!

So what happens if BUPA quit? Will another company fill the void or can VHI and Vivas look forward to a jump in new business?

Should VHI even get the money? Is it BUPAs fault they have younger subscribers and that VHI has been less than dynamic in pursuit of the "Celtic Cubs" money? Should VHI be cut free by the state sooner than 2012 to give it a shake up?

I dunno myself, I'm with Bupa and as far as I can tell I'm paying less than I would be for the equivellent VHI scheme and I suspect VHI, being a "legacy"
outfit, have plenty of room for increasing efficiency.

Mike.

Tom Dunne

mike65 wrote:

Should VHI even get the money? Is it BUPAs fault they have younger subscribers and that VHI has been less than dynamic in pursuit of the "Celtic Cubs" money? Should VHI be cut free by the state sooner than 2012 to give it a shake up?

In what industry, in what other country, does a company have to subsidise it's competitor, because it's competitor's costs are higher?

It defies any kind of logic.

jd

mike65 wrote:

I dunno myself, I'm with Bupa and as far as I can tell I'm paying less than I would be for the equivellent VHI scheme and I suspect VHI, being a "legacy"
outfit, have plenty of room for increasing efficiency.

Mike.

Mike, I thought VHI may have plenty of room for increased efficiency, but their operating costs are about the international average (as a percentage of revenue).

Obviously their under-writing costs are going to be higher if they have a higher number of older patients. Perhaps the best option is to have VHI broken up into a number of competing comapanies, with some of the older customers being moved to the competitors (VIVAS and BUPA).

parsi

As you get older you tend to think more about getting health insurance. Risk Equalisation is a part of community rating which means that your policy costs the same independent of age - the sort of thing that MJAG would like young drivers to benefit from.

As the incumbent VHI had got a large proportion of older subscribers but the newbie company targetted the market of people who didn't have insurance and these were primarily the younger folk who (like pensions) subscribed to the idea that they didn't need insurance now. Hence the disparity in age profiles.

Community rating does benefit us all - I'd hate to think of having intolerable health insurance costs in my later years.

It should be noted that risk equalisation (as a concept) and community rating existed _before_ BUPA entered the market. Risk equalisation is similar to what jd proposes above i.e spread out the oldies..

maly07@poczta.o

i dont know whats wrong with this country, seems like any competition on the market is considered as bad thing, feckin eircom, esb, bord gais (just got the bill - 33,8 % increase, wtf !!!) now Vhi what next ?

polish guy

parsi

maly07@poczta.o wrote:

now Vhi what next ?

polish guy

Bupa usually have their increases mid-year, VHI have them at the start, Vivas don't seem to mention it. Ryanair have increased their baggage fees.

Part of the problem is the Semi-States have to announce their increases but the private sector can just lash it on without having to publicise it all that much.

dahamsta

tom dunne wrote:

In what industry, in what other country, does a company have to subsidise it's competitor, because it's competitor's costs are higher?

That's a gross oversimplification. Until '96, VHI was the only health insurer in the market and consequently had to take on all comers whether they liked it or not. Risk equalisation might not be the path that should have been chosen, but something needed to be put in place to compensate for this.

adam

spank_inferno

I'm a young driver. I'm insured with quinn direct

Most young people I know are also insured with same, as they have a reputation of not scalping the young drivers like the other companies do.

Most accept that insuring young drivers costs more than insuring older more experienced ones.

Therefore can quinn-direct seek compensation from Hibernian / allianz / axa etc just because their client base is deemed to he costlier???!!!

This country beggers belief

side point: If insuring the swarms of old people is hurting the VHI why dont they just charge them more? Lower the prices for younger, healthier people, gain more market share in that demographic, and eventualy be able to cut prices because a larger part of their customers arent old.

Xterminator

Perhaps the point your all missing is Bupa dont discrimate or cherry pick their clients.

Hence all these old people with VHI are free to move to Bupa, and save the few bob too at the same time. I believe Bupa even offered to send a letter to each 'old person' offering to take their custom, seeing they cost VHI so much to insure.

Also Bupa are forced by regulations to set a certain amout of cash aside each year (large sum) as do Viva, but VHI have no such obligation, eg the private companies have more obligation than VHI.

In addition VHI have no incentive to become competitive and cut un-nessacary costs, as Bupa will have to subsidise them.

I think as long as Bupa dont cherry pick, then they should not have to pay a subvention.

Sarn

The reason why my healthcare insurance is with BUPA is because it is cheaper. I should really check out Vivas as that is probably cheaper again. The thing is I like to shop around for value, the same applies to my car insurance. It appears that the majority of people couldn't be bothered switching (the ol' sure I've been with them for years syndrome).

As a relatively young individual I would switch to VHI if it was the most cost effective.

When I was with VHI I kept getting all these promo letters packed with colourful leaflets, what a waste of cash. Dealing with them was also an interesting experience (although I haven't had to do this with BUPA yet thankfully).

MrPudding

Xterminator wrote:

I believe Bupa even offered to send a letter to each 'old person' offering to take their custom, seeing they cost VHI so much to insure.

An offer that was refused by VHI. Why make effort to inprove your business when you can keep the same inefficient work practices knowing that your competitors will be forced to bail you out.

Although part of me would not like to see it another part of me would like to see BUPA follow through on their threat, assuming the appeal is not successful.

Does anyone wonder why none of the other big european health insurance provider operate here?

MrP

jd

spank_inferno wrote:

side point: If insuring the swarms of old people is hurting the VHI why dont they just charge them more?

They can't - the market operates under community rating.

jd

MrPudding wrote:

Why make effort to inprove your business when you can keep the same inefficient work practices knowing that your competitors will be forced to bail you out.


MrP

As I said, vhi operating (not underwriting) expenses are within european sector norms as a percentage of revenue.
I think it works out at about 8%, while many insurers operate on about 10-12%

spank_inferno

what does "community rating" mean?

Gurgle

tom dunne wrote:

In what industry, in what other country, does a company have to subsidise it's competitor, because it's competitor's costs are higher?

It defies any kind of logic.

They weren't in competition until now.

VHI was built on the principle that all adults pay an equal amount for cover. Age-biased insurance quotes would not be allowed.

Bupa poached a few of the low risk customers from VHI by exploiting a loophole in how the industry was governed.

From VHI's annual report:

It takes the premium from seven 25 year olds to pay the claims of one 70 year old.

Risk equalization is about levelling the field until Bupa customers' age profile matches VHI.

Bupa may well quit the market, take their profits and run.

They are now really in competition against an organization which targets its annual finances to just about break even.

The only profit Bupa can make long term is by providing health insurance with less organizational overheads than VHI.

The only alternative to this ruling was VHI sinking slowly into bankruptcy and the health insurance sector here being divided up between the corporations.

Do we want to see US style health insurance?

'Sorry, you were only covered for up to $20k worth of chemotherapy, you have to pay yourself from now on.'

Even people who were well insured can be left bankrupt if they get the wrong illness.

scuby

Doubt Bupa will pick up and run... earned too much and they would get a lot of flak, also they bought into an insurance company in australia that benefits from risk equalisation !!!!! ok in australia but not in ireland ?

parsi

spank_inferno wrote:

I'm a young driver. I'm insured with quinn direct

Most young people I know are also insured with same, as they have a reputation of not scalping the young drivers like the other companies do.

Most accept that insuring young drivers costs more than insuring older more experienced ones.

Therefore can quinn-direct seek compensation from Hibernian / allianz / axa etc just because their client base is deemed to he costlier???!!!

This country beggers belief

side point: If insuring the swarms of old people is hurting the VHI why dont they just charge them more? Lower the prices for younger, healthier people, gain more market share in that demographic, and eventualy be able to cut prices because a larger part of their customers arent old.

Have you read anything posted in this thread ? /hits head in bewilderment

The point is that unlike car insurers VHI charges everybody the same premium for the same cover. That is community rating. It means that you aren't penalised for age. It means that a company with an older profile is shelling out way more than a company with younger people.

Community rating is a good idea but it seems to go against the grain of those who prefer short-term gain (cheaper premia now) versus long term benefit (non-penalisation for age).

The 5 of us (me, Mrs Parsi and the 3 little Parsi's) are with VHI. A similar plan with BUPA or VIVAS would cost much the same and like all great policies none of them offer exactly the same thing so as to make comparisons even more difficult.

Aquos76

parsi wrote:

The 5 of us (me, Mrs Parsi and the 3 little Parsi's) are with VHI. A similar plan with BUPA or VIVAS would cost much the same and like all great policies none of them offer exactly the same thing so as to make comparisons even more difficult.

Assuming one was on Plan B options with a wife/husband and 3 kids under 18 with VHI would charge €2059,Bupa essential plus(no excess) would be charging €1612 and for vivas we plan level2 they would be charging €1605

There a bit of a difference there. Granted not all plans are identical, but each has advantages over one another.

parsi

Twould be more like Family Plan Plus v Health Manager (judging by a quick look)... no two plans are identical !

MrPudding

scuby wrote:

also they bought into an insurance company in australia that benefits from risk equalisation !!!!! ok in australia but not in ireland ?

Slightly different in Oz. There is something like 20 providers. That means actual competition. Also, no one provider has a huge percentage of the market.

I know it is from BUPA but there is some interesting reading here.

http://www.bupa.ie/news/risk.htm

MrP

Gurgle

MrPudding wrote:

http://www.bupa.ie/news/risk.htm

From there ^^:

Isn't Risk Equalisation necessary to prevent "cherry picking"?
No you can't cherry pick in Ireland. Insurers can't refuse someone who wants to join and everyone pays the same price depending on the product they have chosen.

but check the waiting periods page here, its quite clearly not the same product you get if you're over 55.

MOH

Gurgle wrote:

From there ^^:


but check the waiting periods page here, its quite clearly not the same product you get if you're over 55.

LOL,
"You are already pregnant and you wish to improve your cover, how long before you can avail of better cover? - 1 year"

Bit late then!