Government encourage and reward inefficiency - BUPA confirm they are pulling out

gandalf

Well BUPA have just announced that they are pulling out of the Irish Market, so much for Mary Harney and her ethos of "shopping around" looks like our choices have been dimished even more by this backward and insular government. It is obvious that the VHI is a wasteful and bloated organisation yet they allow them to get increases year on year without any real return in productivity increases.

BUPA to pull out of Irish market over risk equalisation

The health insurance firm BUPA has announced that it is pulling out of the Irish market.

In a statement on its website, the company says it has no choice but to make the decision and is doing so with great regret.

BUPA had warned that it would leave the Ireland market after the High Court's recent decision to uphold the risk equalisation scheme.

The ruling meant BUPA would have had to pay compensation to the state-owned VHI because of its younger client base.

The company claimed the move would force it to hand over €161m to its rival, even though its profits would be just €64m.

Its decision to quit the market leaves the field open for Vivas to target BUPA’s 15% market share, totally around 500,000 customers.

http://www.unison.ie/breakingnews/index.php3?ca=35&si=102930

Colonel Sanders

I work in insurance and couldn't believe it when I heard about risk equalisation. It would be like every other general insurer being forced to compensate Quinn for having large numbers of young drivers on their books. Ridiculous.

Villain

A totally disgrace, 400 jobs gone as well. This Government is really starting to cheese me off.

seamus

Colonel Sanders wrote:

I work in insurance and couldn't believe it when I heard about risk equalisation. It would be like every other general insurer being forced to compensate Quinn for having large numbers of young drivers on their books. Ridiculous.

Or it would be like forcing every insurer to charge everyone the same amount for car insurance, regardless of a person's age.

Risk equalisation in health is a joke. When you get older, you should be paying more health insurance, simple as.

layke

You just beat me to it

I'm sure i'm not the only one who saw this happening. I have to say her decision was absolutely stupid. Further to that the subs will keep any other health insurance companies out of the country as the competition (or lack there of) isn't fairly fixed.

Heard Harney on the radio saying how dissapointed she was and how important the subs are to our own system. This was a case of not admitting your mistakes nor making any effort to keep BUPA in the market. It looks like some sort of communism system put in place between the two.

hmmm

I'm sure VHI will be adding 10% to whatever increase they had planned this year in celebration. If we are going to have risk equalisation in optional health insurance where the young subsidise the old, I would expect for fairness sake that we would have it in car insurance as well.

Well it was obvious that this was going to happen.
A commercial company wasnt going to stay in the Irish market to sustain losses as a result of [STRIKE]profit sharing[/STRIKE] Risk equalisation.

Are FG/LAB supportive of this policy by the way? If they are,theres no point bashing the government about it-other than pointing out the pd's clear hypocrisy being a supposedly party of business.

How is Risk equalisation getting past the competition authority by the way? The EU one or the Dublin one?

Or is it an animal farm competition authority that we have here where some competition is more equal than other competition?

flogen

seamus wrote:

Or it would be like forcing every insurer to charge everyone the same amount for car insurance, regardless of a person's age.

Risk equalisation in health is a joke. When you get older, you should be paying more health insurance, simple as.

Indeed, and if I, as a 21 year old male, am forced to pay through the nose for car insurance based on the fact that I'm both young and male then I don't see this as being any different a matter.

Of course, no one likes the idea of old people having to pay more just to ensure their good health (because God knows they can't rely on public healthcare to help them), but it's as much a fact of life as the above example and if they want to solve these problems they should do it all at once, or not at all.

Macy

We either have community rating, which inevitably involves risk equalisation or we go to a health insurance system that you can afford until you get sick (and that is regardless of age). BUPA are leaving because they aren't doing as well as they thought they would - this just gives them a convenient cover.

btw VHI/ VIVAS/ BUPA was going up anyway - Cowen increased charges for Private Beds as one of the stealth taxes.

Calina

Macy wrote:

We either have community rating, which inevitably involves risk equalisation

Why "inevitably"? In a balanced market, the spread of risk would be across all players in which case RE isn't necessary at all.

Colonel Sanders

Btw does anyone know what the EU competition authority has to say on this matter?

Macy

Calina wrote:

Why "inevitably"? In a balanced market, the spread of risk would be across all players in which case RE isn't necessary at all.

Because it isn't a balanced market. None of the companies offer full cover with immediate effect.

Fratton Fred

when I moved over, my brother in law gave me some advice, he said

"If something is done by a commercial company, it is generally done well. If a government body gets involved, they generally **** up."

another case to prove him right.

is_that_so

Risk equalisation in principle is a good idea. It ensures that companies don't fill their books with low risk clients and thus generate substantial profits from it. With the VHI being the only company for many years they accepted all and sundry and so have a much wider base of risk. That notwithstanding they don't operate as a commercial company.

Incidentally once people go over 65 and want to get health insurance for the first they have to wait for two years on average whilst still paying the premium.

jd

gandalf wrote:

It is obvious that the VHI is a wasteful and bloated organisation yet they allow them to get increases year on year without any real return in productivity increases.

It may be "obvious" but why then are their operating costs within international norms within the health insurance sector (at abt 7.5%, I think)?

hmmm

Risk equalisation may work where you have equal competition. Instead what you have is one bloated semi state which is supported by the government, and a private competitor who is forced to subsidise them. It's nuts, and we're all going to have to pay more in the future to keep the unions in the VHI happy. This country is going backwards, thank goodness house prices aren't falling..oh wait.

jd

hmmm wrote:

. Instead what you have is one bloated semi state which is supported by the government,.

In what way is the VHI bloated? Figures please.

hmmm

jd wrote:

In what way is the VHI bloated? Figures please.

hah! an easy answer, you've obviously never dealt with the VHI.

The conventional wisdom that VHI has a much older membership than BUPA Ireland and that BUPA Ireland thus owes VHI large amounts of compensation for this age gap is not supported by the evidence. The average age difference is small at 6 years and in a range over which health expenditures are more likely to decline than rise with age. Based on the YHEC data ,risk equalisation would require VHI with an average age of 44 in its membership would be required to compensate BUPA Ireland for the higher health expenditures incurred by its average membership age of 38 because of the higher health expenditures of women at age 38 than at age 44.

From "Risk Equalisation and Competition in the Irish health insurance market" from TCD.

Get back to me if you need any of the big words explained.

daveirl

This post has been deleted.

is_that_so

hmmm wrote:

hah! an easy answer, you've obviously never dealt with the VHI.



From "Risk Equalisation and Competition in the Irish health insurance market" from TCD.

Get back to me if you need any of the big words explained.

Ah yes the beauty of statistics. IMO you need to compare like with like. VHI has 76% of the market and consequently a considerably higher number of "older" subscribers.

jd

hmmm wrote:

Get back to me if you need any of the big words explained.

Absolutely way out of line .

seamus

So now we have a public health service that can't afford to treat the public, and a private health service that only the well-off can afford (€500/year for health insurance is a lot of money to most people).

Nice work Mary.

jd

daveirl wrote:

This post has been deleted.

Any indication guiven of the perecentage of the client base on different schemes?

daveirl

This post has been deleted.

Zynks

Guys, have a look at the letter from TCD that hmmm linked above. It says that the average age for BUPA subs is 38 and 44 for VHI. Considering the critical mass VHI has with over 3/4 of the market, this age difference should be neglibible, unless the incompetence in VHI is ingrained.

I am (or was) a BUPA subscriber and wrote to Mary f***ing Harney earlier this year protesting against those plans. I got a response that they were putting it on hold for the time being.

I am having difficulty to express the anger and frustration this extreme example of incompetence makes me feel.

Yesterday I read an article about the World Economic Forum's rating of the most dynamic economies in Europe. We don't even appear in the top 10. This news should bring us all the way to the bottom.

http://news.bbc.co.uk/2/hi/business/6174573.stm


Please, please bring the elections forward. I really need to vote!!!

Zynks

Just in case, I am posting the executive summary of the report by Dr Sean D. Barrett, Department of Economics,Trinity College.

(A) EXECUTIVE SUMMARY.

The analysis contained in the YHEC report indicates that the report did not consider adequately the role of competition in the market for health insurance. This is a major weakness and appears in part to be due to a late deletion of competition from the report’s final research brief by the HIA.(p.90)
The evidence on the average age of BUPA Ireland members, 38 years and VHI members, 44 years provides no basis for transfers from BUPA Ireland to VHI. In the case of females between 38 and 44 years health expenditures decline with extra years.
The regressiveness of the transfers and cross subsidies in Irish health insurance under community rating is illustrated by the internal transfers from low cost profitable Plans A and B within VHI to high cost loss making Plans C, D and E. Under the proposed transfer of €34m a year from BUPA Ireland to VHI a low cost BUPA essential health insurance cover with a premium of €272.39 would be levied to cross subsidise VHI Plan E costing €1,316.33 per adult. The price of the most expensive subsidised product under the HIA proposal is 4.8 times the price of the product to be levied in order to finance the cross subsidisation. The average BUPA premium was €327 while the average VHI premium was €435. The price of the average product to be subsidised is therefore 33% greater than the price of the average product to be levied to finance the cross subsidisation. CSO data confirms that expenditure on health insurance rises over all ten income deciles. Incomes in the top decile are 10.1 times those in the bottom decile but health insurance expenditure is 22.9 times greater.
Section C of this report deals with the HIA letter to BUPA Ireland requiring the equalisation payment of €34m annually from BUPA Ireland for transfer to VHI which had operating profits of €73.3m (before unexpired risk reserve) in their accounts to February 2004. The HIA presents no analysis of the rationale for the payment. It mistakenly asserts that consumers as a whole will be better off from levying one firm in order to cross-subsidise another. It asserts without evidence that the payments required are significant, rising, likely to rise further in the absence of risk equalisation and that in their absence the stability of the industry will be threatened. While there is recognition of possible withdrawal from BUPA Ireland of some younger members because of the price rise in order to finance payments to VHI there is no recognition in the letter of the benefits of competition to health insurance consumers.
Section D examines the competition issues neglected by both YHEC and HIA and the benefits foregone by the anti-competitive levies imposed on BUPA. The Irish health service is characterised by high costs and rent-seeking by producers which are extreme by EU standards. The scope for immediate cost savings and further future leveraged savings in a high cost health service is therefore large but these benefits are foregone by regulators adopting the anticompetitive levies recommended by the regulator in this sector.

While I disagree with the whole idea of BUPA being made to pay VHI, I think this is only spitting the dummy stuff. BUPA have sufficient assets to render the payment negligible to them. As Macy said, guess they weren't making the profits they thought they would and this is their excuse...

Zynks

Deleted User wrote:

While I disagree with the whole idea of BUPA being made to pay VHI, I think this is only spitting the dummy stuff. BUPA have sufficient assets to render the payment negligible to them. As Macy said, guess they weren't making the profits they thought they would and this is their excuse...

From BUPA's website:
BUPA Ireland is a not-for-profit organisation, which means that any profits made are reinvested into healthcare for the benefit of all our members.

shoegirl

is_that_so wrote:

Ah yes the beauty of statistics. IMO you need to compare like with like. VHI has 76% of the market and consequently a considerably higher number of "older" subscribers.

But that doesn't take the following into account:
1. VHI has had about 30+ years to build up its customer base, whereas BUPA has had only 10
2. VHI are still at a competitive advantage as being the "first one in" in the lucrative corporate market where employers pay for their employees cover (frequently without offering the employee a choice of insurers) - though BUPA have aggressively pursued this market in recent years with a high degree of success
3. And lastly, but I think this is key - an awful lot of older people were "trapped" with VHI since they had established relationships with consultants who were "VHI-only" - there is no obligation on a consultant or doctor to accept payments from BUPA/Vivas so effectively this prevents many (especially older) VHI clients from transferring to BUPA/Vivas.

Not to mention the fact that a lot of bills, eg outpatients, are settled at the end of the cover year, which means you have to transfer to the new insurer after this is sorted out.

The big problem with risk equalisation is that it tried to solve one problem without tackling fundamentally anti-competitive processes at play in the market - for example, the issue I raised above. It also failed to take into account the regulatory differences between the different companies which has led to a situation in recent years where VHI not only still hold onto 80% of the market, but also still make much higher profits than the competition, yet could still require cross subsidies.

The problem really is that the government policies have led to a conflict between competition and risk equalisation, and really much more should have been done to level the playing field.

I believe the EU Competition Bodies have taken an interest and may be initiating proceedings against Ireland as a result of this. My worry will be now if VHI manage to also push Vivas out of the market - which now is a real possibility if Vivas fail to get a good percentage of BUPA's residual customer base.

Again the problem here will be just like the eircom/Smart debacle. It was rumoured that eircom hired an extra 500 sales staff on the day they pulled the plug on eircom to poach back its customer base. And I suspect that the VHI will likely do the same thing, especially with the corporate paid-insurance market.

The real victims here though, are the 300 people who are going to be out of a job within 12 months. Fermoy is not a rich place and 300 jobs (many of which were good jobs) will be badly missed there.

Finally why has nobody mentioned the fact that VHI make a loss on the high-end plans (c, D and E) which are cross subsidised by lower income customers on plans A and B? Effectively BUPA was being asked to help subsidise these (usually) high income customers despite having a largely lower income customer base (judging by the quite low takeup of their Healthmanager Gold product). Risk equalisation ignored quite a number of factors at play in the industry. Now Ahern, Harney and her mafia have got exactly what they deserver.

Zynks

Zynks wrote:

From BUPA's website:
BUPA Ireland is a not-for-profit organisation,

Sure they should have registered as a charity,that'swhere they went wrong.

Anyway, the lesson to be learned is, put FF back in as a single party government with an overall majority...

gandalf

What Conor the same FF that let this happen on their watch :rolleyes:

jd

Zynks wrote:

Guys, have a look at the letter from TCD that hmmm linked above. It says that the average age for BUPA subs is 38 and 44 for VHI. Considering the critical mass VHI has with over 3/4 of the market, this age difference should be neglibible, unless the incompetence in VHI is ingrained.

The problem arises as people reach the age of about 60 or so, when health costs rise sharply. The average doesn't really give the full story, we need to see the percentage of of various age ranges in each company's customer base.

bk

Here is what should be done. Break the VHI into three separate companies, each with an equal number of customers and with a fairly dispersed age profile. Privatise each part selling it to the likes of BUPA/VIVAS and don't allow them to ever re-merge.

That way there is no massive company with an inbuilt monopoly (like Eircom) and all companies have the same age profile, meaning equalisation is not required and allows for the companies to compete with each other for customers.

This is a bit like what the US did with breaking up AT&T into mini-bells.

bk

jd wrote:

The problem arises as people reach the age of about 60 or so, when health costs rise sharply. The average doesn't really give the full story, we need to see the percentage of of various age ranges in each company's customer base.

But we also need to see what plan each age group is on. There is a lot of evidence that as people get older, they tend to go on the more expensive private plans which are far more profitable for VHI. There is a lot of evidence that you have BUPA with lots of younger people on very cheap (low margin) package having to subside older people on very expensive plans at VHI.

jd

bk wrote:

But we also need to see what plan each age group is on. There is a lot of evidence that as people get older, they tend to go on the more expensive private plans which are far more profitable for VHI. There is a lot of evidence that you have BUPA with lots of younger people on very cheap (low margin) package having to subside older people on very expensive plans at VHI.

Some doubt here, Shoegirl thinks they (high end plans) are less profitable. Anyone have any figures on this?

jd

bk wrote:

Here is what should be done. Break the VHI into three separate companies, each with an equal number of customers and with a fairly dispersed age profile. Privatise each part selling it to the likes of BUPA/VIVAS and don't allow them to ever re-merge.

.

I suggested something similar on a previous thread.
http://www.boards.ie/vbulletin/showthread.php?t=2055020793

mike65

Older clients tend to be on more expensive plans C,D and E. In Australia the risk-eqalisation applies only to those over 65 I belive. Its treated like a seperate market. There are over 20 private health insurers in Oz.

Mike.

Sean Barrett . A fair use of stats as always.

oscarBravo

hmmm wrote:

Get back to me if you need any of the big words explained.

One more crack like that and you'll be getting some time off from this forum. Get back to me if you need the charter explained.

Time Magazine

Deleted User wrote:

Sean Barrett . A fair use of stats as always.

Just thinking the same thing myself . He was at Michael O'Leary's wedding, don't you know.

Zynks

Bottom line of the story. From having some choice, we are now down to 3 options for health care:

- Public services which need no introduction
- An expensive white elephant enjoying a monopolistic position and totally backed by people who say they promote competition (oh, and who is running also the one above) and
- A company that is small, but backed by the second richest man in the country who is not in this business for any other reason than profit and one of the most profitable banks in Europe

Ah, isn't it great, we got rid of the odd one that had decent prices and a not-for-profit approach...

Judt

Though we all agree here, I think it might be worth noting that most of us are not the elderly and infirm, for whose cover this was proposed. Personally I don't think that this is a good idea at all, but we are mostly singing to the choir here as well.

Government has created a huge mess of the health insurance market. An improvement would be for community rating to be abolished, and for the government to pay lump sums to those who experience higher premiums that they cannot afford. It would be a far more efficient system. What we have now is a system, which to outside observer, seems to be designed to let rich people skip the queue in public facilities.

constitutionus

Deleted User wrote:

Government has created a huge mess of the health insurance market. An improvement would be for community rating to be abolished, and for the government to pay lump sums to those who experience higher premiums that they cannot afford. It would be a far more efficient system. What we have now is a system, which to outside observer, seems to be designed to let rich people skip the queue in public facilities.

correct me if im wrong but isnt that what the medical card is meant to be for ?:D VHI have been prataling on about old people compleatly forgetting theyre entitiled to free health care over 65, methinks its just a fig leaf to get rid of the competition.

first smart telecom (and guess who got their 3g liscence) and now BUPA. tell me exactly where am i meant to shop around?

i'll be honest, my solution? allow anyone in the country to insure themselves with any heath care insurer across europe! we're meant to be a single market damnit. after 30yrs of the EU the least we should be able to do is insure our cars in germany and get health insurance in france. of course that would mean crushing the cartels in the financial and health sectors in this country, something our lads in the dail arent interested in :mad:

True, medical card does cover people to a large extent. General idea I was trying to get at is that Community Rating has better alternatives. It served the VHI's interests more than anyone else, as they didn't have to bother assessing each individual's risk. Good point on the pan european market too. Charlie McCreevy should be making more progress towards opening up markets in general and especially insurance.

CJhaughey

Deleted User wrote:

Sure they should have registered as a charity,that'swhere they went wrong.

No there is a difference between a charity and a Not-for-profit organisation, Canadas health system is largely private but run on not-for-profit lines.
Where BUPA went wrong was entering a market which had a useless shower of corrupt incompetants in govt.
I think that the EU will have a look at this and just shake their heads in disgust and walk away laughing.

Captain Trips

hmmm wrote:

hah! an easy answer, you've obviously never dealt with the VHI.



From "Risk Equalisation and Competition in the Irish health insurance market" from TCD.

Get back to me if you need any of the big words explained.

Averages are not "properly" statistical though, and misrepresent the reality, IMHO. We need Medians and all that standard deviation stuff.:)

I do not either use VHI or work for them, but I would not like a cut throat mercenary attitude available to health insurance companies, which BUPA has clearly displayed, and is akin to models in the US.

The alternatives to risk equalisation would be VHI upping insurance to whatever it is to pay for expensive care for older people, with much longer durations of stay in hospital compared to younger.

"Average" age comparisons are utterly meaningless.

WOuld a suitable comparison be in car insurance? It's not about "biggest" in subscriber numbers, like someone mentioned regarding Quinn Direct, but if one company had the vast majority of young drivers, and the other companies had a new market of previously uninsured safe and experienced drivers. Those new companies would likely have far less claims (if we are to believe the hype around young drivers being inexperienced, that is a different matter).

A true "open market" would mean paying the $10,000/year family premiums so enjoyed by many American families in the current free/open/we-love-competition market.

Competition is for businesses and governments to deal with. As a citizen, you should only be concerned with paying the least possible for the best possible quality (IMHO!) - and if BUPA see to wish to profit elsewhere, as an obviously truly mercenary company would, then let them.

Has it meant your quality of insurance care/cover has worsened? Have your costs increased? Have those costs been in line with international norms - if it's all good, then you won't notice a thing.

I do not want a system where our parents/seniors/ourselves-in-30-years have to work in Tesco to pay for health insurance or prescription drugs - that is what a free market does and it is not very pleasant. NY Times has many stories on these problems.

LostinBlanch

constitutionus wrote:

first smart telecom (and guess who got their 3g liscence) and now BUPA. tell me exactly where am i meant to shop around?

You're definitely singing to the choir here.

constitutionus wrote:

i'll be honest, my solution? allow anyone in the country to insure themselves with any heath care insurer across europe! we're meant to be a single market damnit. after 30yrs of the EU the least we should be able to do is insure our cars in germany and get health insurance in france. of course that would mean crushing the cartels in the financial and health sectors in this country, something our lads in the dail arent interested in :mad:

Well I know of someone who was pulled up a couple of years ago for not showing their insurance disk. He was insured with a Dutch insurance co and was covered for travel throughout the EU and ahd a photocopy of the premium in place of the disk. Mind you he was a Dutch resident when he bought the insurance. Anyway he was brought to court, but they had a special sitting 30 minutes before the court was officially in session and he got off as he was insured and had shown proof of insurance.

bk

Captain Trips wrote:

I do not want a system where our parents/seniors/ourselves-in-30-years have to work in Tesco to pay for health insurance or prescription drugs - that is what a free market does and it is not very pleasant. NY Times has many stories on these problems.

And what is wrong with my suggestion of breaking the VHI into three separate companies of equal no and type of customers and then selling each to different private companies.

Then you have everyone starting off on a level playing field and no need for risk equalisation.

Time Magazine

Competition Authority to call for break up of VHI.

Maybe it's all a masterplan by Harney to rid us of the monster?

:rolleyes:

layke

That would suggest there's some sort of intelligent thought behind this. But in all honesty too little too late.

On another note, I just got quoted €642.02 from VHI (I am a 25 year old non smoker). That's nearly €200 more expensive then Bupa's last quote. I will not be paying this. I'd rather buy foreign health insurance and hop country if something goes wrong. Prolly cheaper too.