The current debate about which private health insurance firm is cheaper or offers better benefits - BUPA or VHI - would interest anyone trying to decide between the two, but there are also issues affecting future health care.

A White Paper on private health insurance is being prepared by the Department of Health and Children. Private and public health-care services are inextricably linked so recommendations on how the private system operates is going to have repercussions for the public system.

In its submission, the Society of Actuaries, has highlighted what it sees as the weaknesses in our current system and has made some radical proposals to achieve a more equitable system of public and private care.

Some 40 per cent of the population opts for private coverage. That is the nub of the problem for both sectors, according to the Society of Actuaries' submission. The symbiotic relationship that has developed is beginning to eat away at the system.

Private health insurance was originally set up to provide health care for people who were not entitled, for income reasons, to use public health facilities. But even though public health access is now universal, the inadequacies of the service means that 40 per cent of the population is now availing of a system which has bypassed the long queues of patients waiting for treatment and provides some choice and comfort.

The availability of private cover has, over the years, taken some pressure off public services and because private consultants have been able to treat their private patients in the public hospitals, this has kept many of them within the public system. Yet this contribution may not be high enough to justify the subsidies private health insurance companies and patients have enjoyed.

"Private health insurance, in fact, contributes a relatively small proportion of overall health spending. The Government Net Estimates for 1998 give an estimate of £2.767 billion for Exchequer spending on health. This compares with VHI's total claims cost for 1997/98 of approximately £304 million. Furthermore, this latter figure must be netted down to reflect tax relief . . . and the indirect subsidy of private health insurance through pricing private beds in public hospitals at less than the `full economic cost'."

There is a growing belief that the way private insurance is structured is contributing to many of the problems facing private and public health care. One of the most glaring of these is the unequal access to public hospital beds and treatments.

Ironically, the Society of Actuaries also notes that its success in jumping queues could also be the undoing of private health insurance: the more members who join, the more pressure on hospital beds and services, which could eventually result in waiting lists for private patients, many of whom may dispense with it altogether.

Another issue that needs addressing, and one of the reasons such a large proportion of the population has private health insurance, is the community rating system which does not differentiate on age or health grounds and provides lifetime cover.

The preservation of this costly system depends on attracting a "broad cross-section of the population by age and health status", but the numbers of younger members will decline if equal access for public and private patients (as the Government intends) becomes a reality or "if the real cost of private insurance continues to increase". (Costs will continue to increase, says the submission, because the insurers have no choice but to cover members whose lifestyles blatantly contribute to health risk - smokers, for example.)

One of the cost problems created by community rating regulations is that they have prevented primary care or preventative treatment being fully integrated into the healthcare system, mainly because GPs remain outside the private health-insurance schemes. All the emphasis has been on funding far more expensive hospital treatments, to the detriment of both sectors.

The Society of Actuaries also cited other reasons why the current system is not working properly. Health insurance companies, it states, are subject to many Government constraints - who they must insure, the level of benefits they must provide, the subsidies they must pay each other if one company ends up with a larger number of higher risk members or payouts than the other (this is known as the Risk Equalisation Scheme), and in having to accept arbitrary rises in prices.

Such restrictions have discouraged competition between them especially in the area of providing better quality and standards of service and in keeping costs down. One thing that has been lacking, however, according to the submission, has been proper supervision of the way the health insurers operate, and whether they deliver a quality service or not.

It recommends that there should be a "joint initiative by all participants to develop agreed clinical protocols or case management practices [which] could be of significant value, both in terms of cost containment and ensuring the consistent delivery of quality care to both public and private patients alike".

It says that actuaries should have a statutory role within health insurance companies, as they do in life companies where they are responsible for ensuring the company is solvent and meeting its customers expectations.

On the matter of regulation, the submission also notes: "There is no statutory control over the establishment of private hospitals. Hence there are no minimum standards of care which have to be maintained outside the public system."

The society supports the recommendation by the Commission on Health Funding that all private hospitals be licensed but believes that all health-care services - private and public - be monitored by "an appropriate statutory authority".

The Society of Actuaries recommends three options to make the delivery of wider healthcare services fairer. The first is the maintenance of the current structure with a few changes, such as:

amending the community-rating system to permit health insurers to charge higher premiums to people who enter the scheme at an older age;

charging the "full economic cost", on cost-per-case and hospital-specific basis, for private treatment in public hospitals.

adjusting the community-rating regulations in order to integrate primary care (ie. GPs) into the private schemes and help cut overall costs;

developing performance measurement standards;

researching the notion of a "needs-based" approach to resource allocation within the public-health system.

Option two is more radical. It supports the view of the Commission on Health Funding that admissions to public hospitals be based on merit and not take the insurance status of the patient into account.

"On its own, this change could result in a significant reduction in the number of people effecting private health insurance," since fewer people would be prepared to pay the higher premiums needed to be treated in private hospitals. But it could also reduce resources required to fund public hospitals.

The way around this, it suggests, is to limit public access by income, with people earning above the income limit having to compulsorily purchase private health insurance. Such patients would have access to public hospitals, but not preferential access to beds.

The society's most radical suggestion is the introduction of a system of compulsory insurance for the whole population "in order to cover a defined basic set of health services. Individuals would be free to purchase additional insurance [from the insurer of their choice] which would cover health services not included in the basic package".

The advantages of such a system, is that it would result in more equitable access to basic health services regardless of ability to pay. There would be more competition between the insurers; a more stable framework for financing overall health expenditure and it would facilitate the integration of primary and specialist care for the entire population and bring about a needs-based allocation of health care resources rather than the geographic basis we have at present.

But this submission makes it clear private health insurance, as it has developed in this State, has created nearly as many problems as it has solved. The present system, with membership constraints, its reliance on subsidies, and its inadequate cost and quality controls means it may not be sustainable.