Family Money asked VHI Healthcare and BUPA Ireland to give their perspective on the role of private medical insurance and the Irish healthcare system.

VHI Healthcare has 1.5 million members, the bulk of whom are in group schemes availing of a 10 per cent discount. It has been providing private medical insurance since 1957. Premiums have risen by 50 per cent on average in the past five years.

BUPA Ireland has 220,000 customers and launched its first product in November 1998. Premiums have risen by one third since BUPA Ireland opened for business.

Why is it necessary to take out private medical insurance?

VHI Healthcare: The main reason is speed of access, to avoid waiting lists. Members also benefit from more choice. They can choose which hospital or which consultant they want and more importantly when they avail of treatment or services.

The majority of our customers see a consultant within four weeks, compared to queues stretching for months in the public system.

It's also good value. One week's stay in a semi-private room in a private hospital costs £2,300 (€2,920).

BUPA Ireland: The honest answer is to queue jump. The options are either to rely on the public system, go private without private medical insurance or take out private medical insurance.

People weigh up the risks against the value and opt for private medical insurance. The motivation to pay for health insurance is not to get a private room, if you take into account that the bulk of claims are for day cases. It's about access and you have two companies out there convincing people how important health cover is.

Consumers rarely complain about cost, they are concerned about the availability of services and treatment.

What do you offer that your competitor doesn't?

VHI Healthcare: The simple product offerings are coming closer together but we are confident that we have a reliable claims system with very high satisfaction rates. We also get the best value because of the deals we can make with hospitals.

VHI Healthcare is totally transparent and, unlike BUPA Ireland, we produce an annual report. Members can see exactly what they are getting and where their money goes.

BUPA Ireland: Our philosophy is quite different to VHI's - irrespective of which plan you buy, you get full cover. Even the basic Essential Plan provides cover for high-tech treatment for heart surgery, for example, at the specialist centres.

We were the first to offer alternative medicine and our customer service is second to none.

BUPA Ireland is also taking less money per head from our customers. We are the only ones to offer cover for primary care. With Health Manager, 50 per cent of outpatient costs are covered from the word go.

Is risk equalisation really necessary?

VHI Healthcare: It all comes down to community rating and whether one buys into it or not. You can't have one without the other. We need a mechanism to make sure that the young pay for the old.

The uncertainty around risk equalisation has been as big a barrier to new entrants to the market as its actual application. Which is more important after all? To get a third competitor in or have a stable health insurance market?

BUPA Ireland: The bogeyman was that the market would collapse without risk equalisation and that hasn't happened. The VHI has got stronger every year.

Risk equalisation is a hypothetical mathematical formula about a hypothetical fear, which has been shown to be without foundation.

Is VHI saying that, if we bring an extra 100,000 people into the market, we have to pay them?

If we get customers, we only get them for a year and VHI is free to come after them. They might as well give us a subsidy for administrative costs because of their economies of scale.

Is compulsory private medical insurance the way forward?

VHI Healthcare: There are a lot of initiatives which could be introduced to incentivise private medical insurance.

We think there is a still a long way to go before people decide health insurance is a purchase they are willing to give up, so in that sense compulsory private medical insurance is not absolutely necessary for market stability.

BUPA Ireland: We don't think it's such a huge issue. The issues are equity, access, accountability and competitiveness.

How the system is funded is not that important but our history is about making people assume responsibility for their own health care. BUPA commissioned an independent survey on attitudes towards compulsory private medical insurance last year and it was clear that consumers wanted it.