Despite all the fighting talk, the only way is up for health insurance premiums, writes Paul Cullen, Consumer Affairs Correspondent.
The battle for Bupa Ireland has been hard-fought and the saga has taken many unexpected turns, but will it make any difference to the consumer? The Irish health insurance market is deeply dysfunctional, after all, with one dominant company, another with a tiny market share and a third which wanted to pull out but has been taken over by new owners.
Billionaire Sean Quinn brings to Bupa a track record for cutting premiums elsewhere in the insurance business but, even assuming he wants to adopt that strategy with this company, the health insurance market promises to be a tougher nut to crack.
Quinn has made a splash with his commitment to freeze prices for 12 months, a move his rivals in VHI and Vivas will have to take account of when doing their sums for the coming year. However, a 25 per cent rise in the cost of public hospital beds last January translates into 6 per cent extra on health insurance costs, so both companies will find it difficult to match Bupa. After all, VHI increased premiums by 12.5 per cent last September and Vivas by 6.7 per cent in October on the back of a smaller - 10 per cent - hike in the cost of public beds in January 2006.
Meanwhile, the underlying global trend of rapidly escalating medical costs means that prices are heading up in the medium term, regardless of the level of competition in the market.
Not that there is much competition in the market, even with the Quinn Group's arrival. Three companies is hardly a free-for-all and, as the Competition Authority noted recently, numerous factors act to limit competition between market rivals and to prevent new companies entering the market.
Unlike others in the wider insurance sector, for example, health insurers cannot offer discounts to people with healthier lifestyles, or employers who run screening programmes for staff. They are also constrained in their freedom to pick which hospitals to work with, based on efficiency and quality.
Ten years after the market was opened up to competition, VHI still dominates with a 75 per cent market share even before the Bupa controversy erupted. Bupa has 22 per cent and Vivas just 3 per cent.
Much of the debate has centred on the complex concepts of community rating - charging all customers the same premium regardless of age and health - and risk equalisation, which involves rivals compensating the VHI for the extra costs arising from its older customer base.
Bupa accepts community rating but not risk equalisation and the issue is likely to keep lawyers in the High Court for many years. The uncertainty caused by Bupa's initial withdrawal from the market, the Quinn Group's late arrival and the ongoing rows over risk equalisation are inhibiting competition. Why would any company consider entering the market when the terms under which they would operate are unclear and when so many issues are bogged down in litigation?
It is easy to criticise the players in this market for their high premiums but consumers must also share some of the blame. One of the foundations of "rip-off Ireland" is consumer inertia and nowhere is this worse than in the field of health insurance. Only 10 per cent of private health insurance customers have switched insurer since competition started in 1997 and 14 per cent told the Health Insurance Authority last year they never would.
There is a widespread perception that changing insurer is difficult, but this is incorrect. So long as there is no gap in cover and the customer has served all waiting periods, the new insurer must provide immediate cover and there are no additional waiting periods.
Another factor inhibiting change is the legacy of salary deduction schemes that VHI has built up since it was the State-funded monopoly provider. "Inertia on the part of employers makes it difficult for other health insurers to build up a similar network," the Competition Authority noted.
Consumers also find it difficult to compare the offerings of the various health insurers, and the lack of independent information doesn't help. However, in general Bupa's products cost about 10 per cent less than VHI's, while Vivas comes in at over 10 per cent less than Bupa. Different companies offer different benefits, so if a consumer can match the policy to their requirements, the savings can be even greater.
Until consumers start voting with their feet, however, all the talk in the world won't make much difference.