OPINION:There is little competition in the Irish health insurance market, writes SARA BURKE
THE ANNOUNCEMENT by VHI Healthcare that it is to increase premium for the majority of its customers by between 15 per cent and 45 per cent is a direct consequence of Government failure to reform both the health system and the private health insurance market.
It is also a result of the inherent contradiction in Government policy of wanting to promote “competition” in healthcare on the one hand as well as trying to ensure “fairness” for patients on the other. It is the clearest evidence yet that Government has failed dramatically to achieve either.
There is little competition in the Irish health insurance market due to the dominant position of the VHI. The forthcoming hike in premium demonstrates the inability of the current “market” to protect older and sicker customers. The two-tier system of public hospital care continues to favour private patients over public patients and render fairness redundant. Despite libraries full of reports and rulings on health policy and health insurance reform, systemic contradictions remain.
Currently, the VHI has 62 per cent of the market and 80 per cent of all health insurance costs due to the older, sicker nature of its customers. The Supreme Court ruled in 2008, that risk equalisation (sharing the risk between younger and older, healthier and sicker patients) was outside of the powers of the Minister and therefore had to be discontinued.
Since then, a health insurance levy is paid to health insurance companies for the older, more expensive patients. Due to the make up of VHI’s customer base, it receives the majority of this levy fund but the VHI maintains it is not sufficient to cover the increasing cost of its ageing cohort with increasing healthcare demands.
The VHI estimates its clients will need 10 per cent more healthcare this year than next and that it faces €147 million in losses this year from older customers without the price increases. It also say that the 21 per cent increase in charges for private beds in public hospitals is causing 8 per cent of the price increases.
Unfathomably, VHI chief executive Jimmy Toolan, speaking on RTÉ Radio One’s News at One, said the 21 per cent increase for private beds in public hospitals was “not within my thought process”, although it has been government policy since the 1999 White Paper on private health insurance to charge the full economic cost of private care in public hospitals
In December 2010, in a letter sent by the VHI to private hospitals (trying to negotiate down costs), the insurer stated that “we are currently unable to generate sufficient premium income to fund our customers healthcare needs”.
The VHI had a very public stand-off with private hospitals, in which it achieved a 3 per cent cut in costs (having done so also last year) but lost the battle to cap how much it pays to each hospital. Having failed to get sufficient “savings” from the private hospitals (which now make up 70 per cent of all VHI care costs), the insurer needed to find somewhere else to save money. Hence the enormous increases announced yesterday.
The VHI, still a statutory body, although meant to be competing in a market, has lost €160 million in the last three years. It needs to match its income with expenditure and says it has no other choice but to pass on the pain of increased costs of healthcare to its customers.
While the overall share of the population with private health insurance has decreased by 70,000 since it peaked at more than 52 per cent two years ago, the VHI has lost significant market share with many people downgrading their type of plans, many more moving to the two competing health insurers – Vivas and Quinn health insurance – or dropping their health insurance altogether. Many more people will now have to move to a cheaper plan within VHI, or move to other providers or drop their health insurance.
The Government announced more reform of the health insurance sector last May, with plans to sell off the VHI. To do this substantial State investment will be needed so that the VHI meets a sufficient level of reserves to achieve authorisation by the financial regulator.
The transfer of ever-increasing costs of healthcare on to the patients’ shrinking purses is verification once again of this Government’s absolute failure to really reform the health system during its 14-year tenure.
Once again, it is the sick public who will pay for this legacy in the months and years ahead.
Sara Burke is a journalist and health policy analyst