# Risk equalisation examples outside Ireland



## daveos (9 Mar 2006)

Working on a project on BUPA and risk equalisation. Most of the information on the Web seems to point to documents and files relating to the VHI, HIA and the Irish situation regarding R.E. Had a read of the thread on the VHI letter, so that was helpful.

This made me wonder if there is any equivalent cases of R.E. in other countries, and how did it operate? Is Ireland an exception to the case in that the statutory body of VHI has over 80% of the market, effectively a monopoly, and is exerting it's size on the HIA to make BUPA pay up to fund it's inefficiencies? Am I right in saying that the VHI does not report it's entire accounts, or comes under the scrutiny of the Regulator, for some reason, or something along those lines? 

Or are BUPA making a mint out of the Community rating process, charging their younger members relatively high premiums but making substantial profits on the low level of claims from this low-risk membership? 

And at the end of the day, will BUPA stay the course in Ireland, or will they leave. Has this happened in other Health Insurance markets? 

My first thread, so forgive me if I'm not following rules.  Thanks.


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## CCOVICH (9 Mar 2006)

You might want to review this thread.

I have moved this to The Great Financial Debates.


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## A.Partridge (9 Mar 2006)

Your 3rd para is spot on. Bupa has been creaming it for years here, mainly because of the lack of a risk equalisation mechanism, its members average being much younger and also the fact that it seems to have been just price-following the VHI. 

The VHI is a stae body and as such is required to publish its annual results every year in full. You can check this through its website www.vhi.ie. However, AFAIK Bupa does not publish separately its Irish results but instead they are mixed in with its Group results in the UK - which is where I suspect most of its Irish profits end up. I checked the VHI results for the last few years and certainly its admin expenses ratio (to premium income) is very low - something in the region of 8-9% so it is not inefficienty run. I think it is losing money purely because it is carrying a disproportionate share of older members and these are bigger risks.

In a Community Rating system there must be some method equalising the risk among insurers or the whole system could face collapse as there would be no mechanism to prevent insurers cream skimming the youngest risks. It seems to work well in places like Australia where I believe Bupa is a net beneficiary of risk equalisation funds. So it seems odd to me why they are so against Risk Equalisation - unless they are making too much money as it is. I certainly don't think that they will up-sticks and leave.


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## bearishbull (9 Mar 2006)

i think private health insurance should be abolished and a system like nhs set up, in america the private health insurers have actually increased the costs of the health system.the best medical systems such as canada and france have no private system and spend less per citizen but get better results.


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## Calina (9 Mar 2006)

bearishbull said:
			
		

> i think private health insurance should be abolished and a system like nhs set up, in america the private health insurers have actually increased the costs of the health system.the best medical systems such as canada and france have no private system and spend less per citizen but get better results.


The NHS is not without its problems at the moment, given that the British Government are trying to introduce some market ideas to it. 

Additionally, I'd be careful making generalisations about the medical system in France - currently it's bordering on bankruptcy and cutbacks are being made in all sorts of things like prescription drugs and increases in basic GP visits (still much lower than here though).


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## jpd (9 Mar 2006)

The french system is not fully public - in theory you pay for all medical services and then can reclaim part of the cost from the Social Security (assuming you are insured ie working) and the balance (up to a limit) from a private medical insurance (the premiums are paid by employer and employee). In practise, the cost is recovered directly from the Social Security and Insurer by the medical practitioner so you never have to put your hand in your pocket. However, it is not free and is facing serious financial constraints.

Recently, the Social Secirity part has been extended to provide universal cover. Also, most people but not all is covered by the the private medical schemes. 

The employers and the unions run these schemes conjointly, but recently as the financial pressures increase, the government has been taking a greater interest in the actual running of the schemese. 

Apart from this, the actual service provided is world-class and if you could chose where to be sick, France would be at the top or near the top of my list.


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## MOB (9 Mar 2006)

"I checked the VHI results for the last few years and certainly its admin expenses ratio (to premium income) is very low - something in the region of 8-9% so it is not inefficienty run."

I am no expert, but don't think it is reasonable to draw such a sweeping conclusion from a single benchmark such as this.  If VHI pays too much for particular procedures, or inadvertently overpays doctors or hospitals for work not done, this has no bearing on the expense ratio, but clearly constitutes inefficiency.  

 I wonder is there a commonly accepted set of benchmarks out there for assessing the efficiency of health insurers.  Anybody know?


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## askalot (17 Mar 2006)

MOB said:
			
		

> If VHI pays too much for particular procedures, or inadvertently overpays doctors or hospitals for work not done, this has no bearing on the expense ratio, but clearly constitutes inefficiency.



On three seperate occasions, three people I know had procedures done and when the VHI sent out a copy of the hospital's invoice for the patients to check, the consultants had charged the VHI for work they didn't do. Out of the three people only one told the VHI, the others were afraid to say anything in case they needed to see the consultant again! The guilty finger points at the us, the public, as well.


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