# VHI Risk Equalisation letter.



## Odea (25 Jan 2006)

Did anybody receive and respond to the letter from the chief executive of the VHI Mr. Vincent Sheridan on Community Rating? In my case I received a response half "as gaeilge" and the other half in English. Their email was not compatabile with mine leaving all sorts of symbols scattered throughout the text.  What really annoyed me was the standard response that did not refer to any of the specific points I raised.


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## DrMoriarty (25 Jan 2006)

Yeah, I got it too. I know VS personally (old buddy of my late Da's, back in the days when the life insurance industry in Ireland was still led by 'gentlemen'...  )

Thanks for saving me the waste of time; I'd thought of responding by e-mail, in the (apparently) naïve hope that it might actually reach his desk. But VS must be an Exceedingly Wealthy Gentleman by now, and has presumably installed multiple layers of incompetent drones between him and the coalface...

Would anyone (Brendan?) mind if I posted him a letter drawing his attention to this thread?


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## ClubMan (25 Jan 2006)

I received the letter but couldn't be bothered reading it.


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## Brendan Burgess (25 Jan 2006)

Hi DrM

Go right ahead. But doesn't he always listen to doctors?

Odea

Would you like to post the letter and the reply you got?

Brendan


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## ajapale (25 Jan 2006)

Im not with VHI so didnt get the email. Perhaps someone could cut and paste the contents here?

Im with BUPA and got a letter from them about risk equalisation last year. It read like a party political broadcast. I considered the letter to be in breach of the data protection act. I gave my name and address for the express purpose of the provision of health insurance and not for some quasi political pr exercize.

I wonder if I switch to Vivas next year will they also bombard me with this political pampleteering?

aj


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## DrMoriarty (25 Jan 2006)

The VHI missive was equally 'political'. Here's the website's [broken link removed], and here's [broken link removed] and [broken link removed] of what they actually posted...


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## ajapale (25 Jan 2006)

Odea,

What specific points did you raise?

aj


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## CCOVICH (25 Jan 2006)

I was peed off at the VHI wasting money posting crap about why we all deserve health insurance at the same price (we don't).  Like ajaple, it struck me as a 'political' type of circular.  If only for the fact that my company now pays my health insurance and I haven't the energy I would be taking it further.


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## Odea (27 Jan 2006)

First response to my personal email to Mr. Vincent Sheridan, CEO of the VHI. 


Thank you for your e-mail enquiry.Â  
Â 
Due to the unprecendented response we have received to the letter from our CEO, to our customers regarding Risk Equalisation and Community Rating, we wish to advise you that the service level for our e-mail service has been extended to 3 working days.Â  We hope to return to our normal service of replying within one working day as soon as possible.
Â 
You may find the information you need onÂ our website, atÂ  http://www.vhi.iejavascript:ol('http://www.vhi.ie');javascript:ol('http://www.vhi.ie');javascript:ol('http://www.vhi.ie');.
For any further contacts please quoteÂ 153555, which is the unique interaction I.D. associated with your email enquiry.
Â 
Yours sincerely
Â 
Customer Service Department
Vhi Healthcare
Â 
BuÃ&shy;ochas as d'fhiosrÃº rphoist. TÃ¡ sÃ© mar aidhm againn freagra a chur ar fÃ¡il laistigh d'aon lÃ¡ oibre amhÃ¡in. 
Â 
Idir an dÃ¡ linn, mÃ¡s mian leat labhairt le duine d'Ã¡r gcomhairleoirÃ&shy; seirbhÃ&shy;se do chustaimÃ©irÃ&shy; glaoigh ar Ã¡r n-uimhir sÃ¡bhÃ¡il ghnÃ³ - 1850 44 44 44.
Â 
D'fhÃ©adfaidh teacht ar an eolais atÃ¡ uait fÃ©adfaidh tÃºÂ ar Ã¡r suÃ&shy;omh grÃ©asÃ¡in ag http://www.vhi.ie . MÃ¡ bhÃ&shy;onn a thuilleadh teagmhÃ¡lacha agat luaigÂ an uimhir idirghnÃ&shy;omhachÂ atÃ¡ comhcheanglaithe le d'fhiosrÃº phoist.
Â 
MÃ¡s rud Ã© gur mhaith leat freagraÂ a fhÃ¡ilÂ as Gaeilge, seol d'fhiosrÃº arÃ&shy;s, agus iarr orainn amhlaidh a dhÃ©anamh le do thoil. Beidh Ã¡thas orainn freagairt dÃ¡ rÃ©ir. 
Â 
Le meas

Â 
Comhairleoir SeirbhÃ&shy;se do ChustaimÃ©irÃ&shy;
Vhi CÃºram SlÃ¡inte"
Â


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## A.Partridge (30 Jan 2006)

Hey, I got one of those letters too. Read it, understood it and had no problem with it.(although Brendan you're half Irish half English version would have had me stumped!)

Why don't you send the email back to the VHI and just ask them to reply again? Looks like it was some sort of technical mix-up.

Incidentally, I'm kinda glad Mr Sheridan wrote to me otherwise I would have been unaware of what was goin on with Bupa and the govt and all that. For what its worth I personally feel that its better to have everyone pay the same rate for health insurance rather than face 'loadings' as we all get older. I don't want to be without my VHI when I get on a bit, simply because Bupa or whoever want to continue making big profits. I also dont want to have to rely on the public hospital system - sure that's a disaster. I say fair-play to the Govt for taking this stand against Bupa.


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## Budgie (30 Jan 2006)

I think Vincent Sheridan's letter was very clear and was surprised at the lack of mudslinging in it.  However he probably has one eye on the court case.  One question that I do have for him is that when Bupa/Vivas hand over the cash, will VHI premiums come down? (Somehow I think not).

Community rating is only one way to pay for health insurance.  There are many other ways.  The main issue is if you adopt community rating you have to adopt risk equalisation.  You have to have all or nothing.  There are alternatives should risk premium, %age of salary (which is used in Germany) etc. but I am not going to discuss the merits here.  

I have no sympathy for Bupa.  They came, made no difference to prices, rode the wave (and profits) and when the party came to an end they whinged about it.  Regardless of what happens Bupa will not leave the Irish market.  With RE there will still be plenty of gravy to go around.  The view that RE will wipe out their profits is rubbish.  Bupas claims reserves as a proportion of premiums written have risen steadily over the years.  This has the effect of deferring profits.  RE only applies to "Plan A" benefits so they will still have their premiums on the excess of benefits over Plan A (which is alot - how many people take out Plan A?).  

Fair play to Mary Harney...she had the guts to press the button.  I think she was right and in years to come with Bupa, Vivas, VHI plus others all competing, we will wonder what the fuss was about (except for the lawyers - who will be receiving a "risk equalisation" windfall of their own!)


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## Odea (30 Jan 2006)

Response from Mr.Sheridan to my personal email.  Anyone else receive an identical response?. 


Thank you for contacting VHI Healthcare

Â 
Health Insurance is about paying claims.Â  In 2007 we expect our claims pay out to exceed â‚¬1 billion. Thatâ€™s â‚¬1 billion going back into the Irish Healthcare System. While we may have 78% of the market we pay out *93%* of all the claims in the market.Â  For every â‚¬100 in premium Vhi Healthcare takes in we pay out â‚¬90 in claims.
Â 
Risk equalisation simply means that the costs of all the claims, of all the members of all health insurance companies are shared.Â  Therefore there is no incentive to cherry-pick younger, healthier customers.Â  This will eliminate the possibilityÂ of companies making windfall profits out of the Irish market, this will be good for all health insurance members.
Â 
VhiÂ prides itself on being recognised as one of the most cost effective health insurance companies in the world.Â  As you will see from the figures above 90% of premiaÂ received is used on claims.
Â 
I hope this clarifies our position.
Â 
Kind Regards, 
Â 
Damien Brett,
Customer Service Department


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## DrMoriarty (30 Jan 2006)

DrMoriarty said:
			
		

> VS must be an Exceedingly Wealthy Gentleman by now, and has presumably installed multiple layers of incompetent drones between him and the coalface.


And to think that some people demurred at my use of the term 'drone'...! 

Mind you, if I was on VS's salary/benefits, I don't think I'd be responding in person to customer e-mails... (and I bet he didn't sit down and compose the letter himself, either!)


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## Odea (2 Feb 2006)

My three sons moved their health insurance from the VHI to BUPA simply because BUPA was cheaper. The VHI don't seem to want to compete head to head with BUPA but rather sit and whine with their outstretched hand looking for more money.


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## Sago (3 Feb 2006)

VHI have 78% of the market as they said in that letter.  In the papers they are saying that their claims are millions more than that of BUPA - surely their members didn't grow old over night - were is the money these older members were paying in 30 years ago and not making any claims?  Why wasn't this money put in some sort of diposit account and held until these members here older and higher risk???
I don't support them at all in their case.
BUPA and VIVAS have come into the market and under cut VHI for the same if not sometimes better cover.  The introduction of risk equalisation will open the flood gates for other sectors for the Irish economy and push inflation and the cost of living through the roof.


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## Budgie (3 Feb 2006)

I have to disagree with you Sago. 

VHI are not operating a pension scheme.  Members can come and go as they please.  If they were the only participant in the market, they would have a flow of youngsters to subsidise the old.  When new entrants arrive, it makes sense (in the absence of RE) for them to pursue the youngsters and they don't have the burden of the legacy business.  Without RE, BUPA and Vivas can make margins of 40-60%.  I did not see that difference in premiums between them and VHI the last time I looked.  

Where are BUPA/Vivas reserves for their clients getting old? Nowhere. I rest my case.


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## scuby (5 Feb 2006)

Why does Bupa not have a problem in recieving benefit in Australia where they bought into a company that benefits from risk equalisation.? Also the money that they make here in ireland is then transferred to their UK parent company ! They also knew that Risk equalisation was going to be introduced into the market. If this was not introduced, you would pay extra premium if you were a smoker, older aged person, medical would be carried out to see if you had any illness's and you would have to pay more depending on the type of illness etc


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## Sago (6 Feb 2006)

BUPA do have the reserves in place for when their members get older. The RE in Australia was introduced because there are 4 or 5 different Private medical insurers in the state, all owning an even % of the market. RE was introduced there to level the playing field. In Ireland VHI have approx 78% of the market, BUPA have approx 20% and VIVAS approx 2%. These %'s don't reflex an even market. If RE is not introduced Community Rating (same premium for all member regardless of age, health status, claim history etc) will still be in place - this is set in stone. BUPA are an Irish Company, they don't send their profits to the UK. Their parent company is in the UK - BUPA Ireland invest in hospitals, clinics, communities all over the country.


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## Budgie (7 Feb 2006)

Interesting comment Sago.  However no Irish regulations require you to reserve for the liabilities of policyholders arising beyond their policy year (i.e. for a 30 year old, you don't have to reserve for any claims arising from them renewing their premium at age 70!).  The reserve might just as well be called "we want to defer profit" reserve.  

Happily, unnecessary higher reserves have the ability to defer profits (as long as the company is expanding).  Therefore BUPA can understate profits and whinge that risk equalisation will wipe it out.  The HIA and Mary Harney have seen through this already.  

Community rating = risk equalisation.  You can't have one without the other.  The size of the incumbents is immaterial.  In any case, you get a 3 year RE free period when you start up a new company.  

If RE is thrown out, community rating will collapse and we will be into a risk premium situation.  Thats an alternative system that has its pluses and minuses.  

I would bet that if BUPA lose their case, they will remain in Ireland.  There is still enough gravy to go around if they do have to shell out.  

Of course, BUPA's UK policyholders are and will benefit from Irish profits.  They are the owners of the company and that is their right.  Who else is it going to, charity?


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## ClubMan (7 Feb 2006)

_Odea _- you might want to double check the terms & conditions under which those emailed responses to your queries. Quite often organizations will preclude further publication or reproduction of such emails.


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## Sago (7 Feb 2006)

Well maybe it's a case of bad management and planning that VHI didn't think about the future of the health insurance market and their members aging!
Community ratind = RE as per VHI - this is not what the HIA are saying.

BUPA invest in the Irish community on a local basis as well as nation wide - they have invested in hospitals, research centres etc. Their profits don't go to the UK.

On the sunday business post a few months back there was an interview with BUPA saying that the had told the VHI that they would buy their older members off them and cover them if VHI didn't want them - but VHI wouldn't not reply to the offer - If BUPA are trying to keep a younger membership - why would they offer something like that????


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## Budgie (8 Feb 2006)

Maybe it is bad planning.  But health insurance is a "year to year" thing...you can opt in or out at any time.  There is no need for aging reserves and you are not obliged to hold them.   

I can't accept the no profits going to UK policyholders thing.  On that basis, if I asked you for €100k and said that you would get zippo back, would you invest? I think not.


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