Views on risk equalisation for Health Insurers

Re: Risk equalisation across monopolies

Again on the subsidising monopolies, but slightly off topic:
If BUPA have to pay VHI for being the new kid on the block (as it were) and having a different customer base, shouldn't O2 or Meteor have to pay Eircom (or better the state) for use of telecom masts originally subsidised by the taxpayer.
OK, maybe it's a lot off topic.

Does this type of system operate in any other countries? Just interested as to where you got the idea.

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I dunno, I just thought it up. It would be simple for any life/insurance company to offer such a product 'though because the cost of health insurance increases with age. So a large proportion of your initial payments would be saved/invested to cover the excess later when the cost of your health insurance eventually excedes that of your payments.

Re: Risk equalisation across monopolies

microsquidb4 said:

shouldn't O2 or Meteor have to pay Eircom (or better the state) for use of telecom masts originally subsidised by the taxpayer.

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Do you reckon mobile phone service is as critical as hospital service?

redstar said:

"BUPA csutomers have a lower average age profile than VHI csutomers, therefore the business they underwrite is more risky, and hence BUPA are paying VHI a premium/contribution to equalise their respective risks."

OK, but surely that is because there was no competition over the years so VHI built up a huge customer base, young and old. I think BUPA and any other newcomers are being unfairly asked to compensate VHI for their loss of monopoly. What happens in 20 or 30yrs time when BUPA and VHI should have similar customer-age profiles and hence similar risks ?

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Just to be clear, I am not necessarily for RE, I was just outlining my understanding of how it operates.

If the age profiles of VHI and BUPA customers were similar, there would be no contributions made to RE by either party, as risks would be equal.

Jill Kerby attacks community rating in yesterday's Sunday Times. Quoting James Sheehan of the Blackrock Clinic:

...community rating is akin to someone starting up a pension fund in their sixties, paying the same rate as those who have contributed since they first started work, an receiving the same end product.

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Jill suggests that an age-related premium should be introduced for anybody who joins over 35.( as a 1999 white paper suggested)

I was in the VHI for around 35 years subsidising older, sicker smokers. I quit around 10 years ago when I realised the extent to which I was subsidising people. Like darag, I resent the fact that I am not able to buy health insurance at the right market rate for my health and age. I will probably join BUPA or VHI soon as I get older.

Brendan

Shane Ross said in the Sindo a number of weeks ago that Risk Equalisation exists NOWHERE in the world where the leading health insurance provider has more than a 30% share of the market. If this is true, then it knocks the VHI's argument on its head. Can anyone confirm whether it is true?

VHI had 100% of the market for decades. That should be a massive advantage when competition arrives. It's the ultimate first mover advantage. If anything VHI should be subsidising BUPA 'till they get a suitable market share. VHI only have to keep their existing customers, BUPA have to get new ones. Everyone in business knows that there is a world of a difference between the two. If VHI had been doing their job properly over the years BUPA would have found it impossible to get a market share.

Slightly off topic. Someone from Vivas (new player on the health insurance block) was interviewed on NewsTalk a few days ago. According to him, they would welcome the "older insured subscribers who VHI keep complaining about" saying Vivas would offer them the same cover at less cost. [broken link removed]

If it ever comes about that everyone in the state is covered by health insurance (not impossible in the future) the question of risk equalisation would become irrelevant. The current young and less costly Bupa members will grow older in time, so will Bupa then find itself in the same position as VHI now? It should be possible to devise a better system - I hesitate to say fairer since the current one patently is not for those who cannot afford private insurance.

The fact is health care costs continue to rise exponentially due to technological and scientific advances so it is never going to be cheap but then neither is house or car insurance which all of us pay (mostly) without complaint. I'd still rather be ill in this country than in good old U.S. of A.

What would it be like if all of us became health policemen/women - noting down our neighbours life styles in order to detect any sign of over indulgence that might increase their health risks and therefore cost to the rest of us. Risk equalisation.......!

Community rating = risk equalisation. The two cannot be separated or the whole system collapsed. As far as I am aware, Australia has a CR system but it was in trouble due to the fact RE was not introduced.

If RE is not introduced, premiums will spiral as VHI will increase them faster to cover losses and the other two (BUPA, Vivas) will follow suit and collect the profits.

Mary Harney should call BUPAs bluff. They are making at least 20% margin on premiums, VHIs margin is now negative. BUPA are not going to leave in a hurry even if margins are lower.

In Mercer advise to the Dept of Health published on their website, it stated that Vivas never anticipated that RE would be introduced and it would be surprised if it was. Mercer commented that this "was difficult to understand and believe". Not sure what planet the Vivas boys are on!