Irish NHS Remodelling
Every time the NHS comes under pressure in the UK, the voices for a move to a co-payment system supported by PMI come to the fore. The recent AMII conference was no exception. While there are undoubted merits to such systems – indeed they are much more common than our NHS model – it is usually assumed that the result would simply be a free market for PMI insurers with a much bigger business base. In fact, where co-payment systems are in place, this is very rarely the case. Rather, with “State partnership” come restrictions. Ultimately the restrictions can become so onerous, as in France, that the system is more akin to a bank collecting money than insurance as we know it. We do not have far to look to see how things can actually pan out and for this I want to take you to Ireland.
First the good news. Around 50% of the Irish population have PMI. Some buy it for themselves. For others it is provided by employers through group schemes. This rises to 60% for the working population. Besides the copayment system, PMI also benefits from tax relief. Another issue regularly lobbied for over here. There are three providers the VHI (a state run company), Quinn (which took over BUPA’s book when they left Ireland…..) and Aviva. The VHI is the biggest, with about 60% of the market and Quinn is second. The VHI has the biggest proportion of older people.
But things are not as simple as they seem – as you might be beginning to guess from BUPA. Because the market is so big and so important for people’s health needs the government has always had social policy interests. The previous government’s position was, in essence, to sustain a stable health insurance market that provided solidarity between younger/healthier people and older/sicker people. And to protect older/sicker people from being loaded with premium increases or more expensive policies solely because of their age and medical history. Initially it did this by restricting price differences between age groups and guaranteed acceptance. BUPA went in on this basis. Not surprisingly though they recruited more younger people (from the VHI) and this gave them lower costs. Enter the risk equalisation scheme where a government agency calculated an amount that BUPA had to pay the VHI to compensate them for their client base. BUPA went to the EU Court on the amount but won too late to prevent their exit from the market. Then the government introduced minimum PMI benefits – for example on primary care fees. All very complicated.
This year a new government coalition was elected and they have set out an ambitious agenda for change. What was already a complicated situation for PMI will pass through an interim period dealing with past issues (the risk equalisation scheme and minimum benefits). It will then move to a completely new system of compulsory social insurance based on the Dutch model – with competing private companies to choose from (Quinn, Aviva and the VHI). Ironically one of the reasons for the change is that the current system is regarded as inefficient in terms of GDP/health benefits. A core argument for those who support a co-payment system in the UK.
All this will have implications for individuals who buy, or will have to buy, insurance as well as for companies that currently pay for all, or a proportion of, PMI costs. The move to a universal health insurance system may well have a big impact on group PMI schemes. Before leaping to support co-payments in the UK – whether for PMI or IP – insurers should ask themselves how they would feel about increased government regulation and its impact on their margins.
Written by Richard Walsh, Director and Fellow, SAMI Consulting
Published by Cover Magazine, 12 September 2011, Click here to view the full article