Friday, 15 December 2006
I am grateful for the opportunity to raise this issue concerning the BUPA health insurance company. As a result of the introduction of risk equalisation, BUPA has decided to withdraw from the Irish health insurance market. Yesterday's announcement was disastrous news for the 300 people BUPA employs in Fermoy. It was a bad day for BUPA's almost 500,000 customers and a disappointing day for competition in the health insurance market. Yet the announcement should not have surprised anybody. It has been flagged for at least five years that the introduction of risk equalisation in the format proposed by the Government would result in BUPA's leaving the Irish market. As BUPA personnel have made clear in the past day they have not been in the business of making threats to the Government. In the past number of years they have simply and calmly outlined clearly that it would be financially impossible for BUPA to survive in the Irish health insurance market if risk equalisation as proposed by the Government were introduced. It is significant that in the High Court judgment a fortnight ago when the judge indicated the Government's political entitlement to introduce risk equalisation, he also stated clearly that risk equalisation could result in BUPA's becoming financially unviable. It is disappointing the Government did not respond to this. This crisis has been flagged and, sadly, should not surprise us. It is disappointing the Government has not reacted differently in recent years.
We often hear from the Minister and the Government that risk equalisation is necessary for community rating policy, which everybody supports. However BUPA operates community rating. Like VHI, BUPA takes clients from any age group in this country and has done so since it entered the Irish health insurance market ten years ago. What sort of advertisement is yesterday's decision for competition in Ireland? What sort of advertisement is it for Ireland abroad? What sort of signals are we sending out when, on the one hand, we try to promote competition across a range of State services, but on the other hand we have put in place a risk equalisation policy that would inevitably end competition in the health insurance market, as it has done.
The clock is ticking quickly. BUPA's decision has been made and announced. However the Minister is aware that this health insurance issue will come up for adjudication by the Competition Authority and the Health Insurance Authority in the next few weeks. I pointed this out in the Seanad two to three weeks ago. The Government must first ensure those reports are published quickly. If, as some media indications suggest, those reports result in major changes in health insurance regulations, the Minister must meet BUPA in the near future to see if the new regime proposed, as we are led to believe by the Competition Authority and the Health Insurance Authority, would provide a mechanism whereby BUPA and other companies such as VIVAS could have a long-term future in the Irish health insurance market. The Irish health insurance market is unique in that one company, VHI, is absolutely dominant with almost 80% of the market. This critical factor makes it difficult to maintain and promote competition and is the reason risk equalisation, which works in other countries, could not work here. I appeal to the Minister as we face the Christmas period, to use whatever resources are available to the Government, and whatever little windows of opportunity are still open, to seek urgent talks with BUPA.
BUPA is a mutual society, a non-profit making organisation with health insurance policies in more than 100 countries across the world and a long and proud record of providing health insurance on a non-profit basis. We should try to assist it, not drive it out of the Irish market. It is urgent that in the next day or two the Minister for Health and Children and her Department make immediate and direct contact with BUPA and try to find a way around yesterday's disastrous decision. It was shocking for Fermoy, disastrous for health insurance, bad for competition and goes against the ethos of what we have been trying to do in this country in the past 20 years. While risk equalisation has a place in certain markets, with the size and scale of the Irish health insurance market and with a dominant, almost monopolistic company, risk equalisation could result only in what we saw yesterday, that is, bad news for consumers and competition.
I am taking the Adjournment on behalf of the Minister for Health and Children, Deputy Harney.
The Minister regrets BUPA's decision to leave the Irish market and, in particular at this time, the loss of jobs resulting from that decision. The Minister, on behalf of the Government, has endeavoured to achieve a solution that would enable BUPA to stay, but would also protect the fundamental principles of community rating supported by risk equalisation. This means health insurance is available and affordable for older people and those with illnesses. The recent High Court judgment upheld the existing regulatory arrangements, including risk equalisation. BUPA's view following the High Court decision was that it could not stay in the market. Following the High Court decision, a meeting between the Minister and BUPA senior management was arranged, and Senator Bradford will take comfort from that. After that meeting, further discussions took place involving senior officials of the Department of Health and Children. Notwithstanding that both sides put forward positions and proposals, it did not prove possible to reach an outcome in which BUPA decided it would stay in the Irish market. The best advice available to the Minister was that the positions she put forward were consistent with BUPA's being able to continue operating in the market and to make profits at a level close to that which it makes in the UK. It is noteworthy that VIVAS is still in the market and has not said it will pull out.
The Government continues to support sustainable competition and consumer choice in the private health insurance market. The Government will also support the stability of the community rated health insurance system and the safeguards provided to protect it, such as risk equalisation. This policy is designed to benefit the insured population, particularly the elderly and the ill, who would otherwise be vulnerable to the effects of risk selection, and would find the cost of private health insurance unaffordable. Risk equalisation seeks to remove an insurer's incentive to select preferred risks. It is clear from health insurance markets around the world that a system of risk equalisation and community rating is not incompatible with viable, ongoing competition. Risk equalisation is not designed to over-compensate any insurance undertaking for the share of the total community of sick and elderly. It is about compensating for differential risk profiles. It is not about transferring profits. It is about ensuring that competition takes place on an equitable basis. It is the Minister's view that the regulatory framework for private health insurance, including provision for risk equalisation, is appropriate, and that it would have been possible for BUPA to remain in the Irish market and make reasonable profits.