In the runup to Christmas a new term came to the fore in the Irish media – “risk equalisation”.
What exactly is it?
The Health Insurance Authority have provided a simple definition:
Risk equalisation is a process that aims to equitably neutralise differences in insurers’ costs due to variations in the health status of their members. Risk equalisation results in cash transfers from insurers with lower risk members to insurers with higher risk members.
Simple isn’t it?
Well not really.
Let’s look at the Irish health insurance market…
At present there are only three companies offering private health insurace – VHI, Bupa and Vivas. VHI is owned by the Irish state and currently has more than 80% of the market!! It’s not simply a matter of them having a dominant position – with over 80% they have a lot more than that.
Under risk equalisation VHI’s competitors would be obliged to pay VHI who have an older client base and are more likely to have claims made against them. So any company entering into the Irish health insurance market is basically being told that they must subsidise the market leader.
It’s more than a bit odd.. Imagine if this were to happen in other sectors..
According to VHI:
If the activation of Risk Equalisation is delayed, irreparable damage will be done to Vhi Healthcare, its members and the private healthcare market in Ireland. Quite simply, the activation of Risk Equalisation as a matter of urgency is essential to the continued viability of Vhi Healthcare
But they’ve got over 80% of the market, haven’t they?
You can read more about it on the Bupa site, Vivas and VHI
So basically you think old people should be burdened with massive premimums and the young should have no social responsiblity and companies should be able to greedly create massive profits.
No. I think the market should be competitive. At present it isn’t and with the introduction of risk equalisation VHI’s monopoly will be protected. Why are there only 3 companies in the sector at present? Why haven’t other companies entered the market?
You beat me to it Michele with this post, I was going to write about it today 🙂
It’s an absolute joke, the fact of the matter is that the VHI is poorly run and has huge costs besides the older clientele. Which is typical of a government run/owned body.
The fact that Bupa came to the market as the first private healthcare insurer later then the VHI started up was always going to mean they would be have a younger client base.
The “risk equalisation” payment is the governments way of not having to bail out a loss making business.
No other healthcare insurer in their right mind would start up here, with cowboy tactics like that going on.
I debated this extensively with Wulfbeorn on his blog, having linked to his risk equalisation post from a similar post on disillusioned lefty, so I won’t rehearse the same arguments here again. I have to say though, what evidence is offered that VHI is badly run? They’ve done a lot of excellent work for clients in the way they work with consultants and hospitals.