BUPA Ireland to quit Irish market - 300 jobs to go; VIVAS Health warns Government policy could kill competition

Irish
BUPA Ireland to quit Irish market - 300 jobs to go; VIVAS Health warns Government policy could kill competition
By Finfacts Team
Dec 14, 2006, 13:26

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Oliver Tatton CEO of VivasHealth

UK health insurance company Bupa announced today that it is to pull out of the Irish market.

From today the company, which has 475,000 customers in the Republic, will no longer accept new members, and the annual policies of members will not be renewed once they expire.

The move follows the loss last month of a High Court challenge by the insurer against the introduction of the risk equalisation scheme announced by Minister for Health Mary Harney last year.

The scheme was to have involved Bupa paying a subsidy to rival VHI to compensate the latter for having a greater proportion of older, more expensive subscribers.

The company, which has been operating in the Republic for the last ten years, told the High Court that the equalisation scheme was a barrier to carrying on its business and that it would expose the company to liabilities of €161 million over three years.

Following the decision of the Health Insurance Authority in March 2005 to recommend to the Minister for Health and Children that levy payments commence, BUPA Ireland initiated High Court hearings in May of that year, securing a stay on payments pending the outcome of the hearing. The Minister subsequently decided on Dec. 23 last year to commence levy payments.

The case was heard before Mr. Justice McKechnie between Feb. 7th and April 28th this year.

BUPA Ireland challenged the levy on two broad grounds:

Its compliance with the TNLD and the EU Treaty
Its compliance with the Irish law including the Irish constitution

In today's statement, Bupa Ireland repeated that claim and said it had made "extensive efforts" to find an arrangement that would enable it to stay in the market.

It said the decision had "been forced on it" due to the scale of the payments required under the Risk Equalisation Scheme which, the company said, is now costing over €1 million every week.

Mary Harney said she regretted the move but said that "we cannot have a health insurance market in Ireland which does not respect community rating".

She said her department had been in discussions with Bupa for the last ten days but could not convince them to remain in the market. She said she was "really really sorry" the company had take the decision it had.

BUPA Ireland managing director Martin O'Rourke said Irish consumers were "the real losers as the market will be restored to a virtual monopoly".

He said consumers had benefited from "the choice, innovations and quality of service we have brought to the market over the past ten years, and it is with great sadness that we must begin the wind-down of our business".

Today's announcement was termed as "a bad day for Irish consumers, a bad day for Irish jobs and a bad day for competition in the health insurance market" by Fine Gael's health spokesman, Dr Liam Twomey TD.

"This is a regulatory failure. It is a failure by the Fianna Fail/PD Government to strike a balance between the issues of community rating, risk equalisation and competition in a way which delivers to the Irish people, he said.

Bupa employs 300 people in Fermoy and Dublin. O'Rourke said they had been informed of the implications of the closure and that everyone in the organisation had been given "at risk" notice. "We will need some people to service existing contracts and claims as we wind down," he said.

Current Bupa members who have recently renewed will remain fully covered. Anyone who is in hospital or about to arrange any medical treatment remain covered.

"Members will continue to be provided with a comprehensive, quality service until all contracts have expired and claims under those contracts are settled," the company said.

No new members or renewals of membership will be accepted from today.

"Members are legally entitled, if they wish, to transfer to another insurer with no break in insurance cover," Bupa said.

National Consumer Agency calls on Harney to address dominant position of State insurer VHI Healthcare

"We regret BUPA's decision to pull out of the Irish market. There is little competition in the Irish health insurance market as it is and BUPA's decision limits that even further," said Ann Fitzgerald, Chair of the National Consumer Agency and Director of Consumer Affairs.

"It is now critically important that the Minister for Health addresses, as a matter of urgency, the dominant position of the VHI in the Irish market. Dominant players are not in consumers' interests; we have seen that in various sectors of the economy. It is not good enough to allow VHI a further six years - until 2012 - to meet the solvency requirements which other health insurers must meet. To do so would strengthen and copperfasten the dominant position of the VHI," she said.

"Current VHI advantages include the freedom not to comply with capital adequacy requirements which other insurers are required to do. Other advantages which would accrue to VHI over that six year period would include freedom to develop new products and markets without regulatory oversight and without compliance with the regulatory requirements which apply to other insurers.

"Radical proposals are needed to address this dominance question now. Otherwise, consumers will lose out and the market will continue to be unattractive to new entrants," she noted.

Ann Fitzgerald reminded consumers that they are can transfer to Vivas or VHI without any loss of cover and advised them to not to be rushed into a decision and to look for the best deal when doing so.

VIVAS Health warns Government policy could kill competition

New Government Strategy and Policy Direction urgently required to protect consumers of Private Health Insurance in Ireland,” Oliver Tattan, CEO, VIVAS Health

VIVAS Health CEO, Oliver Tattan today warned that the former monopolist, VHI, is now perfectly positioned to kill all competition in the private health insurance market following the decision by BUPA to deliver on its threat to leave the Irish market.

“VHI already has 80% market share. VIVAS Health will fight to take on as many of BUPA’s customers as possible however; VHI has the benefit of a wide range of state protections and supports which will give it an unfair advantage in this fight. We are looking for clarity from Government if it now intends to further subsidise the VHI with the €100 million required to take on the BUPA customers.

“In light of this most recent development in the rapidly deteriorating health insurance market, it is imperative that the Minister for Health, Mary Harney takes immediate steps to make the necessary policy changes to ensure that the private health insurance market does not end up operating in a monopoly situation again.

“The Minister’s ill advised decision to trigger the risk equalization subsidy scheme has resulted in one of the three competitors in the market being forced to leave due to the fact that the market structure no longer allows fair competition. VIVAS Health is 100% committed to this market however, we need the environment that we are operating in to change in order for us to be able to continue to invest and innovate in this market for the benefit of consumers.”

The range of unfair advantages which the VHI enjoys, including the risk equalisation subsidy, the ability to operate insolvently, exemption from consumer protection regulation and the ability of the VHI to cross-subsidise products in a way no other European insurance company can, are clearly very effective deterrents and are successfully keeping other investors out of the market. From today, they also have the effect of actually forcing an established player out of the market.

Tattan concluded: “This is a bad day for the Irish consumer and a bad day for the health insurance market. We regret that BUPA is pulling out of the market. The Government’s policies in this area have clearly failed. We are calling for immediate corrective action on this matter.

"We need a clear and detailed policy on competition in the Irish health insurance market that will serve as a framework for the future and as a guide to potential new market entrants and investors as well as those already here.” said Tattan.

VIVAS Health is also encouraging customers of BUPA to switch to them.

Consumers are advised to call 1850 71 66 66 to speak to VIVAS Health. Switching health insurer is simple and involve only a phone call to your new health insurance provider, there is no gap in cover, no forms to fill out and no medicals are required.

Corporate customers are advised to speak to the VIVAS Health Business Support Team on 1850 721 721.

VIVAS Health says that it regularly consults with organisations looking to set up a Group Scheme and will work out the plan which is most suitable and tailored to the needs of the scheme members. With regard to company employees who are looking to switch health insurer, VIVAS Health conducts onsite clinics and one-one-one consultations with staff to ensure the process is fully explained and easy. There is a 10% discount for members of Group Schemes.

To find out more about your rights to switch, consumers should log on to the Health Insurance Authority’s website www.hia.ie.