I can just imagine the cheers and celebration going on at VHI HQ this afternoon as it was announced that Bupa, the second largest health insurer (with 22% of the market) is going to pull out of the Irish market because of risk-equalisation.
Two things really annoy me about this decision:
- When they set up shop in the first place they knew that risk equalisation was inevitable. It’s a side effect of how the Irish health insurance market works. Everyone pays the same premium, the incumbant VHI has older and more costly members and risk equalisation meant compensating VHI. They should have planned realistically for it although how one can plan to compensate another company a sum of money larger than one’s own entire profits is beyond me.
- Why couldn’t they have come up with a more imaginative solution. If VHI had simply given Bupa a percentage of their elderly members to even out the age spread of their memberships then VHI wouldn’t have had a leg to stand on and risk equalisation wouldn’t be an issue.
I’m a Bupa member as is my wife. A friend of mine works for Bupa in Fermoy. We’re all sorely disappointed at the decision today. There’s still Vivas Health but I wonder what their plan is to cope with the huge payouts VHI will want off them in a couple of years.
The company is blaming the move on a scheme known as risk equalisation – which it says compels it to pay €1 million every week to compensate other insurance providers for covering older consumers.
The company claimed the move would force it to hand over €161m to its rival over three years, even though its profits for the period would be just €64m.
Michele linked to a newsletter written by Martin O’Rourke, the boss of Bupa Ireland. As I expect the Bupa website will disappear sooner rather than later and this message with it, I’ll copy/paste it here after the jump as a record of what evils a monopoly does to an industry.