Every time the NHS comes under pressure in the UK, the voices for a move to a co-payment system supported by private medical insurance (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 we go to Ireland.
First, the good news. About 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 co-payment system, PMI also benefits from tax relief. Another issue regularly lobbied for over here.
There are three providers: VHI (a state-run company), Quinn (which took over Bupa’s book when it left Ireland) and Aviva. VHI is the biggest, with about 60% of the market, and Quinn is second.
VHI has the largest proportion of older people. However, things are not as simple as they seem – as you might begin 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 or healthier people and older or sicker people.
It sought to protect the latter from being loaded with premium increases or more expensive policies because of their age and medical history.
Initially, it did this through restricting price differences between age groups and through guaranteed acceptance.
Bupa went into the Irish market on this basis. Not surprisingly though, it recruited more younger people (from VHI) and this gave it lower costs.
Enter the risk equalisation scheme, where a government agency calculated an amount that Bupa had to pay VHI to compensate it for its client base.
It then went to the EU Court in opposition to the amount, but won too late to prevent its exit from the market.
Then the government introduced minimum PMI benefits – for example, on primary care fees. All very complicated.
This year, a new coalition government was elected and it has 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 VHI).
Ironically, one of the reasons for the change is that the current system is regarded as inefficient in terms of gross domestic product v. health benefits.
This is 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.
Richard Walsh is a director and fellow of SAMI Consulting, www.samiconsulting.co.uk
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