Across the sea

Almost 50% of the population of Ireland have private medical insurance (PMI) compared to approximately 11% of all UK residents. If this figure is considered in terms of the number of citizens in each country, it equates to around five out of every 10 people in Ireland paying for private health compared to one in 10 in the UK.

For a country both significantly smaller in size and population than the UK, Ireland is indeed leading the way in terms of having a successful public and private healthcare partnership. Having private cover is not compulsory, yet nearly half the country's population have opted to take out PMI, suggesting medical insurance can successfully sit alongside a public health service if the proposition is right.

There are a number of reasons for the high take up of PMI in Ireland. Perhaps one of the main differences between Ireland and the UK is the public healthcare structure and how each system operates.

In the UK, the NHS is funded by National Insurance (NI) contributions paid by taxpayers and provides healthcare for all citizens based on need and not on an individual's ability to pay. Most services such as hospital stays, operations and appointments to see local GPs are free to all citizens needing to use these services, although in most cases there is usually a waiting list.

Although charges for some services like dental and optical are becoming more commonplace, the NHS essentially provides free healthcare to all who need it and as a result, it is starting to feel the strain, as supply cannot meet demand.

A different system

In contrast, the healthcare system in Ireland is run rather differently. Entitlement to health services in Ireland is based on residency and means rather than on the payment of tax or other types of social insurance. Although a Health Contribution is paid from all incomes at a rate of 2% and allocated to the Department of Health and Children to fund health services in Ireland, healthcare is not free at point of delivery to all residents.

Instead, the Irish population is divided into two groups, medical cardholders and non-medical cardholders. Medical cards are distributed on a means tested basis and holders are exempt from paying the Health Contribution. The medical card would normally cover the holder, a dependent spouse and any dependent children. All people over 70 years of age are entitled to a medical card irrespective of their income.

Medical card holders are entitled to a number of health services free of charge including GP services, prescribed drugs and medicines, public hospital services, dental, optical and aural services as well as maternity and infant care facilities and a range of community care and personal social services.

Those who do not have a medical card are entitled to free public hospital services but may have to pay inpatient and outpatient hospital charges. While the treatment is usually free, there is a nominal public charge levied per hospital stay. This is set at 40 euros per night and to a maximum of 400 euros per patient per year.

Non-medical cardholders are not entitled to free GP services and are required to visit a local GP as a private patient. There are no set fees for services provided by a GP to a private patient ' the amount payable is dependent on the contract between the patient and the GP.

A GP may provide certain services to private patients free of charge such as maternity and vaccination services if they have agreements with their local health board to do so. But in some cases, although the vaccination is free, a charge will still be levied for the GP's service.

The key to success

Although the public healthcare system means Irish consumers are perhaps more familiar with paying for parts of their healthcare needs than those in the UK, the way the health insurance system operates in Ireland also plays a vital role in its success.

A number of companies offer voluntary PMI in Ireland, but the largest is Vhi Healthcare, which currently has 1.55million members. BUPA Ireland is the second largest provider and there are also a number of other medical insurance providers that deal specifically with certain groups of employees. These companies offer restricted membership schemes and are usually limited to particular groups of employees such as the Gardai and prison officers.

Health insurance in Ireland functions on a community rating basis. This means that it is a statutory obligation on all providers of PMI in Ireland to charge members the same rate per policy regardless of their age, sex or health status. This is entirely different to the risk-based approach taken by most PMI providers in the UK, and more importantly, one of the reasons for its success, says Dr. Bernadette Carr, medical director at Vhi Healthcare.

'Community rating is one of the key drivers behind the success of private health insurance in Ireland,' she says.

'The cost of private medical insurance is significantly lower here with Irish consumers enjoying the benefits of private health insurance at approximately one-third of what a US citizen, or at half of what a UK citizen would have to pay for equivalent cover. Experience in other countries where community rating is not applied shows a dramatic decline in the level of insurance held by older people.'

Carr's comments are particularly true of the UK market where the main drop-off in the number of people holding a PMI policy is in the retirement bracket. The risk-based approach taken by UK insurers means that the older a person becomes, the more likely they are to fall ill, causing premiums to increase.

Spiralling costs

Coupled with the rapid rise in medical inflation and the rate of technological advancements in medicine, PMI premiums are spiralling upwards and comprehensive cover is becoming increasingly out of reach for many UK citizens. For those who have paid premiums for PMI cover for the majority of their lives, to lose the protection at a time when they need it most can be devastating.

Despite the different ways in which PMI providers price products, the reasons that people take out cover are very similar, as Kate O'Keeffe, spokes- person for BUPA Ireland points out.

'People's reasons for joining a health insurance scheme vary, although many cite faster access to hospital treatment as a primary reason,' she says. 'For those joining a health insurance scheme for the first time, serving a waiting period is required; 26 weeks for those aged under 55, one year for those aged 55-65, and this precludes you from receiving treatment except in the case of an accident or an emergency.

'Similarly, if you have a diagnosed pre-existing medical condition you are precluded from treatment for that condition for a defined period of time ' five, seven or 10 years for those aged under 55, 59 and 65, respectively. Those over 65 are exempt from joining a health insurance scheme, although a member of another company may transfer at anytime, ' she says.

One of the key changes in the PMI market in Ireland over the forthcoming year will be the introduction of risk equalisation, which is due to come into force early next year.

Risk equalisation will mean that the cost of claims for the entire insured population will be spread among all the market players and linked directly to their claims profile. Companies will either pay into or receive funds from the Risk Equalisation Fund depending on the claims they pay out over the course of a year. It will be monitored by an independent body, the Health Insurance Authority.

Carr believes risk equalisation is good news for the medical insurance industry in Ireland. 'Risk Equalisation is the foundation stone of community rating. It protects and sustains community rating by ensuring that young healthy members of society continue to support older sicker members, regardless of which insurer they join. It means that all health insurers pay a fair share of all the claims of the older, sicker members.

'Risk equalisation means that the cost of claims of the insured population is spread among all the players in the market in proportion to their claims' profile,' she says.

Whether risk equalisation will damage or strengthen the PMI market in Ireland remains to be seen. It always takes time to become accustomed to new initiatives, but with sales riding high and the population continuing to grow, the private healthcare system is likely to continue to flourish.

Community rating has ensured the steady growth of the industry and it is more than likely the introduction of risk equalisation will reinforce its success. This, coupled with a public healthcare structure that is both robust and clearly defined, means the healthcare system in Ireland is likely to go from strength to strength, suggesting that it is possible to have a successful public and private healthcare partnership.