Distribution, Brand, Customer Responsiveness, Product Innovation, Claims Management,
Purchasing Efficient and Administrative Efficiency. (WP, 42). Some of these non-price types
of competition would increase costs. Nonprice competition in aviation, for example, led to
high costs expensive brand-imaging, service competition in terms of seat pitch and food and
drink on offer, decor of aircraft, expensive forms of retailing, and frequency of service with
low load factors. Similarly in banking the absence of price competition led to service
competition with an increased number of branches.
The White Paper rules out the targeting of low-risk individuals and incentives to
change the conduct of either the individuals insured or the medical sector. A major complaint
by BUPA against the White Paper is that it prevents them from changing the incentive
structures for both patients and producers which have pushed up costs.
The improvements which BUPA wishes to make which would be negatived by risk
equalisation as proposed by the Irish government include the following;-
(a) Insurers encouraging people to stay healthy, through screening, preventative programmes
and better systems of managed care;
(b) Insurers who have shorter lengths of hospital stay;
(c) Insurers who encourage day care rather than inpatient care;
(d) Insurers who encourage people to use alternative medicines; and
(e) Insurers who choose drugs rather than invasive surgery(O'Rourke, 1999).
The context of risk equalisation in Ireland is one in which everyone is covered for
hospital and consultant costs. Government interference in the market for health insurance is
thus concerned with bypassing queues and accessing the hotel aspects of hospitals such as
perceived differences in food and room furnishings. VHI itself cross subsidises its high cost
plans from its basic product. VHI has a 91 per cent market share in Irish health insurance,
thus making it impossible for BUPA or possible other new entrants to cross-subsidise such a
market dominant company. The benefits of risk equalisation are nil but the cost in deterring
new entrants and preventing efficiency improvements are considerable.
The White Paper recognises the inefficiencies inherent in the risk equalisation policy
it proposes. The White paper states that " the regulations will also be examined and
discussions held with insurers with a view to avoiding situations where an application of an
"excess" on out-patient services may provide a perverse incentive for minor procedures to be
carried out in a hospital setting rather than in a local surgery." (WP, 57)
While supporting "steps to promote the position of primary care in the system" the
White Paper paradoxically states that " a compulsion to cover primary healthcare is not
necessary for the protection of the interests of the common good, as reflected in the core
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