THE ECONOMICS OF COMPETITION IN HEALTH INSURANCE- THE IRISH CASE STUDY.



principles of the private health insurance market- community rating, open enrolment and
lifetime cover. Accordingly, an approach prescribing that insurers should include an extensive
range of benefits in the area of primary care in their cover arrangements is not being
proposed."(WP, 58)

O'Connor states that a further difficulty is that the risk equalisation scheme " does not
discriminate adequately between artificial cost savings caused by benefit restrictions and
genuine cost savings caused by negotiation of supplier discounts etc." (p.6).

The White paper notes that " a significant number of people subscribe to plans which
provide benefits in the nature of cash payments rather than indemnity", in respect of
hospitalisation, specific diseases, major surgery or other health related incidents. (WP. 61).
The White Paper states that experience elsewhere indicates that such cash plans are " a
potential threat to indemnity health insurance business." In a further move to restrict
competition the White Paper states that "the Government will keep under review the
question of whether they (cash plans) should be subject to requirements imposed on
indemnity-based health insurance contracts." (WP, 61).

VII THE POTENTIAL FOR COMPETITION IN THE IRISH HEALTH
INSURANCE MARKET.

The Indecon Report found that in Ireland in 1997 had the least competitive health
insurance market in sixteen countries examined in the EU plus Australia and New Zealand. In
Ireland, the market share of the largest producer of private health insurance was 91.3 per
cent compared to 42.2 per cent in the UK, an average of 31.7 per cent in the sixteen
countries and low market leader shares of 9 per cent in the Netherlands, 11.1 per cent in
Italy, 16.0 per cent in Sweden, 16.9 per cent in Germany and 17.2 per cent in France. The
most competitive health insurance market s were the UK and Spain. The UK had 81
companies in the health insurance market. (p.62).

Indecon sought the views of 28 foreign health insurance companies on competition in
the health insurance market and their potential interest in the Irish market and ten replied.
The important factors associated with competition according to these health insurance
companies were reduced cost and product innovations which 60% rated as very important
(Indecon,34).

An assessment of the impact of competition in the health insurance market in Ireland
by the Consumers Association of Ireland found that " BUPA is cheaper at the lower end of

12



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