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

all taxpayers have contributed to the public health service and have thus a call on it when
private hospitals find it too expensive to provide certain services.

The White Paper indicates, therefore, that the stand-alone private sector in the Irish
health services is relatively small and that there is a complex relationship between public and
private sector costs in public sector hospitals.

V GOVERNMENT INTERVENTION IN THE HEALTH INSURANCE MARKET.

The White Paper gives the reasons for government intervention to increase consumer
expenditure on private health insurance as follows:-

(a) individuals taking responsibility for meeting the cost of their own healthcare displaces
demand that would otherwise fall on the public health system.

(b) private health insurance provides facilities to meet a burgeoning demand for acute care.
(c) private health insurance is affordable and accessible because of community rating and
open enrolment (WP, 23)

Research by VHI and the ESRI indicates that consumers buy private health insurance
for the following reasons;-

(a) protection against large hospital/medical bills

(b) peace of mind about healthcare needs

(c) faster access to hospital beds/avoidance of waiting lists
(d) option of private/semi-private accommodation. (WP, 23).

While the White Paper presents community rating, open enrolment and lifetime cover
as the values underpinning the health insurance market O'Connor (1999) presents a less
benign view. "The VHI, as a monopoly, was free to choose how to levy its members to cover
its claim cost, and naturally, chose the administratively simple route of open enrolment and
lifetime cover. That such features, with minor modifications are now deemed prerequisites of
a competitive private medical insurance market speaks volumes for the sheltered evolution of
the Irish approach to financing health care!" (p.3).

O'Connor also states that, with the option of open enrolment, many potential
members may choose to replace promises with personal savings. As they age, they have both
saved resources and the same promise as all other members. The benefits
from private health insurance are of the hotel type i.e. accommodation and food benefits. As
O'Connor emphasises " catastrophic risk is, of course, covered by universal public health
access."(p.4). In the health insurance sector " service provision is focused on improvement in
choice, access or comfort, rather than the provision of "All Up" healthcare."

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