Consumers: their choicesVHI and Vivas to compete for custom of health insurer's 475,000 members

It was an empty threat, some believed. Others felt Bupa had no choice.

Either way, the British health insurer's announcement yesterday that it will accept no new members and cease renewing existing memberships with immediate effect was described as "a bad day" for consumers and an unhealthy one for the market.

VHI, the State-owned dominant player, fresh from its victory in the long-running risk equalisation argument, took the time yesterday to note that this was "a particularly difficult day" for Bupa members.

The custom of these 475,000 Bupa members is suddenly up for grabs between VHI - now even more dominant by default with 1.55 million members - and relative newcomer Vivas Health, which is backed by AIB and has just 80,000 members.

In its statement, Bupa confirmed that current members who have recently renewed their annual plans will remain fully covered until their next renewal date. Anyone who is in hospital or about to arrange any medical treatment will remain fully covered. But no new members or renewals of membership will be accepted as of yesterday.

Bupa members are legally entitled to transfer to another health insurer without any break in their insurance cover and the National Consumer Agency (NCA) has urged them not to rush into a decision, but to take the time to find the best deal. The next Bupa renewal date falls on January 1st.

Members whose policies are up for renewal on that date need to have an alternative policy in place by the end of the month to ensure continuity of cover.

Health insurance companies are obliged to give immediate cover to people who have switched from another health insurer, as long as the break in cover does not exceed 13 weeks.

This means that anyone who switches health insurer, including the Bupa members, do not have to go through the waiting periods that apply to people taking out their first health insurance policy.

Although cover for emergency and outpatient treatment is usually available straight away, people who are signing up to health insurance for the first time have to wait 26 weeks before they can make a claim for a new condition, a year before they can make a claim for maternity benefits and five years before they can make a claim for pre-existing medical conditions. Longer waiting periods apply to people aged 55 and over.

Bupa members who are still subject to these waiting periods will have to sit out the remainder of the waiting period at a new insurer, but they won't see the clock restarted. If they take the opportunity to upgrade their type of health cover during a move to VHI or Vivas, they may have to wait up to two years before they can access the enhanced benefits in relation to pre-existing conditions.

For people aged 65 and over, the extra cover for pre-existing conditions may not kick in for five years.

These maximum waiting limits are regulated by the Health Insurance Authority (HIA), which last summer launched a campaign to convince consumers about how easy it is to switch insurers without loss of cover.

But even if the switching process is as straightforward as the HIA says, Bupa members now face another dilemma.

Choosing between just two remaining health insurers - in "a virtual monopoly" as Bupa's managing director Martin O'Rourke put it - is not as simple as it sounds.

Health plans are infuriatingly complex, with layer upon layer of "bells and whistles" and as many as five different levels of cover often found within one plan. How much cover is enough?

Common terms such as "semi-private" hospital accommodation are frequently misunderstood by consumers, a study by the HIA found. (Semi-private can, in fact, mean anything up to five beds in one room.)

Remembering details such as policy exclusions, excesses and waiting periods is not all that easy, with the result that Financial Services Ombudsman Joe Meade has reported receiving an increasing volume of complaints from consumers shocked to discover from their hospital beds that their insurance was not quite as comprehensive as they thought.

A good starting point is VHI's Plan B: more people are on this than any other hospital plan. Although the company is no longer marketing its A-E range of plans, favouring instead its LifeStages products, Plan B remains open to consumers.

It offers cover for a private room in a public hospital and a semi-private room in a private hospital, which is exactly what Bupa's most popular plan, Essential Plus, offers. The Vivas equivalent is the Level 2 option on its "I" and "We" plans.

Bupa had just five different types of plans. The cheapest, its Essential plan, offered the lowest level of cover and is comparable to VHI's Plan A or Vivas's Level 1 options. One area where Bupa differed was that even under the Essential scheme it gave members full hospital cover for certain types of cardiac procedures taking place in the Mater Private, Blackrock Clinic and Galway Clinic.

This cover is available from Level 2 upwards on the Vivas We plan, while VHI's Plan B offers 90 per cent cover. VHI's LifeStages plans, however, completely exclude cover for the Mater Private and Blackrock Clinic.

Customers of Bupa's three HealthManager schemes will have been used to an element of "day-to-day" cover within their schemes, meaning they could claim back 50 per cent of outpatient expenses, including GP and consultant fees. This was an innovation that Bupa brought to the market. Both VHI and Vivas have since launched products with cover for everyday medical expenses. This is included automatically in the VHI LifeStages plans and can be purchased as an optional extra with Vivas.

The latter insurer, still a tiny player, has been aggressive on price, undercutting both VHI and Bupa for roughly the same benefits, plus a few extra, such as the most comprehensive cover for health screening, accord- ing to Aongus Loughlin of benefits consultants Watson Wyatt. Its main weapon has been a 50 per cent discount on kids' premiums. Earlier this month, it stepped up its campaign by holding a one-day sale where kids' premiums dropped to €1.

The response from consumers has been good, according to a spokes- man. But it seems likely that Vivas will run into the same problem that Bupa did when it first came here in 1996: consumer distrust of a newcomer.

The NCA yesterday mourned the loss of Bupa. "There is little competition in the Irish health insurance market as it is and Bupa's decision limits that even further," said NCA chairwoman and director of consumer affairs Ann Fitzgerald, who called on Minister for Health Mary Harney to address the dominant position of VHI in the market.

"Dominant players are not in consumers' interests," she said.

But the really bad news for consumers is that health insurance premiums are set to increase next year for everyone. The 25 per cent rise in the cost of public beds from January will add 6 per cent to health insurance premiums next year, the Minister admitted.

The next round of premium increases are likely to exceed the 6.7 per cent average increase on Vivas plans last October and VHI's 12.5 per cent increase in September, according to Mr Loughlin, as these increases followed just a 10 per cent hike in the cost of public beds last January.