As another decision on risk equalisation looms and a survey finds only 10 per cent of consumers have switched insurers, Laura Slattery examines the state of the health insurance market.
A necessity, not a luxury, is how most people with health insurance view their cover, and once they do insure themselves they tend to stick to the plan they've got.
Only one in 10 people has ever switched from one health insurer to another, according to a new study by the Health Insurance Authority (HIA), with cost savings singled out as the main reason for moving by around half of those who had switched. In most cases, they left State-owned VHI to join BUPA Ireland with a small trickle signing up to newcomer Vivas Health.
The HIA's research into consumer attitudes to health insurance has been published at a crucial time.
By October 28th, it must confirm its proposed recommendation that Minister for Health Mary Harney should introduce risk equalisation, under which BUPA and Vivas would have to make payments to compensate VHI for the fact that its membership base is older and gives rise to higher claims costs.
VHI, still the dominant player in the market with 1.55 million members, contends it will become insolvent if risk equalisation - the pooling of health insurers' claim risks - is not introduced and fast.
It argues that the system is vital for the future of community rating, the principle that means health insurers must charge consumers the same premium for a particular plan, regardless of their age, gender and current or likely future state of their health.
Bupa, which arrived from the UK in 1997, has threatened to up sticks and abandon the Irish market if it is forced to hand over an estimated €30 million to VHI, and it has taken a case to the European Court of Justice claiming that risk equalisation is nothing more than illegal state aid.
Vivas, which this week celebrates its first birthday (albeit with an estimated market share of less than 1 per cent), says risk equalisation is anti-competitive and has criticised "continual regulatory interference" in the market.
The Minister does not have to follow the HIA's recommendation and last June, she decided not to trigger risk equalisation, a decision that will be revisited every six months.
At the time, the Minister indicated that she wanted to see more competition, which is why the switching levels are so important.
Dermot Ryan, the HIA's chief executive, describes the 10 per cent rate of switching as low, despite a rise from 6 per cent in a previous study conducted at the end of 2002.
"It hasn't increased that much, given Bupa has been in the market that bit longer and for a year now we have had a third insurer," he says.
Those who do leave VHI for Bupa or Vivas tend to be younger.
"Older people aren't inclined to move. The average age at which people switched was 39, while the average age of consumers in the study was five years older than that," notes Ryan.
However, Bupa, which has in the past been accused of cherry-picking the young, fit and claims-free, is now making a point of competing for older customers - in theory closing the gap in risk between it and VHI.
Since July 1st, people over the age of 65 who have not previously held health insurance have the right to buy it, and Bupa has responded by waiving initial waiting periods and offering free health checks to the over 65s.
Its campaign has added several thousand over 65s to its books, although it still has a long way to catch up with VHI's 178,000 customers in this age group.
This legislative change, which has been in the pipeline since 2001, is good news for older customers who can now buy health insurance at the time when they are most likely to want it.
Community rating makes their cover affordable.
If the principle of risk rating applied, older people and those who have adverse health conditions would have to pay much higher premiums and the insurance could become out of reach for the people who need it most.
The HIA's study revealed a huge amount of confusion among consumers about community rating and risk rating.
Although a third of consumers correctly said that community rating operated in the Irish health insurance market, about half of these also agreed that risk rating, effectively the opposite of community rating, existed in the market. A total of 35 per cent incorrectly stated that risk rating applied and a high level of "don't knows" were recorded in both cases.
Ryan says that the recent public discussion about risk equalisation has helped raise awareness of community rating and its huge importance to consumers.
As things stand, it seems most insured people consider their cover to be good value for money, notwithstanding the headlines heralding news of premium increases - 12.5 per cent at VHI last month, 6 per cent at Bupa in March and 7.5 per cent this week at Vivas.
"The cost of insurance has gone up over 60 per cent in the past five years and the market is still growing," says Aongus Loughlin, healthcare consultant at employee benefits firm Watson Wyatt.
Just over half of the population - 52 per cent - now has private health insurance, a total of 2.07 million people and they have high expectations.
Nearly 70 per cent believe that having health insurance gives them a better level of healthcare, while 57 per cent think having it means they can skip the queues.
Despite the low level of switchers, the arrival of Vivas has stirred things up and led to a period of greater innovation, Loughlin says.
On the day Vivas launched, VHI introduced a new generation of plans.
Both insurers' plans were geared at particular stages in people's lives, so a basic no-frills plan was aimed at younger individuals, a plan with increased maternity cover was aimed at people planning families, and a plan including cover for the Mater Private and Blackrock Clinic targeted older people.
Bespoke plans explicitly marketed at and tailored to particular segments of the population are, it could be argued, one way for health insurers to get round the community rating rule that means a particular plan must be offered at the same price to everybody, regardless of the risk they pose.
"Once a plan is open to all persons it is not against community rating, although you might say it is not the spirit of community rating," Loughlin says.
There is now over 100 different health plans available between the three insurers, compared to 40 before Vivas set up shop. "With all of this choice, there is a risk people might say 'no, this is too complicated, I'll stick with what I've got'," says Loughlin.
And the HIA's study indicates that people tend to have misconceptions about their own cover, never mind what's available elsewhere on the market.
Only a tiny percentage of people could correctly identify the maximum number of beds in a semi-private room - it's five - with the majority thinking it was less than that.
"Although none of the insurers will guarantee you a bed, the perception is that you will be seek quicker and that you will be given a private bed," says Loughlin.
Some 10 per cent of claimants also told the HIA that they were dissatisfied with the way in which their claim was handled, up from 4 per cent in the previous 2002 study, with the main reasons cited relating to expectations not being met and treatments not being covered.
"If you fall ill, the last thing you think about is your insurance," says Loughlin.
"It's only when you find out afterwards that you're not covered that it leaves a bad taste in the mouth."