After Bupa's exit, where will people buy health cover? Laura Slatterycompares the options - VHI and Vivas.
Most people don't like to think about their private health insurance: they buy it and hope they will never need it. But this Christmas, 475,000 Bupa members have been considering their cover options following the insurer's dramatic withdrawal from the market.
Just before Christmas, the Government set up a review group to examine whether the Irish market can be profitable for health insurers. It follows a myriad of claims and counterclaims, both by Bupa and its rivals regarding the viability of the market, following the introduction of the controversial risk equalisation scheme.
This involves companies like Bupa, who have younger members, compensating groups like VHI who have older membership profiles.
Assuming Bupa leaves the market, there will only be two major health insurance players in Ireland.
Bupa members are legally entitled to transfer to another health insurer without any break in cover, as long as they sign up to a new insurer within 13 weeks of the expiry date of their Bupa policy.
The choice is now between the State-owned VHI which has a massive 1.55 million members and relative newcomer Vivas Health, which is backed by AIB and has just 80,000 members.
Apart from the reduced competition in the market, there will be further bad news for health-conscious consumers next year, with premiums expected to increase at even higher rates than they did in 2006.
Last January, Minister for Health Mary Harney put up the cost of public beds by 10 per cent. In September, VHI had increased its premiums by 12.5 per cent, while increases on Vivas health plans in October averaged at 6.7 per cent.
From January 2007, however, the cost of public beds is set to increase by 25 per cent. The knock-on effect on private health insurance costs from this measure alone will be an extra 6 per cent on all policies, according to the Minister.
Medical inflation will also put pressure on premiums, according to Aongus Loughlin, head of healthcare and risk consulting at benefits consultants Watson Wyatt.
The cost of covering treatment in private hospitals such as the Beacon hospital in Sandyford, the new Hermitage clinic in Lucan and a new private hospital due to open in Limerick will push up insurer's costs, says Loughlin, while the availability of expensive new drugs, such as the breast cancer drug Herceptin, will also add to premiums.
"You can expect that premium increases will be higher than 12.5 per cent next September," says Loughlin.
One way for consumers to keep their premiums down is to opt for an excess plan. This is a health plan where policyholders pay the first part of any claim themselves.
Bupa was the first insurer to bring this concept to the health insurance market and it is particularly popular with employers who want to keep their employee benefits costs down, says Kevin Kinsella, senior consultant in healthcare at Mercer.
Excess plans are about 10 per cent cheaper than standard plans. For example, Vivas's "We" health plan at Level 2 costs €628.75 for an adult. But under the excess plan, if the consumer or their employer pays the first €75 of any claim (except maternity and cancer cases) they can get the plan for €597.50.
Since it launched in October 2003, Vivas has been aggressive on price, holding campaigns where it offers a 50 per cent discount on children's premiums and even a one-day sale offering children's premiums for a mere €1.
It remains to be seen whether these prices will overturn any mistrust consumers have of the newcomer. But the 475,000 people who joined Bupa over the decade that it was in Ireland have already shown willingness to choose an alternative to the dominant VHI and for the corporate sector the savings offered by Vivas seem clear.
Like Bupa, which started the fashion for including "day-to-day" medical expenses cover with their hospital plans, Vivas has also brought innovations to the market.
Its plans cover cosmetic treatments not usually associated with standard health plans, such as cover for laser eye surgery and teeth whitening, notes Loughlin. Vivas's latest wheeze is to offer a 33 per cent discount off the cost of Allen Carr's Easyway to Stop Smoking programme.
Vivas also has the most comprehensive cover for preventative health screening, while VHI offers only limited cover for health screening on its newer generation LifeStages plans. The benefit is not available on its Plans A-E.
The inclusion of preventative health screening, as well as the cover for GP fees offered under the day-to-day policy extensions, means consumers will have greater encouragement to check out any niggling health worries.
Next year will see further move toward "wellness" in line with trends in the US health insurance market, according to Kinsella.
"Traditionally, the health insurance focus has always been on illness," he says.
The added day-to-day and preventative health benefits make sense for insurance companies as well as consumers, according to Loughlin.
He says: "If they are insured for it, consumers are more likely to go for a screening and catch something early, so it doesn't develop into an illness that will lead to their hospitalisation and a much a higher claim."