Competition is best hope for averting hikes
Published 24/12/2011 | 05:00
Health insurance is already very expensive for many families in Ireland, but the best hope for preventing future price rises is competition and choice.
In that context, yesterday's purchase of Quinn Healthcare by a group of local managers in Cork is welcome.
While the terms of the deal were not announced, the encouraging news is that Ireland will still have three competing health insurance companies in the market from the New Year.
That is no small achievement. For several weeks now there has been feverish speculation that Health Minister James Reilly would simply merge Quinn Healthcare with the VHI, in a move that would have disastrously reduced competition.
Dr Reilly never publicly commented on these plans, but equally the suggestions were never denied.
On one level, that idea would have had merits -- combining the VHI's older customer base with Quinn's younger clients, thereby reducing costs overall.
But the cost would have been competition. Before BUPA (now Quinn Healthcare) and then Aviva arrived into the health insurance market here, there was only VHI and nobody wanted to go back to that monopoly position.
As a result, Irish consumers should be glad that the Quinn Healthcare offering will remain in the market, giving at least some level of competition to VHI and Aviva Healthcare.
A group of four local managers have done a management buy-out (MBO) at Quinn, with backing from the giant insurer Swiss Re.
The day-to-day management of the company will be done by the managers, with Swiss Re assessing the insurance risks by pricing the products and paying out the claims, a process known as underwriting.
Because it has a younger customer base, the risk Swiss Re is taking is somewhat reduced, but insurers are cautious people, so unfortunately there is little chance of a price war breaking out between the three main providers.
Ultimately their customers use the same hospitals, get the same procedures and have to pay the same nurses and consultants, so the opportunities to undercut each other are limited.
Where there are differences is in the efficiencies within each company and the kind of deals they can set with hospitals.
In this latter area, the new Quinn Healthcare company is likely to be hard nosed.
For the employees of the existing company, all that will really matter is that their jobs are preserved.
They are also likely to be cheered by a link-up with a company on the scale of Swiss Re, which is one of the world's largest re-insurance companies.