THE HEALTH insurance market in the Republic is in a state of flux. The VHI rolled out massive price increases earlier this month as its chief executive Jimmy Tolan claimed the entire market was effectively broken.
He blamed an ageing subscriber base for many of the company’s difficulties.
Community rating appears to be under threat and a return to risk equalisation, which was supposed to create a level playing field for all players in the health insurance market, appears to be a long way off.
What is the Milliman review?
The Government announced plans to privatise the VHI last summer.
While this is not expected to take place for at least three years, Minister for Health Mary Harney almost immediately commissioned a report to be carried out the US consultancy firm Milliman to examine the VHI’s claims costs and to look how they have increased over recent years.
Has the report been published?
No. The Minister said that to republish the report in full would hand an unfair advantage to the VHI’s competitors, Quinn Healthcare and Aviva, as neither insurer has had to be so open about its internal workings. However, under pressure from the Opposition, the Minister agreed to release portions of the report in a Dáil statement on Tuesday.
And what did Ms Harney say was in the report?
Ms Harney said it had found the VHI had given limited focus to what it was paying hospitals for and had failed to invest in ways it could manage claims to better yield savings. She said the insurer could make savings of a minimum of 5 per cent to 10 per cent in this area regardless of the risk profile of the insured population.
She claimed the report showed that the VHI can and must address its claims costs aggressively, rather than relying on other elements such as risk equalisation – or indeed huge price increases - to help sort out its difficulties.
What is the VHI’s impression of the report?
Unsurprisingly, the VHI said it had been very effective in reducing its internal costs and said it had cut 15 per cent off its consultants’ bill and 6 per cent off its private hospitals’ bill over the last two years. It says the report praises the speed at which it had undertaken its cost-cutting measures.
So thats good news for the VHI, then?
Not at all. The VHI warned that if recommendations contained in the report are implemented, doctors would lose the absolute right to determine the type of care insured patients required. It says its primary recommendation is that the VHI should look towards becoming a US-style company which would see it switch from being a firm that funds the healthcare needs of its customers to one that determines what level of care and treatment was needed.
What about hospital consultants?
The VHI says if the report is implemented, then the ability of a consultant in a hospital to determine a course of treatment for an insured patient would be diminished and the insurer would have to enter into new agreements with consultants and hospitals and its customers, whereby it would ultimately determine the treatments.
How would a health insurer determine my treatment?
It would need to employ a panel of consultants to review your medical records and determine the best – or at least the most cost-effective – way to proceed. While such a system is without precedent in the Republic, more intervention at an early stage by health insurance companies is commonplace in the US.
Patients need to get the green light from them before they can embark on certain treatments.
That sounds like bad news?
It certainly does. While the US may have the most advanced medical system in the world, its health insurance market has repeatedly been accused of cutting corners to save costs, turning down treatments after the fact and refusing to approve certain treatments on a cost basis.
Would it save the VHI money?
Ms Harney seems to think so and, says the report, could lead to a minimum of 10 per cent savings or more than €100 million a year.
The report is not so clear, however. It only goes as far as saying that pending a pilot programme testing we cannot be certain of the magnitude of this opportunity.
For its part, the VHI says the report has failed to demonstrate the theoretical savings were either tangible or achievable in the medium term.
The VHI says moving to a US-style healthcare utilisation company would require a very significant upfront investment and would be a long and complex journey”.
