Friday 7 January 2011

VHI and the drive to Co-Payment

The country has reacted to the VHI’s announcement of increases of up to 45% with a mixture of outrage and shock. Call centres from all three Health Insurers have buckled under the response as people scramble to find a way to either reduce or avoid this hit.

The thing that I find absolutely unbelievable in all of this is the continuous harping on about the burden that VHI’s elderly members put on the system. The amount of complete garbage being thrown about beggars belief. The VHI is apparently suffering because some 20% of their members are 60 or over, and those people tend to claim a lot more. This isn’t a surprise folks, that’s sort of why they have actuaries and all the other expensive risk profiling staff they have employed but even without them it’s blatantly obvious that older members will claim more. For a medical insurance firm to turn around and say that those people are a burden on them that affects their profits doesn’t make any sense – these people have been members for decades, probably all their lives, and were under claiming or claiming nothing for many of those years. If the VHI were properly accounting for the risks their members presented they should have built up reserves to deal with the age profile of their members. I’d have some sympathy for Quinn or Aviva making the claim given the fact that they haven’t been around so long but even so their charges should allow them to meet their expected claims profile, including making assumptions about those members getting older and making more claims.

If the VHI are actually claiming that the claims that older people now represent a 45% higher burden than they previously expected them to be then frankly they are admitting to gross incompetence. I’ve no problem with increases being necessary, medical costs are rising too fast, but the VHI and other providers are in a distinctly powerful position to keep that under control. In any case I can’t believe that’s true at all, it’s just a convenient excuse. The real problem is that Plan B represents a style of plan that the VHI really wants to kill off because such comprehensive insurance is a bad idea because it removes any cost awareness from the members, and ideologically that’s a bad thing if you’re an insurer.

It seems to me that the motivation is that the VHI want to move the population en masse to co-payment based plans, because those are believed to encourage lower overall claims, and to do so in a way that avoids most of the specific debate that would take place about that if they were to do it any other way. Given that the people who have reacted to this are, by and large, younger people on Plan B and its ilk I suspect that it is all pretty much going according to plan and the VHI will be pretty happy provided most people elect to change plans rather than providers. Even if relatively few elderly members switch they will have made significant inroads into eliminating the real problem – the 500,000 odd younger people that they never want to see growing old on a non co-payment plan.

If I’m right then VHI will continue making the same claims about the elderly being a burden , and continue to equate elderly with Plan B participation while they repeat the dramatic hikes on the cost of those plans.