Competition can be a difficult concept for some companies and judging by VHI's reaction to last week's Family Money article on the price battle between it and BUPA, it isn't any easier even when your business is 30 times bigger than that of your rival. The article examined the major price differential between VHI and newcomer, BUPA Ireland, focusing specifically on two plans, VHI's Plan B Options and BUPA's Essential Plus. Plan B remains VHI's most popular plan, but by the company's own admission, nearly 250,000 customers have switched to the new Options scheme which VHI introduced, it claims, because there was interest among "some members" in enhanced benefits and services.
Independent fee-based consultants, like Mr Dermot Goode of the IPT Health Insurance Consultancy and Ms Aisling Kennedy who heads the same department at Mercer Consultants, provide advice to companies on health-care services. It is their opinion that VHI Plan B Options, which adopted many of the better-known benefits of the Essential Plus scheme such as enhanced cardiac treatment in private hospitals, the inclusion of 18-21-yearold students on children's premium rates, automatic cover of newborn infants, and improved maternity and outpatient benefits was a direct response by VHI to the introduction of the BUPA scheme.
It is their independent view that the fairest way for their corporate clients (group schemes represent the bulk of private-health insurance membership) to make a value-to-value comparison of the two health insurers is to compare VHI's Plan B Options with BUPA's Essential Plus where the benefits are roughly similar.
As of next month, however, when VHI raises its premiums by 9 per cent, an even wider cost gap will arise between the two schemes and the BUPA plans will be significantly cheaper, at least until that company's next price rise, probably in February 1999.
From September, the average family of two adults and two children will pay £861 a year for cover under VHI Plan B Options and £703 a year under BUPA Essential Plus, a difference of 22 per cent. Add one third-level student to each family and the prices rise to £993 and £795 respectively, a difference of 25 per cent. This comparison is utterly rejected by VHI.
Despite the fact that nearly 250,000 of its 1.4 million customers have already switched to the enhanced Plan B product since it was introduced last November, VHI insists that the fairer comparison is between Plan B, with its more modest range of benefits and cheaper price, and BUPA Essential Plus. From next month, a family of two adults and two children will pay £772 per annum for Plan B. The same family buying BUPA Essential Plus will pay £703. Plan B becomes only £70 more expensive than BUPA's product. According to Mr Tony McSweeney, VHI's head of marketing, research undertaken by its regional offices of what individual and group-scheme clients want, reveals that Plan B remains the most popular and attractive of all its schemes and that this is the plan that customers are comparing to BUPA's Essential Plus.
Independent advisers claim that this comparison does not make sense, given that Plan B does not include the wider range of benefits that either BUPA Essential Plus or even VHI's Plan B Options offers.
Plan B remains the pre-eminent product, VHI insists, not just because of its "excellent" range of benefits such as for psychiatric cover (80 days more than BUPA offers), but also because VHI offers a superior product generally with more fully participating consultants than BUPA (1,441 compared to 1,282), more hospitals (98 compared to 79), a head office in Dublin as well as four other regional offices, (BUPA has just one office in Fermoy, Co Cork) and 40 years of service to the public, against BUPA's two years.
Independent analysts like Mr Goode of IPT and Ms Kennedy accept that VHI and BUPA benefits and services are not identical. "The numbers of consultants who are fully participating is an important issue for our corporate clients," says Ms Kennedy, "but the lists the two insurers use are subject to future change, with some consultants coming off and others going on. What is important is their long-term strategies to get as many consultants aboard, and this is broadly similar."
VHI points out that St John of God's and St Joseph's in Dublin are not fully participating in the BUPA scheme; BUPA says that VHI does not fully cover St Michael's in Dun Laoghaire and the Galvia Hospital in Galway. (BUPA does offer one benefit the VHI cannot: access to its own 120 hospitals in Britain if treatment is not available in Ireland.)
"The hospital issue is important depending on where you live, but it works both ways," says Ms Kennedy. "Our advice to clients is to take location into account before making a final choice. One shortfall shared by both VHI and BUPA is that neither offers adequate GP cover. Some larger, multi-nationals are beginning to make their own arrangements."
The crux of the matter for most customers, especially companies paying for employee group schemes, is price. It may very well be, as VHI sources say privately, that BUPA has underpriced its plans to gain some marketing advantage and that it too will have to introduce sizeable premium hikes to stay in business.
But until it does and for as long as there are products that can be directly compared and customers who are prepared to pay for enhanced benefits VHI is going to have to learn that it can no longer dictate the market, or market opinion.
