BUPA Ireland managing director Mr Martin O'Rourke will launch his company's health insurance products on the Irish market next Tuesday. The arrival of BUPA will break the monopoly which the State owned VHI has had on the Irish market since its formation, giving customers a choice for the first time. The man who will lead BUPA's drive knows the market well, having spent most of his working life with VHI.
The extent of competition on price and service will only become evident when BUPA announces its full package. But Martin O'Rourke insists that BUPA "will be different and will be more competitive".
After twenty five years at VHI, with which he will now compete for customers, Mr O'Rourke has the experience to develop BUPA in the Irish market. He joined VHI after leaving school, which he attended in his native Limerick. The man who "came in at the bottom" spent 15 of those 25 years in management, the final eight as an assistant chief executive with responsibility for operations and corporate planning. Within VHI he studied at night gaining professional qualifications in accounting, computing and taxation.
In 1993 he did the executive management programme at Harvard on a three month release from VHI.
"It was a marvellous experience. There were people from 34 countries and 33 different sectors, all senior managers and chief executives. It was a great learning experience and part of forming a network".
Mr O'Rourke left VHI in 1995 to become an independent management consultant. In his years there he had been closely involved with the international association for mutual bodies Associate Internationale de Mutualite chairing health funding and information technology committees. He was thus well known and respected in the international health insurance and health care community. "I was approached by a number of companies including BUPA", he says.
Within months he had been head hunted by BUPA to develop its planned Irish operation. He became managing director of BUPA Ireland in May 1996. "l did not spend as long as I would have liked as an independent consultant. I was appointed to an operation with no office and no staff," he jokes.
He was attracted to BUPA because it was a large, international, provident organisation, with strong reserves and experience of setting up in new markets BUPA sells insurance or health care services in 115 countries. Mr O'Rourke is a strong believer in the concept of the provident or mutual society.
BUPA, like his former employer VHI, is a provident association it does not have shareholders, it does not pay dividends and profits are reinvested in health care services. He is also a strong believer in competition in the market and in choice for the customer.
He also believe's in encouraging people to be "self reliant" and to take responsibility for their own health. For this reason we may see special discounts or offers on BUPA products to encourage healthy lifestyles and the use of alternative medicines. There may even be refunds for health club membership.
Enthusiastic about his business, Mr O'Rourke says "health insurance is a good industry in which to work. It's about helping people when they are vulnerable and exposed. It's about selling security".
But he is mindful of the need to control costs if premium charges are to be competitive. On the contentious issue of consultants' fees, BUPA will "track the VHI schedule because this is acceptable to 95 per cent of consultants and has become the market rate". In the area of hospital accommodation, BUPA has an agreement with 72 hospitals to provide potential customers with full cover for all hospital costs based on agreed lengths of stay for particular procedures. Agreeing that guidelines on lengths of stay are "not universally applauded", he argues that BUPA will give "certainty to the providers, the customers and ourselves".
Certainty is a big consumer issue, he maintains. "Our research shows very clearly that customers fear not knowing how much they will have to pay if they get a balance bill". (Balance billing involves an agreed payment by the insurer to the hospital or consultant and a further top up payment by the customer to cover the entire bill).
The secret of cost control is good relationships with the health care providers, he argues. Cost control and using new medical methods and new technology "is a journey rather than a destination and is a continual battle for everyone in the industry.
Coy about BUPA's membership targets, Mr O'Rourke says the company has been approached in recent months by a number of group schemes seeking choices.
"People buying, like to have a choice", he says. Group schemes where employers or associations arrange membership on behalf of their employees or members are likely to be targeted by BUPA. In Britain where BUPA has 45 per cent of the health insurance market with 3 million customers, some 60 per cent of its business is from group schemes. The company is expected to announce a range of packages targeted at employers.
Mr O'Rourke expects the overall health care insurance market to grow by 3 to 4 per, cent per annum reflecting strong economic growth, the arrival of competition and the expected development of,, new insurance packages such as cover for dental benefits and drugs. VHI has 1.4 million customers and while BUPA will compete for these, Mr O'Rourke says that many of the enquiries it has had have come from people who do not have health insurance.
The conditions imposed by legislation on any company offering health insurance in the Irish market community rating, open enrolment and minimum benefits are very pervasive and limit the scope for innovation", according to Mr O'Rourke. Under community rating similar premiums must pertain for all customers while open enrolment means that people cannot be turned down for insurance on age grounds. These restrictions were introduced by the Government to avoid "cherry picking" by new entrants into the market, who could have insured good risks and imposed heavy charges on weaker customers, such as old people.
"We espouse these values. They are consistent with our policies and with promoting self reliance", Mr O'Rourke said. Despite these restrictions he says he "is confident that our products will be exciting. We will have to make them so in a market so heavily regulated".
BUPA will build its brand image stressing security, large reserves and that it is here for the long haul. The company will enforce that brand image by providing security at the point of claim. There will be no balance billing, says Mr O'Rourke.
BUPA Ireland's parent company insures three million people in 115 countries. Founded in 1947, it is Britain's largest health insurance company with two million customers and 45 per cent share of the private health care market. It provides both health insurance and health services and owns and operates 29 hospitals in Britain, a number of hospitals in Spain where it bought the second largest healthcare company. Last year BUPA reported a surplus of £49 million sterling, a 19 per cent increase on 1994 figures while total reserves rose to £565 million. The group has 33 private health screening clinics across Europe. With a majority share in the Blackrock Clinic, Dublin, BUPA is "aware of the benefits of operating our own hospitals". It has no immediate plans to expand its hospital ownership in Ireland but, says Mr O'Rourke, "if something cores up we will look at it".
"For us building our operation in Ireland is a big education process. We are new to the Irish market. We accept that customers will take their time to decide. But we will be different. We will compete on price and we will be innovative."
