The arrival of BUPA on the health insurance scene has opened up a sclerotic and unsatisfactory market to the winds of competition. The VHI has been increasingly criticised by its customers angered by its apparent inability to exert muscle against powerful interests like the consultants, or to moderate the inexorable rise of the costs of medical treatment. Some of the criticism is unfair and unjustified: the Government has been at fault for its failure to expand the public system adequately, increasing demand for private facilities which it then penalises.
But even when allowances are made, the general perception of the VHI is of an organisation which has developed as any monopoly is likely to do, changing benefits from year to year without obvious logic while premiums have steadily gone up. How true this perception is will now be put to the test. The scales of charges unveiled by BUPA this week are, at a basic level, lower than those operated by the VHI where like can be compared with like.
But the question of whether this is simply an introductory strategy, susceptible of being changed when the company has more local experience and has attracted a viable subscriber base, or sustainable over a reasonable period, is not likely to be answered for some time. At least now the customer has a choice and can decide according to individual circumstances.
On initial sight, it is clear that considerable change is likely, little of it to the advantage of the VHI. BUPA has played by the rules in introducing a basic product that will cost the same for everyone, regardless of age or claims history. That was properly made a necessary condition for any new insurer entering the market. But it has added a "discretionary convenience" - additional premiums related to the level of hospital accommodation which will vary according to the age of the subscriber. Young people can expect to benefit quite substantially from this provision, while older subscribers will pay more than the VHI charges currently all the more so if the Revenue Commissioners insist on not giving tax relief for the extra premium.
In a static situation one would expect a wholesale transfer of allegiance by the young, while older people remain put, exacerbating the problems that the VHI has already been experiencing from the ageing of the population at large. But things are unlikely to stand still. The VHI monopoly is being challenged in other ways by BUPA, through a more attractive range of benefits - no balance billing in some cases, the inclusion of alternative medicines, the choice of cash rather than the better hospital accommodation a customer may be entitled to which radically change the health care landscape. How will the VHI respond?
There are some overall advantages. More people are likely to be attracted into the market, strengthening effective demand for private health care: leading in turn to greater efficiency and competition between providers and a reduction of non essential costs. That could have knock on effects for the public sector too.