Under embargo until 15.00 pm:Reforming health care, the role of health insurersSpeech by Sean Egan, Chief Executive, Aviva IrelandGood afternoon ladies and gentlemen.My name is Sean Egan. I am Chief Executive of Aviva Ireland, which is,comprised of three separate entities – life and pensions, general insurance,and of course, health insurance.Let me start by saying that I am delighted to be afforded the opportunity tospeak with you, to meet you and to listen to you today.As I came to putting my notes together for my speech today, I was veryconscious of the heavyweight group of very bright and informed minds onhealthcare gathered together in this room.With this daunting prospect in my mind, I considered what I could bring totoday’s debate.As CEO of Aviva Ireland, I am tasked with having a broader, longer-term,development vision for our business, including planning for the futuregrowth of our healthcare business.Without this oversight function, it is all too easy to get bogged down in theintricacies of our complex health care system and health insuranceprovision, without ever addressing the wider, macro challenges which areprevalent in that system.So in terms of my contribution today, I hope that I can give you a brief,summary of Aviva’s vision for the future of private health insurance inIreland.Health insurers are in an unusual position in the overall health system.We are not health care service providers; we are not the end users; nor, arewe health policy decision-makers.
Yet we are at front and centre in the lives of those for whom the wholehealth system exists in the first instance – patients.We facilitate patients, our customers, in gaining access to the treatmentsand services which they require. We do this by acting effectively as themiddle man between the health service and the patient.Every decision which is taken in the provision of healthcare affects ourcustomers and by extension our business model in a significant way.Talking about our healthcare system and business in the same sentence hasthe potential to make many people uncomfortable. However, given thestructure of our healthcare system, it is vital that the two are fully synched.Of course there are increased sensitivities around healthcare. It is sopersonal and of vital importance to each of us, our families and ourcommunities.Healthcare cannot and should never be treated like any other business.Yet healthcare can learn much from business.The challenge, for the private and public sectors alike, is to get the balanceright between providing customers with the highest levels of service andcustomer care, while keeping a constant eye on your costs and the wideroperating environment.The health insurance sector, like all sectors, is experiencing real challenges.47% of the Irish population now have private insurance. This figure hasbeen in decline since 2008. In 2011, 66,000 people dropped out of privatehealth insurance market. Others have been forced to trade down or reducetheir level of cover.This is happening against the backdrop of a severe economic downturn;high unemployment levels; and, rising premium prices.The declining numbers is a major cause of concern for the health insurancesector and also, I imagine, for the Minister and the HSE because of itsknock-on impact on public health services.
Despite this bleak backdrop, we can be positive about the private healthinsurance sector and its long-term future.Almost half of our population continue to be covered by private healthinsurance.Equally, people remain reluctant to abandon private health insurance. Thisgives me confidence that once economic recovery takes hold, the numbersparticipating in health insurance will bounce back again.My expectation of a renewed uptake in private health insurance in animproved economy comes with one major caveat.It will not happen unless we have a fundamental reform of the healthinsurance market.We particularly need to address: How can private health insurance help the Government deliver on its vision for healthcare in Ireland? How private health insurance delivers for its customers? How private health insurance operates in terms of the market structure and regulation.Without reform, we will not have the well-functioning and competitivehealth insurance market necessary to fund our health service.The introduction of Universal Health Insurance (UHI) will mark asignificant shift in our current system of healthcare provision, particularlyhow the system is funded.Aviva Health Insurance is fully supportive of UHI.Indeed, Aviva globally has had a positive experience of UHI in othercountries including the Netherlands. Given Aviva’s global experience ofworking in different healthcare systems, we hope to use this experience tocontribute to UHI’s introduction.UHI will lead to a fairer allocation of health resources in the health systemand enable patients to gain access to treatment based on need, rather thanability to pay.
UHI, while a worthy initiative, is just one part of the reform package.UHI will bring a new funding model, but it will not address the structuraland institutional defects in the health service.Indeed, if UHI is to succeed, it is vital that these defects are removed.That includes addressing issues like waiting lists which Dr. Martin Connorfrom the special delivery unit is tackling, increased primary care and ofcourse, an issue close to Aviva’s heart, reform of the health insurancemarket.The introduction of UHI will be a huge challenge for all within our healthsystem.I cannot claim to be an expert on UHI, but I can speak about my personalexperience of managing significant organisation transformation projects.This gives me some understanding of the complexities which lie ahead forMinister Reilly. I do not envy his task.I sense too that it is starting to crystallise in the minds of decision makersthat for UHI to work, the role of health insurers will be key.If anything under UHI, private health insurance’s importance will grow.The contribution of private sector health insurance will be vital to supportthe State subsidised element of UHI.Central to UHI’s success will be: A long-term sustainable health insurance market with patients at its core; Underpinned by robust competition between insurers and between health care providers; Providing affordable health insurance for all regardless of their income, risk profile or other criteria.
The key issue for our customers and for health insurers remainsaffordability. It is the single most important issue facing customers and theindustry and will remain so, even with UHI.The affordability of private health insurance, most evident from the risingcost of insurance premiums, has been undermined in recent years.Medical inflation; a failure to contain costs; failure to reform bothhealthcare provision and health insurance; lack of competition in the healthinsurance market and the introduction of Government levies, have allundermined affordability.Two matters in particular are critical issues when it comes to affordabilityand the long-term sustainability of the private health insurance market.The first of these is the recent proposal to re-designate existing privatebeds in public hospitals.This proposal will see charges levied against private patients in publichospitals. Private patients will now be paying for a bed in a public hospitalon the double – through their taxes and through their private healthinsurance.It is a retrograde step which will further undermine the affordability ofprivate health insurance, increase costs to private patients and push uppremiums.We talk much about fair and equitable access to health care, yet if thisproposal proceeds we are abandoning both.Private patients will migrate to private hospitals and public hospitals willlose out on the millions of euro in funding they currently collect fromprivately insured patients.No one wins.As things stand, this proposal is exactly that – a proposal. It requiresfurther thought. The Health Insurance Consultative Forum, recentlyestablished by Minister Reilly, is an ideal environment to give this proposaldeeper evaluation.
The proposal on bed re-designation comes against a wider backdrop ofrising bed charges over the past number of years.One way to contain bed charge increases is to allow insurers negotiate bedcharges with individual hospitals. Currently, the Minister applies a one-size-fits-all charge.The Minister has publicly called on insurers to control premium increasesby negotiating prices with the service providers, whether hospitals orconsultants. Allowing insurers negotiate with hospitals empowers us to dothis. It is something which Aviva fully supports.The second factor hindering affordability is health insurance competition.We need to do more to make our health insurance market morecompetitive. To do that, we need radical reform.The Minister for Health and the Minister for Finance – who also has a keyrole in this area – have given positive indications around reform.Aviva welcomed the decision by the Minister for Health to establish aHealth Insurance Consultative Forum to drive this programme.But no Forums are necessary to highlight the one glaring inequity whichexists in health insurance today – regulation, or the lack of regulation.Currently, the dominant player in the market, Vhi, with almost 60% of thetotal market, remains unregulated by the Central Bank of Ireland.The failure to regulate the Vhi perpetuates a situation where Vhi is treatedin a different and more favourable manner from its competitors.The result of this lack of regulation is two-fold: It leaves Vhi in a protected position and impedes the development of a truly competitive health insurance market; and The Vhi continues to be exempt from the Consumer Protection Code (CPC), imposed by the Central Bank of Ireland and designed to protect consumers. This may leave consumers vulnerable in their dealings with Vhi.
I mentioned the Code because as many of you may know, Aviva, itself, wasrecently fined by the Central Bank for breaches of this Code.We regret that this breach happened in the first instance. Once aware of it,we took immediate steps to rectify these breaches, a fact which wasacknowledged by the CBI in reaching a settlement.I make no bones about it.Aviva Health implemented the Code in full but failed to abide to the letter ofthe Code.Fortunately, no customers were disadvantaged by the breach, nonetheless,we recognise that the Code requires complete adherence.Given Ireland’s financial recent history, it is understandable that the CBItakes the need for regulation seriously.The result of our breach was that we were slapped on the wrist to the tuneof almost €250,000.Believe me it is a painful slap for any company.We accept the Central Bank’s rationale. But if that rationale is being appliedto some and not all, then the whole system is undermined.All players in the market must be subject to a level playing field and aregulatory regime which treats all equally.With the Vhi outside of regulation, this is not currently the case. It ishindering a truly competitive market.To be fair, Vhi is working to streamline its operations and its annual resultspublished yesterday reflect this.However, in terms of its regulation the power to act lies with Ministers forFinance and Health.In the short term, the need for the Government to increase the Vhi’s capitalsolvency margins and the costs to the Exchequer of doing so, impederegulation. However, Ireland’s current budgetary constraints cannot beused as an excuse.
Aviva believes that the Government and Central Bank can decouple thesolvency issue from CPC regulation by seeking to resolve the solvency issuein the medium term and applying the Consumer Protection Code to Vhi inthe immediate term.In conclusion, let me leave you with some positive comments.In my experience, properly run private health insurers are extremely adeptat managing costs. This feeds directly into the wider healthcare system.Effective cost control with a focus on primary care will help makehealthcare more accessible and affordable for all.Private health insurers are also often first adopters of new technology andmedical innovations.For example, drawing from Aviva’s own experiences, we were the first, andonly, health insurer to cover our customers with breast cancer, forOncotype DX testing, on all health insurance plans.This breakthrough test is now also being provided by the State. It has thepotential to transform clinical cancer care and could help womendiagnosed with breast cancer avoid unnecessary chemotherapy, savingpatients from unnecessary treatment and the government unnecessarycosts.Similarly, Aviva Health was also the first to offer discounted cervical cancervaccinations under our health plans. This initiative was followed by auniversal vaccination programme.I am convinced that private health insurers have the capacity to continue tobe first responders to healthcare innovations which deliver cost savingsand benefits for patients.I am convinced that private health insurers have a vital role to play in thereform agenda.And I am convinced more than ever that our input will result in betterpolicy decisions, better outcomes for patients and a better, more viablehealthcare system.Thank you.