Martin Howell, Medisearch UK, Luton
I remember the day as a BUPA salesman in 1993 when LocalCare, the first network scheme, was launched. “Listen men,” we were told. “What a brilliant idea this is. The member nominates the hospital that they want to use in the future, and in return they receive a 30% reduction in premiums over the standard product. It’s going to make comprehensive health insurance accessible to those people who couldn’t afford it before, and therefore the market will grow, and everyone, the client, the hospitals, and the salespeople, will gain.”
At the time, I believed it. I bet the hospitals, if they believed it then, don’t believe it now. Networks have proved to be a way of negotiating the best possible deal from private hospitals.
But, far from criticising BUPA, I think we should applaud it for introducing a system where hospitals have to sharpen their pencils to stay in business, just like every other commercial operation.
In my view the insurers have a duty to obtain the best possible deal on behalf of policyholders. After all, annual premium rises of 15% seem to be almost normal these days, and anyway of containing this trend has to be welcomed. Rather than facilitating market growth, networks have allowed many policyholders to retain their PMI.
At least BUPA, and some other insurers, give their policyholders the choice of a network or non-network product. PPP’s strategy of using only a reduced hospital network and deleting many hospitals from its list is indefensible without giving existing policyholders the choice of using all available hospitals – albeit at a higher premium. New policyholders can take the network offered or leave it. It is always better that the client is protected by a network insurance product, rather than no cover at all.
I say give the existing or future policyholder the information, tell them what joining a network scheme might mean to them when claim day arrives, and let them decide.
Providing unbiased information is the role of the intermediary, and if that isn’t a good reason why the public should be using an independent expert when purchasing their PMI, I don’t know what is.
Stephen Walker, Medical Insurance Services, Brighton
Networking was, to all intents and purposes, pioneered in the early `90s by BUPA with its LocalCare scheme and was introduced as a cost control measure – if you can persuade hospitals and consultants to come to an agreement on pricing, you have a measure of control on claims payments.
In theory, and to a certain extent, this maybe the case, but do the adverse effects outweigh the benefits, and is this the solution to the problem of rising costs and escalating premiums? From a client’s perspective networking restricts choice – not necessarily a problem when you have applied for a network scheme in the knowledge that treatment is only available in certain hospitals. However, there can be a problem for existing members of a scheme when they are suddenly faced with a reduced hospital list, as with PPP’s network system. A member may have joined a scheme because it covered a favoured hospital when the scheme operated on an unrestricted hospital list (within band), but treatment at that particular hospital may not now be covered if it is not a network hospital. A clear case, it would appear, of moving the goal posts.
If insurers are imposing a pricing structure on hospitals, there is a danger that standards may fall, due to cost cutting measures that need to be taken within those hospitals. Ultimately the client will suffer the consequences.
We have to ask ourselves whether networking is good for the industry as a whole. Small independent hospitals are being forced out of business. One of the first direct casualties of networking is the Bons Secours Hospital in Beaconsfield. Private hospitals rely on PMI to provide up to 80-90% of their business. If, as in the case of the Bons Secours, a hospital is not on the BUPA, PPP or Prime Health network lists, it stands to lose over 70% of its insured business. Insurers may argue that they are getting rid of “dead wood”, but it is also restricting choice. Insurers should be looking at the root cause of high costs and I believe this to be an inherent lack of proper underwriting within the industry, led by the competition for market share. Minimal underwriting equates to an easier application form equates to higher volumes of new business. However, if you don’t do a proper job of assessing risk you will inevitably take on higher risks and higher costs than you should.
The need to protect members’ premiums should be an industry priority and the best solution, (not necessarily the easiest solution), should be adopted. I don’t believe networking is the best solution for either the industry or its clients.