2.1 State-funded care

Healthcare in Ireland is financed from a number of sources (Central Statistics Office, 2020) including government funding (about 74% of total funding in 2019), voluntary payments (about 14% of total funding in 2019, of which 12% is from voluntary health insurance and 2% is from other voluntary sources) and out-of-pocket expenditure (around 12% of total expenditure). Data from the 2019 calendar year are cited here, as the more recent figures published for calendar year 2020 are considered anomalous because of increases in public expenditures associated with the COVID-19 pandemic.

Under the state health system, equivalent to the public insurance arrangement, all individuals (i.e., 100% of the population) are entitled to a defined level of coverage based upon certain eligibility criteria, and in some cases subject to co-payments. Eligibility is determined by factors including income relative to a threshold; age; and the nature and severity of illness (Citizens Information Service, 2022).

Figure 1 presents a split of the population by eligibility group.

Figure 1.

Percentage of population with access to State-funded care by eligibility group.

Depending upon which group each individual falls into, the individual may be entitled to free care for primary, secondary and tertiary care, commonly referred to as having a ‘medical card’.

As of 2019, approximately 31.8% of the population had a ‘medical card’ that entitled them to predominantly free medical care for primary, secondary or tertiary services (Central Statistics Office, 2019).

In addition, a further 10.4% of the population had access to what is termed a general practitioner-only visit card which provided them with predominantly free access to general practitioner services only. While eligibility to this GP visit card is based in many cases on income a sizeable proportion of people are granted based on age rather than income.

Having such a large proportion (42.2%) of the population with partial or fully subsidised access to services means there is already a well-developed process is in place to adjudicate on needs within the population. This infrastructure could be used as a building block for the introduction of a mandatory universal health insurance arrangementFootnote ².

2.2 Role of private health insurance

Currently, private health insurance provides benefits for primary care and hospital care-related services. Primary care services include contributions towards the cost of general practitioners, specialist consultations and ancillary services such as physiotherapy. Hospital-related services include the costs of hospital care and the associated cost of doctors’ fees.

A key aspect of private health insurance, that makes it different to the benefits available to medical card holders, is that those with private insurance are entitled to receive care in the network of private facilitates (mostly hospital and diagnostic) contracted by their insurer, whereas those with ‘medical card’ coverage or who do not have insurance are only entitled to care in state-funded hospitals.

Consumers have free choice of insurer (currently there are four open-enrolment insurers in the market together with a small number of restricted member undertakings) and within each insurer, consumers can choose their health plan (product). Health plans differ in terms of the range of providers and scope of services covered subject to meeting a minimum level of coverage set out in regulation, referred to as minimum benefits (Government of Ireland, 1996).

The over-riding objective of the private health insurance market is to provide coverage as a complete or partial alternative to the state level of coverage (Department of Health, 1999). This terminology has been used by the Irish Department of Health and Irish government Ministers consistently, since the mid-1990s, and reflects the long-standing view that voluntary health insurance market serves as a tool of social policy.

Since the establishment of the Voluntary Health Insurance Board in 1957 (Government of Ireland, 1957) and, more formally the establishment of an open market, under a legislative basis in the mid-1990s, the objective has been to promote risk solidarity to ensure affordability of premiums for high-risk groups, such as the relatively older age-groups.

In this regard (see Government of Ireland (1994, 1996) and amended versions thereafter):

1. 1. All plans must be community-rated with limited exceptions for certain risk groups such as children and younger adults.Footnote ³

2. 2. Open enrolment applies, under which all insurers must accept all applicants regardless of the applicant’s risk profile.

3. 3. Insurers must cover a minimum set of benefits set-out in statutory regulation.

4. 4. Open-enrolment insurers must participate in a risk equalisation system since 2013 including a high-cost risk pool, introduced since 2022.

Although private insurance covers approximately 47.5% (Health Insurance Authority, 2022b) of the population only approximately 12% of total health expenditures are funded through private health insurance (CSO, 2020). As already noted, the bulk of overall health expenditure,approximately 74% in the calendar year 2019, is funded through government expenditure.

For a more extensive discussion of the role of private health insurance and the organisation of the health insurance system in Ireland, see Armstrong (Reference Armstrong, McGuire and van Kleef2018).

2.3 Relationship between state-funded care and private health insurance

It is useful to summarise the relationship and interactions between state-funded care and private health insurance.

1. 1. As shown in Figure 1, 100% of the population are entitled to state-funded services (public insurance) with the extent to which different categories of heath service are covered depending upon the Medical Card eligibility thresholds.

Table 1 presents the levels of coverage within each eligibility group for the principal categories of benefits provided.

1. 2. As illustrated in Table 1, not all of the population are entitled to completely free at the point of use health insurance under the state-funded public insurance arrangement. As a result, many people have opted to voluntarily purchase private health insurance.

2. 3. Private health insurance serves as an alternative to the state-funded public system and it provides those who choose it access to care and some cover for co-payments (OECD, 2021). In effect, it is therefore both complementary and supplement to the public system.

3. 4. As shown in Table 1, the benefits provided under private health insurance are predominantly hospital benefits and give those insured access to additional private hospital services not provided in the public system. The Health Insurance Authority (2023) report that about 15% of total claims paid by insurers in the market was paid to public hospitals while equivalently 47% was paid to private hospitals.

4. 5. In the public system, hospital services are provided, in state and voluntary hospitals, by salaried employees some of whom can also work in private hospitals thereby creating perverse incentives to the detriment of equity.

Table 1.

Benefits provided for each eligibility category under state-funded public system

3.1 Outline of preconditions

Given the nature of both government and voluntary health insurance-funded healthcare and the over-riding health policy objective of improving equity, it is a reasonable question whether the existing health insurance model could be extended and transform into an integrated mandatory universal health insurance system that would eradicate the two-tiers that currently exist.

In considering this question, a starting point is to look at the model of managed competition (or regulated competition as preferred by this author) set-out by Enthoven (Reference Enthoven1978a, Reference Enthoven1978b, Reference Enthoven1988). In part, the model proposes using suitable regulation within a social health insurance framework to achieve equity and efficiency.

The framework set out by Van de Ven et al. (Reference Van de Ven, Beck, Buchner, Schokkaert, Schut, Shmueli and Wasem2013) takes this model a stage further by setting out 10 preconditions that must be met to introduce the managed competition model and also achieve the goals of equity and efficiency to a desired level. In this paper, the 10 goals have been supplemented from work presented by Armstrong (Reference Armstrong2011), Armstrong and Paolucci (Reference Armstrong and Paolucci2014) and Henriquez et al. (Reference Henriquez, Van de Ven, Melia and Paolucci2024) to review the readiness of the Irish private health insurance market to evolve to a mandatory universal market.

This paper is not the first to examine this question as it was extensively discussed before by Mikkers and Ryan (Reference Mikkers and Ryan2014). At that time, the authors came to the conclusion that the introduction of managed competition in Ireland requires a long transition period, and came to the view that the requisite preconditions are not yet in place.

Such a managed competition model has been proposed by multiple political parties, of very different ideological views in Ireland over the last 30-years including by the Irish Labour Party (2000) and the Fine Gael and Labour (2011).

These preconditions can be summarised as follows:

1. 1. Free choice of insurer.

2. 2. Consumer information and market transparency.

3. 3. Risk-bearing buyers and sellers.

4. 4. Contestable markets.

5. 5. Freedom to contract and integrate.

6. 6. Effective competition regulation.

7. 7. Adequate prudential regulation

8. 8. Cross-subsidies without incentives for risk selection.

9. 9. Cross-subsidies without incentives for free-riding.

10. 10. Effective quality supervision.

11. 11. Guaranteed access to basic care.

12. 12. Basic benefit package.

13. 13. Affordable out of pocket payments.

14. 14. No conflicts of interest by the regulator.

Specifically because of the voluntary nature of the health insurance market preconditions 7 and 12 have been added to the original list of Ven de Ven et al.

Pre-condition 7 addresses the need for competing health insurers to be subject to appropriate regulatory oversight from a prudential perspective (e.g., in respect of solvency capital and in respect of consumer protection).

Pre-condition 12 reflects the fact the in some voluntary health insurance markets, such as Ireland, benefit competition is a cornerstone of competition and historically a basic benefit package has therefore not been part of the market structure.

Pre-condition 13 has been added to ensure that the equity objective is met for everyone.

Pre-condition 14 reflects the importance of ensuring regulators act at all times in the interests of consumers.

3.2 Some preliminary comments

In making a judgement as to whether these preconditions have been met in the case of Ireland there are a number of important considerations prior to a detailed review.

1. 1. Each country is different and has different historic, cultural and institutional backgrounds. Therefore, we cannot simply replicate the health system of one country. Nonetheless, we can learn from the experience of other countries.

Thus, while Ireland might look to, for example, to the Dutch, German or Swiss mandatory insurance models in designing its approach (each of which have features of managed competition), there will some significant differences between the Irish health system and each of these systems that must be actively considered, even if the preconditions are met.

1. 2. International experience suggests that it takes a considerable period of time to introduce any system of universal health insurance.

For example, in the Netherlands work commenced in introducing their system in the 1960s and it only culminated in 2006 with the introduction of their national health insurance system. Introducing such a system, in Ireland, need not take as long as this, but it does point to the fact that the timescale for the introduction of universal health insurance (UHI) is considerable. All countries that have moved to introduce UHI have done so over a period of many years.

In this regard, it then becomes a relevant consideration as to whether the timescale for the introduction of a managed competition model is too long, as compared the alternate possible approaches to meet the equity-improvement goal.

1. 3. Ireland is a small country with a limited capacity and introducing any form of managed competition would be a complicated task that will need a significant level of technical expertise.

Having said all this, the recent experience during the COVID-19 pandemic in Ireland has blurred the lines between the public and private delivery of hospital services and demonstrated that more rapid integration of the public and private health systems could be achieved.

During the early phases of the Covid-19 pandemic when state-funded hospital capacity was being stretched the Irish government put in place provider contracting arrangements with private hospitals to use their facilities for non-Covid-19 patients. This arrangement, for a limited period, essentially removed overnight much of the two-tier arrangements within the health system benefitting those with private insuranceFootnote ⁴.

3.3 Review of preconditions

In reviewing the extent to which the preconditions are met, the working assumption is that the model of UHI or managed competition being introduced in Ireland is such that the introduction of a comprehensive, competitive universal health insurance system will mean the consumers will purchase a set of prescribed standardised benefits from competing health insurersFootnote ⁵. Consumers will have a free choice of insurer. Health insurers will contract with competing providers to provide care to their enrolled members. All consumers will be required to buy a basic package of services, and subsidies will apply in order to make the package affordable to everyone regardless of either their risk or income levels.

The concept of consumer choice of health plan together with the regulation of competition with the intention of achieving society’s goal of affordability and efficiency is something that was considered by Enthoven (Reference Enthoven1988). Implicit in the affordability objective is the need for all consumers to have access to healthcare that is delivered up to a pre-determined quality standard.

Such a model of universal health insurance is to various degrees in place already in a number of countries including Germany, the Netherlands and Switzerland, though none of them have fully implemented the managed competition model.

A full discussion of the preconditions is set-out elsewhere (Van de Ven et al., Reference Van de Ven, Beck, Buchner, Schokkaert, Schut, Shmueli and Wasem2013, Henriquez et al., Reference Henriquez, Van de Ven, Melia and Paolucci2024). In considering the preconditions, the paper focuses predominantly on the institutional and structural arrangements that must be put in place.

It should be noted that the preconditions are necessary but not sufficient in themselves. If any of the preconditions are not fulfilled, there is a risk that society’s objectives of affordability and efficiency are not met. In the context of Ireland, where we would want to introduce universal health insurance as soon as possible, the lesson is that we must be careful to ensure that we meet these preconditions prior to the introduction of the insurance-led model.

To aid the reader a summary qualitative assessment of the readiness of each pre-condition to be met is provided.

1. 1. Free choice of insurer

In Ireland, all consumers can choose both the insurer of their choice and the health plan within that insurer that they prefer. Consumers are able to switch insurers freely and easily without the need to fill in complicated forms or bureaucracy. Open enrolment applies to insurers in that they must accept all consumers regardless of their risk profile. A recent report on behalf of the industry regulator, the Health Insurance Authority (2022b), identified that a significant proportion of the market has switched insurer at some point (35%). However, the same report identifies that the predominant groups who have switched are in what could be considered low-risk groups thereby identifying some constraints on the ability of all risk groups to switch between insurers.

At present, in the current voluntary market, initial and pre-existing waiting periods apply for those choosing private health insurance for the first time. Such waiting periods do not apply for consumers switching between insurers providing they are not increasing their level of coverage. It is the assessment of the author that the removal of such waiting periods if the market was being transformed from a voluntary market to a mandatory market would not be overly complicated structurally, though the actuarial risk for existing insurers could change thereby leading to transitionary shocks for insurers. To mitigate this risk, waiting periods for cover in excess of the basic package could be considered.

At present, there are significant number of different health plans available within the market. Currently, 325 products are available to consumers (Health Insurance Authority, 2022). This leads to significant choice overloads with potential negative consequences for consumers (Reference Frank and Lamiraud2009). Such choice overloads are often referred to as product proliferation in the Irish market.

Product proliferation has a number of potential serious complications for consumers as it facilitates risk selection activities on behalf of insurers (Armstrong, Reference Armstrong, McGuire and van Kleef2018). Restricting the number of products within the market as part of the introduction of a managed competition model of universal coverage may need to be considered to stop the possibility of consumers free-riding whereby they increase their level of coverage when they become more high-risk than before. Having some level of product competition can be judged to have some economic advantages as insurers are encouraged to be efficient; consumers have a choice of insurer but it may also incentivise risk selection activities.

In the Irish context, where there is a large group within the population who have a ‘medical card’ and consequently may get subsidised insurance under mandatory insurance arrangement, it would be important to ensure that they have free choice of insurer, in an identical manner, to those who are paying in full for the insurance. The easiest way to do this would be provide everyone identical access to defined health services while enforcing cross-subsidies between income and risk groups to achieve equity.

Summary assessment: While this pre-condition is not fully met the assessment is that through regulation it could be met relatively easily.

1. 2. Consumer information and transparency

The second condition is that there is sufficient information available on the price, quality and other aspects of the services to be offered by providers and insurers.

In Ireland, under legislation, the benefits and premiums for all new products (and existing products being changed) must be notified to the industry regulator, the HIA, prior to launch. The submitted information is reviewed and made available to the public. These arrangements, in principle, allow consumers to make informed product choices. However, a number of limitations still exist:

1. 1. As already indicated, there is a large number of products within the existing market at present thereby making product comparisons for consumers difficult.

2. 2. There is no standardisation of product information within the market thereby making it difficult for consumers to compare products.

3. 3. Even if the information is available to compare products there remain some more complicated differences that are less transparent consumers.

An interesting example of this is in relation to cardiology medical procedures that are provided to consumers on different products. Different insurers have different practices in relation to what is covered and given the complexity of this topic it becomes problematic to become informed on the impact of these differences.

1. 4. There is no easy way to compare the quality of the products as distinct from product benefits and prices. On a related quality point, consumers also have difficulty in comparing the quality of providers covered by the different insurers as there is no mechanism in place to for consumers to compare providers.

All of these limitations suggest that there is a need for policy actions to improve consumer information and transparency. Furthermore, as indicated by Armstrong (Reference Armstrong, McGuire and van Kleef2018) there is a possibility that product proliferation is being used as a tool for risk selection by insurers with consequent negative effects on efficiency and equity.

Summary assessment: All in all, while many of the institutional aspects needed to facilitate consumers making informed choices are already in place it is clear that in moving towards a wider managed competition model the limitations would need to be addressed. The topic of product proliferation under the first limitation is a big concern that significantly inhibits consumers transparency.

1. 3. Risk-bearing buyers and sellers

In Ireland at first review, this condition is already met as both insurers and providers bear the risk for individual consumers.

1. 1. Consumers choose their health plan from one of three insurers and depending upon the subsequent claims experience an insurer (the seller) makes a profit or loss from this consumer based upon the community-rated premium charged.

2. 2. For the care provided to an individual consumer the relevant provider receives a payment to treat the patient with the payment being reflective of the services provided. For hospital services, this payment is made, predominantly, directly to the provider in question.

However, when considered more closely there are a number of features that affect somewhat the extent to which both buyers (i.e., individual consumers) and sellers are risk bearing.

1. 1. Risk-related subsidies are provided to insurers through a risk adjustment formula based on age/gender/type of cover risk adjusters.

2. 2. Additional risk-sharing mechanisms are in place through the use of three elements:

   1. (i) A hospital utilisation credit whereby insurers are compensated for a defined level for each overnight stay or day case.

   2. (ii) A high-cost claims pool, introduced in April 2022, under health plans share the costs of treatments in excess of a defined threshold on a proportionate basis through a central fund (currently 40% of the cost in excess of €50,000 is funded through the central fund).

   3. (iii) An over-compensation mechanism exists that checks to ensure health plans are not over-compensated through the risk adjustment or other risk-sharing mechanisms.

The details of these arrangements have been outlined previously (Armstrong, Reference Armstrong, McGuire and van Kleef2018) with the exception of the high-cost claims pool mechanism which was introduced since April 2022 and which is outlined in KPMG (2021) and Health Insurance Authority (2021) .

The three risk-sharing mechanisms do not nullify the risk-bearing nature of insurers as the insurers still have an incentive to be efficient in the provision of services to the market as any upside is retained substantially by the insurerFootnote ⁶ .

It is also note-worthy that individual consumers (the buyers) are increasingly becoming risk bearing as more consumers purchase excess/co-payment products (see various HIA Annual reports, 2018–2020). While this means consumers are incentivised to choose the most efficient type of care the introduction of high excesses for treatment affect high-risk groups (e.g., orthopaedic procedures) could be considered a form of risk selection that undermines equity within the market. Reform of such practices, including perhaps an outright ban on the application of high excesses for treatments for high-risk groups, would need to be considered in the context of introducing a universal health insurance arrangement. This is a topic that would need to be considered as part of defining a basic benefit package of care.

Summary assessment: This pre-condition is largely met already. While community rating applies for consumers and this arguably is in conflict with the Van de Ven et al. preferred approach for managed competition it is not considered an area of significant concern.

1. 4. Contestable markets

In Ireland, all insurers operate under the same rules in relation to competition and health insurance regulation. All insurers must be registered with the Health Insurance Authority (the industry regulator) and comply with the relevant health insurance legislation. All insurance entities are subject to both Irish domestic competition rules and relevant European competition rules through the local competition commission (the Competition and Consumer Protection Commission) and the European Commission (DG Competition).

From an insurance regulation perspective, all insurers must be authorised and supervised to provide insurance within the European Union/European Economic Area. The significance of this is that insurers need not be fully authorised by the Irish insurance regulator (the Central Bank of Ireland) but can passport in from other countries (European Commission, 2009; Central Bank of Ireland, 2022).

Thus, in principle, there is a level playing insofar as there are identical entry and exit regulatory requirements for all insurers seeking to operate in the market. Nonetheless, a number of factors may inhibit competition in the market and, thus its contestable nature. These factors include:

1. 1. The underlying regulatory structure and, in particular, the framework for risk equalisation has been subject to uncertainty over the years thereby discouraging entry into the market. This uncertainty has dissipated in recent years as a number of legal challenges to risk equalisation have ended and clarity has been brought to the market on these topics.

2. 2. There is a perception among certain consumers groups (particularly the older and sicker groups who are relative high-risk) that switching is difficult.

3. 3. In recent years, insurers have made tentative efforts to vertically integrate for the provision of certain types of services (e.g., minor injury units). This could make it tricky for new entrants to join the market.

4. 4. At present, approximately 2.5m people are insured in the market. While this is not insignificant its relative size compared to that of other countries combined with the high cost of entry may mean the market is not considered attractive to large global insurance entities.

The impact of these factors may explain the fact that current market is highly concentrated, as measured by Herfindahl-Hirschman Index (HHI), with a value of 3,826 calculated under the published market shares of the existing insurers (Health Insurance Authority, 2022a). A HHI of greater than 2,500 is usually taken as demonstrating that a market is highly concentrated (Federal Trade Commission, 2010).

Notwithstanding the high market current concentration level, the assessment of the author is that the growth in the market size to 5.1m people (Central Statistics Office, 2022) that would come from UHI could lead to more entrants to the market and greater competition thereby improving the level of contestability within the market.

Furthermore, as recently confirmed by the European Commission (2022) while the risk equalisation scheme may be considered a selective state aid in that it favours “certain undertakings” it does not give rise to any concerns for the Commission as to whether it is in conflict with the internal market objectives of the European Union.

Summary assessment: This pre-condition is largely met already though increased efforts would need to be made to ensure switching between insurers was incentivised.

1. 5. Freedom to contract and integrate

Insurers are freely able to determine with whom they contract for private providers of healthcare and can freely negotiate with these providers subject to paying each provider that is chosen to be covered the minimum benefit levels set out in legislation.

For public hospitals (referred to as statutory and voluntary hospitals) insurers can conceptually determine which providers they cover though, in practice, there are few examples of insurers restricting coverage for public hospital. However, if they cover a public hospital the insurers have no ability to negotiate the contracted payment rates with the hospital as these are centrally set by government.

It should also be noted that one of the key aspects under the proposed Sláintecare arrangement in 2017 to remove the two-tier nature of the health system is to remove private patients from public hospitals. However, under a managed competition model there would be no removing such patients as there would be a single universal tier with insurers freely contracting with providers to meet the needs of their beneficiaries.

A recent development during the COVID-19 pandemic was the sub-contracting by the state to the private hospital sector to provide overspill capacity for public hospitals. This development demonstrated that it was possible to integrate the public and private hospital markets and could be used as a learning for meeting this pre-condition under the managed competition model.

Summary assessment: Overall, the conclusion is that this pre-condition could be met in the medium term with some significant structural changes, particularly allowing for insurers to freely contract for public hospitals and creating one integrated marketplace of public and private providers of care.

1. 6. Adequate competition regulation

The purpose of this pre-condition is to ensure competition is overseen by an agency charged with enforcing consumer protection including in relation to anti-trust and merger oversight. As indicated previously, the Competition and Consumer Protection Commission ensures competition rules apply generally to all health care market participants and health insurers, with the notable exception of public (state) hospitals where competition oversight does not apply. This is similar to the situation that applies in many other countries of Europe (Siciliani et al., Reference Siciliani, Chalkley and Gravell2017). Extending competition regulation to the entire market would be a pre-requisite before the introduction of managed competition.

Summary assessment: The pre-condition is largely already met.

1. 7. Adequate prudential regulation

In order to protect consumers from the risk of insolvency of any insurer or from the risk that insurer behaves irresponsibly all insurers should be subject to the same prudential set of regulatory standards. This applies in Ireland as all insurers must meet the conditions of the Solvency II Directive for insurers (European Parliament, 2009) and the requirements of the Consumer Protection Code (Central Bank of Ireland, 2022).

In the context of a managed competition model, the challenge is such that by increasing the risk pool to 100% of the population the prudential capital requirements for the entire market would grow significantly in monetary terms. Depending upon the pathway being used to move to a UHI model securing this extra capital may be challenging for insurers.

Summary assessment: The pre-condition is already met.

1. 8. Facilitation of cross-subsidies without incentives for risk selection to ensure affordability

Fundamental to the introduction of the managed competition model is the fact that there are robust systems in place to ensure that the affordability objective is met. This has a number of aspects:

1. (a) Robust risk equalisation

Insurers should be discouraged from selecting better risks (e.g., the young) to the detriment of poorer risks (e.g., the old). To do this a system of robust risk equalisation should be put in place. Ireland has had at this point a long-standing risk equalisation system in place to support the voluntary market (Armstrong, Reference Armstrong, McGuire and van Kleef2018).

The Irish risk equalisation is somewhat unsophisticated compared to many others with the use of age, gender and type of cover as the risk adjusters but the recent introduction of a high-cost claims pool, following approval by the European Commission, will help to improve the system to meet the solidarity objective (European Commission, 2022).

Further enhancements could be made to improve solidarity and ensure affordability in advance of the introduction of a managed competition, not least among the introduction of a health status measure as has been introduced in other countries such as the Netherlands or Germany (see McGuire et al., Reference Armstrong, McGuire and van Kleef2018).

1. (b) Open enrolment and lifetime cover regulations

All consumers should freely be able to choose their insurer regardless of their risk profile and must be covered throughout their lifetime by insurers. Waiting periods apply but under a managed competition model such waiting periods should be removed for benefits in the standard benefit package.

Such regulations are already in place in Ireland and thus would not be a limitation for the introduction of a managed competition model.

1. (c) Adequate income-related cross-subsidies

No income-related cross-subsidies apply within the current voluntary health insurance market.

Key to introducing them will be to harness some of the existing arrangements that are in place to subsidise health care. This could be achieved by using the eligibility arrangements that are in place for the medical card system for those who are entitled to subsidised public coverage. The existing arrangements have been in place for many years so institutionally there is a process in place to determine who has access to subsidised premiums.

The existing risk equalisation system facilitates transfers of funds between insurers, the HIA (as the administrator of the risk equalisation in effect) and the Irish tax authorities and provides a ready-made mechanism for the transfer of premium subsidies from Government ultimately to insurers.

The specific nature of how both the risk and income subsidies will operate is a question that needs further discussion within an Irish context to avoid some of the problems seen in other countries as identified by in other studies (Van de Ven, Reference Van de Ven2006). However, many of these issues have been considered within the existing voluntary market so the debate has already started.

Summary assessment: Some significant improvements need to be made to meet this pre-condition. In particular, risk solidarity may need to be increased through changes in the risk equalisation system and, second, income cross-subsidies would need to be introduced.

1. 9. Cross-subsidies without incentives for free-riding

All consumers should be part of the system and penalties should be put in place for those who do not take out insurance. This will help attain the affordability objective of the system. Otherwise, if consumers have to choose to participate or not in the system there is a risk that they will only do so when they are about to incur medical expenses and this will shift an unfair cost burden to those who do participate.

In a move to UHI in Ireland, there would need to be a strong arrangement in place to ensure the mandatory nature of the system is enforced; the basic benefit package would need to be developed at a more detailed level that the current minimum benefit arrangements; and risk equalisation would need to be enhanced.

Summary assessment: This pre-condition is currently not met. Mandatory health insurance rules would need to be introduced.

Experience from countries such as the Netherlands, Germany and Switzerland suggests that penalties and fines would need to be put in place to ensure enforcement and that state agencies would need to get involved in administering the mandatory system. While in some countries provincial/Cantonal governments are involved (for example in Canada and Switzerland) it is likely that the administration in Ireland, given the relatively small size of the country, would be facilitated by a central government agency. This could include the Irish taxation authorities (the Revenue Commissioners) for the collection of premiums similar to what happens in the Netherlands.

1. 10. Adequate quality supervision

The existing arrangements for quality monitoring overseen by the Health Information and Quality Authority (HIQA) are largely fit for purpose to ensure consumers are protected. Insurers would need to be further incentivised to prioritise quality in providing a proposition to consumers.

The remit of the HIA would need to be strengthened to allow the quality of insurers to be assessed and communicated in such a way to allow informed decisions as to their choice of insurer to be made by consumers. The quality of insurers could be measured by the responsiveness to consumers both in terms of service and needs (e.g. providing preventive care).

Summary assessment: This pre-condition is largely met. The work of HIQA could be extended relatively easily.

1. 11. Guaranteed access to care

Ensuring consumers have adequate access to care is always a source of public contention. At present within the Irish system waiting lists within the public health system are a matter of considerable concern. While there is less concern within the voluntary health insurance system removing the two-tier system will not in itself guarantee timely access to care. There is a wider issue of whether the existing resources for both the public and private systems are adequate to provide timely care. In this regard, it may be the case that separate to the introduction of a universal system there may be a need to increase resources.

The geographic dimension may be less of a concern than is other larger-sized countries as Ireland is a small country in terms of its geographic area. However, it is the case that certain services are provided in large urban centres and this will continue to be controversial in the population’s minds.

Summary assessment: If the hospital element of the benefit package was merely to be provided in state hospitals this pre-condition would not be easily met as capacity is insufficient to cover the entire population. If private hospital providers were to be provided in the benefit package the capacity would be significantly enhanced and the chances of meeting this pre-condition increased. However, this would come at a cost that may have significant implications for the overall cost of the package. Without included private hospital access it is unlikely that a meaningful universal package could be provided to the entire population.

1. 12. Benefit package scope

By its nature, and from an actuarial perspective, insurance is about covering individuals for a defined package of cost-effective care in defined circumstances to a defined level. There has been a limited discussion (see Armstrong, Reference Armstrong2011) within the public health system as to what constitutes an appropriate benefit package from a societal equity perspective in Ireland and with this in mind entitlement within the medical card has arguably deliberately been left ambiguous.

This would be one of the more important discussions to be had in order to bring about managed competition in Ireland.

Summary assessment: Significant work would need to be undertaken in developing a meaningful benefit package scope.

1. 13. Affordable out of pockets payments

Linked to the topic on creating appropriate income-related cross-subsidies this is a topic that is likely to be controversial given the trade-off between cost sharing and achieving equity. Within the public system cost sharing has been gradually reducing in significance in recent years with ambitions to remove most of the remaining cost-sharing mechanisms (including pharmacy co-payments for medical card holders) in the near term. Conversely, the voluntary health insurance system has been increasing co-payments, though the evidence weakly suggests that such products are more attractive to the better risks and, thus, could be used as a tool for risk selection.

Summary assessment: For this pre-condition to be met there would have to be some consistency applied between the public and private insurance systems as part of their integration, and, more generally, clarity as to what is the primary public policy objective in applying such out-of-pocket payments.

1. 14. No conflict of interest by regulator

The Health Service Executive is largely given the role of the provision of services while the Department of Health is responsible for governance/regulation assisted by a number of state bodies. Many of the state bodies would have clearly defined roles in a managed competition environment that would be in keeping with their current remit. This includes the HIA, for the regulation of health insurance undertakings; HIQA for ensuring quality in the provision of services; and the Central Bank of Ireland in the prudential regulation of insurance undertakings.

Summary assessment: Notwithstanding the existence of these institutions, a clear pathway would need to be put in place to ensure there was clarity as to how all the organisations worked together and complemented each other.

4.1 Key areas to consider for transition

Given these preconditions and the various extent to which they have been met the two questions are:

1. a. How far away from having these preconditions in place are we in Ireland?

2. b. How can those that are missing be met in the shortest possible time to deliver UHI?

As identified, many of the preconditions are partially fulfilled but nonetheless, there are many gaps and there will be a need for a very detailed plan to deliver them all in a meaningful way.

Some of the key issues that will need to be considered are outlined below. This is a preliminary and non-exhaustive list designed to demonstrate the complexity of the transition.

What would insurance-based (managed) competition look like?

In keeping with the managed competition model outlined above the taking out of insurance would be mandatory for all. All consumers would have free choice of insurer from one of the risk-bearing insurers.

Those currently with private insurer could continue with their existing insurer or select an alternate insurer. Those currently without private insurance could freely choose their preferred insurer. Open enrolment (a key aspect of meeting the equity objective) would apply and be enforced through regulation so everyone regardless of their risk profile would have access to insurance.

Affordability would be ensured through risk and income-related subsidies with the state covering the cost of insurance for those who cannot afford it. These would be funded through taxation contributions the modality of which would need to be considered further.

There would be a defined standardised package of benefits with the benefits. Undoubtedly, the scoping of the benefit package would be complex and would likely need to be carefully considered.

Insurers will contract to providers on behalf of their insured customers and will compete with each other on the basis of prices and quality of service.

Scope of benefit package

The definition of the benefit package is likely to be one of the most important and technical issues surrounding the introduction of universal health insurance. It will bring in issues of cost and there are considerable differences in the benefit package currently available to those with private insurance and those with medical cards.

Not all benefits are higher within the existing private insurance side of the market. For example, while hospital access benefits are greater for those with private insurance, those with medical cards enjoy better benefits for pharmacy costs. In designing the benefit package, it would also be important to determine the manner in which services outside the benefit package would be paid. If they were completely excluded it could inhibit equity. Furthermore, any necessary negotiations would providers could prove challenging.

My experience of working on the design of universal benefit packages in many countries suggests this step would be a time-consuming and contentious step that needs to be undertaken as one of the first steps.

Increase the insurance pool

Those who currently do not have access to the insurance market would need to be brought within this umbrella. This will not be easy when there is no clarification as to what will be included within the basic benefit package.

Those with medical cards could be transitioned to insurance once the benefit package has been identified. Those in the middle who have neither a medical card nor existing insurance would need to be considered carefully as it may lead to unforeseen poverty traps and low compliance.

Competition between medical providers

Another issue that will need active consideration is in relation to how private and public hospitals can compete to allow insurers to freely contract and negotiate. The medical case-mix of these two types of hospitals is quite different in Ireland (e.g., private hospitals tend not to treat more complicated cases) and the geographic sub-markets in which they operate are different in many cases.

This topic was considered by Mikkers and Ryan (Reference Enthoven2014) who questioned whether the sparse geographic nature of hospitals could “weaken insurers’ ability to prudently purchase care”. Fundamentally while the distribution of hospitals has not changed since this time the Mikkers et al. assessment that provider competition is limited may no longer hold true, for many categories of acute services and more complicated elective services (e.g. orthopaedics). This is because, first, a high proportion of these services are increasingly provided in large urban centres where private and public hospitals compete. Second, private hospitals have recently started provided services outside of their previous geographic locations thereby creating more competition between public and private hospital providers. Third, the government has introduced a regional health structure in recent that has the explicit objective of introducing competition within the public hospital sector.

Notwithstanding these changes, it is true to say that public hospitals fund a large proportion of the cost of medical education of the health service. This cost is not there for private hospitals. Therefore, to facilitate competition between the heterogeneous medical providers some mechanism may be required to rebalance the cost between the providers.

Competition in other areas of the health service is also likely to be difficult to facilitate in the short term given its fragmented nature. This is a particular area of difficulty in many countries and will also need to be addressed as part of the transition.

Robust risk equalisation and income-related cross subsidies

The current risk equalisation system may be fit for purpose in the initial period particularly given the cost-sharing mechanism has been introduced. In the medium term, a more technically robust system of risk equalisation may need to be introduced (e.g., with the addition of a health status risk adjuster). This is a complicated task and without this, insurers will have an incentive to risk select.

Furthermore, developing the institutional capacity with the revenue service to collect income-related contributions to facilitate income-related cross-subsidies and pass them to insurers will be complicated and will need a multi-agency approach.

Though some of the preconditions are not adequately met the best and quickest way to introduce UHI, under the managed competition model may be to use much of the current health insurance market framework as a basis for its introduction.

However, there would also be a need for a substantial strengthening of the system to meet society’s goals and objectives. This work should be undertaken at the same time as more widely progressing work on meeting the preconditions to meet the defined goals.