Risk Equalisation

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In the 30 July issue of the PHM Emerging Markets Healthcare News Feed, we linked a brief article on risk equalisation in Ireland and Quinn Healthcare’s efforts to stop the practice.  I thought it would be of interest to briefly highlight the practice of risk equalisation and how it can impact the private markets.

In brief: risk equalisation is the cross subsidisation of, and by market players.  In Ireland the concept has been put in play recently with a large disparity (fundamentally claims) between the BUPA product line purchased by Quinn Healthcare and other insurance companies.  BUPA has been required to pay in excess of $125 million.

Risk equalisation in its many forms, has been around for some time in other countries.  But in Ireland the concept has taken on new meaning: that is direct payments from one carrier to another.

The private healthcare sector is growing worldwide.  Look to markets where risk equalisation is used as a mechanism to support national health fund distribution, not cross player subsidies.  This is the environment in nearly every developed country.  In emerging countries be wary of governments trying to manipulate an inherently mixed market with pure free-market ideology.

Health solidarity is NOT in conflict with the private market……HK

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On August 20, 2007
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