Comment: Post-OFT, what now for PMI?

Post-OFT, PMI providers must become consumer champions if the industry is to survive

Surprise, surprise. The private medical insurance (PMI) world has “welcomed” the Office of Fair Trading's (OFT) referral of the privately-funded healthcare market to the Competition Commission.

It could hardly do otherwise. Once the OFT published its 141 page report last December, followed by a brief “public consultation”, the wheels were in motion for a full scale referral in much the same way as the First World War could not be stopped once the military trains on both sides had started to roll.

And, whatever the private misgivings about giving any outside organisation (and worse, the public) an insight into inner workings, it is normal practice (and good PR) to welcome an investigation, even one hopes will go away.

So it is a given that PMI providers and the Association of Medical Insurance Intermediaries (AMII) favour the Competition Commission probe. This will look at:

  • The lack of easily comparable information available to patients and their GPs on the quality and cost of private healthcare services.
  • The lack of effective competition in the market.
  • The lack of transparency in pricing barriers to new entrants – some providers can impose price rises or other conditions if an insurer wants to take on a new organisation.
  • Loyalty bonuses and other incentives paid by hospitals to consultants.

AMII neatly encapsulated the case with: “This outcome is welcomed as we feel it is a sensible decision and will ultimately benefit consumers. At present there is no transparency of costs for services and treatment and we are particularly concerned that over 90% of the ownership of independent private hospitals is through venture capitalists whose focus is on profit before patient care.”

So who – despite the reputational danger – has slammed the referral? Step forward BMI Healthcare, the biggest provider of private hospitals and recently in its own price war (now in a truce situation) with Bupa, Britain's largest PMI provider.

BMI said: “We are disappointed with the OFT's decision which we believe will actually harm consumers. Requiring hospitals, insurers and consultants to undergo two years of expensive and distracting regulatory review will be to the inevitable detriment of patients. The market for private healthcare in the UK is competitive and generates great outcomes for patients who report high levels of satisfaction with the services they receive. Almost 97% of BMI Healthcare customers rate their overall quality of care as good or better, according to our latest independently compiled statistics."

Day one of journalism school teaches that you can never go wrong with a “millions of children will die if this goes ahead” opening sentence. BMI has done just that. Consumers will be harmed and the review will be “to the inevitable detriment of patients”.  Note the “inevitable”.  Now if I was a potential BMI patient, I would head elsewhere – this sounds as though the doctors and nurses will be too busy filling in OFT questionnaires to bother with my knee operation or hip replacement (which of course they won't be).

Quite how BMI can claim the market is “competitive” when the OFT tome, at the very least, casts doubt, is opaque. If it believed the market was working so brilliantly for all concerned, then it would probably not have bothered with those 141 pages. Yes, 97% of patients rate care as “good or better” but where was the cost question? With lower costs, and the greater price transparency the OFT requires, satisfaction might have been even higher.

BMI does concede there could be better information on pricing. But in a thinly veiled attack on insurers it concludes: “The referral to the Competition Commission will impose immense costs on the industry and is based on a flawed analysis, driven by certain segments within private healthcare wishing to use the regulatory system to advance their own narrow commercial interests.”

It's difficult to denigrate firms for pushing their own commercial interests. 

It's hard-wired into the politico-economic model. What else is BMI doing?

Healthcare insurers have now arrived at the moment the motor cover world reached two decades ago with repairs. Car insurers realised that costs could not keep rising exponentially. The motor market took the garage industry in hand.

Of course, there are differences. There are scores of motor insurers and thousands of repair shops. There are only a handful of PMI providers, private hospitals (the repair shops) are few, with no real choice in some parts of the country.  Doctors (the mechanics) have powerful restrictive practices, coupled with lobbying power others can only envy.

But if PMI can't tame the hospitals and doctors, there will be no PMI left. 

Private medical insurers need to show they are blasting away at costs, that they are the bulwark between private patients and private healthcare providers, protecting their policyholders against ever increasing and often hidden costs. This is no more than enlightened self interest– exposing how doctors and hospitals have worked together to bring bills that are among the highest in Europe cannot do other than good.

The hospitals and doctors wish PMI providers would go quietly away. They are being urged to “seek self-pay shoppers” at a time when “scores of private hospitals” have “seen a welcome rise in non-insured patients”.

What does that mean? Readers can provide their own answers. But it could mean that doctors and hospitals prefer a patient who will not or cannot question the bill. If the rise in non-insured patients is welcome, then they must be more valuable. There may be a more innocent explanation – that these new patients have come straight from the NHS.

Self-pay is, of course, a basic right. Unlike third party motor insurance, there is no obligation to buy PMI.

But self-payers can rarely shop around (unlike drivers needing repairs). And few will have any idea of the final bill. It's time for the PMI industry to make a strong case that it can control the costs of hospitals and consultants. It's time for insurers to become visible consumer champions.

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