After two years of investigations, the Competition and Markets Authority (CMA) has published its final report on measures to increase competition in the private healthcare market. But, while the health insurance industry welcomes the recommendations, opinion is divided as to whether it will make a significant difference to workplace medical insurance schemes.
Of the package of remedies (see below), possibly the most important for the medical insurance industry is the publication of more information on consultants and private hospitals. This has been widely welcomed and will, many believe, result in the greatest change to company medical insurance schemes.
“The provision of information is what makes the big difference to any healthcare system, private or NHS,” says Aviva UK Health medical director Dr Doug Wright. “When people can see the differences in outcome they can make informed choices about the proposed treatment. It should provide important reassurance to patients.”
Under the recommendations, hospitals will be required to provide episode data for all patients treated to an independent information organisation, which will publish the data online in a format that enables patients to search and compare results easily. In addition, the CMA requires insurers to include standard wording in their literature, highlighting the availability of this information.Wellington Hospital
As well as providing reassurance to patients, Dr Wright also believes this will enable the healthcare providers to make improvements to the way treatment is delivered. As an example, he points to Aviva’s BacktoBetter service which provides early intervention support to employees suffering from musculoskeletal problems. By ensuring they receive the most appropriate support for their condition, this has reduced the percentage of customers that need to be referred to specialists from 65 per cent to 25 per cent and taken 30 per cent off the cost of the average claim.
While there are clearly benefits flowing from this recommendation, it’s also recognised that there are potential pitfalls.
Jelf Group managing director, healthcare Iain Laws says it’s essential that this information is fair and easy to understand. “Greater transparency is welcomed but a little information can be a dangerous thing,” he says. “Patients need to understand that factors, such as the demographics of the patients being treated, can affect the results and the information also needs to give a true representation of previous outcomes. For example, where a patient has post-operative complications and is admitted into the NHS, this needs to be shown in the outcome data.”
Spotlight on fees
Consultants will also be required to be more transparent around their fees under the CMA’s proposals. As a condition of working at a private hospital, consultants will need to provide fee information to patients using a standard letter template.
It’s expected that this measure will be in place by October 2014, with consultants expected to supply data on their fees for online publication by December 2016. This will allow consumers to search the data and make comparisons on price and quality.
This transparency is complemented by another remedy – the ban on hospitals providing incentives to medical practitioners for using their facilities.
Private Health Partnership managing director Stuart Scullion welcomes the move to make fees more transparent. He says that when someone receives private treatment it’s not always clear what is and isn’t covered by insurance. “You get cases where as part of a specialist consultation they send a patient for an MRI scan but, as this hasn’t been authorised by the insurer, it’s not always covered and the policyholder ends up incurring the cost,” he explains. “Putting fee declaration up-front will avoid this happening but will also enable patients to question the treatment they’re receiving.”
Another potential outcome of the CMA’s recommendations is a reduction in the cost of medical insurance. This is certainly something that Bupa is expecting. “Where the CMA has found that a major hospital group has been charging rates that are excessive, we will seek a significant reduction,” says Bupa Health Funding managing director Dr Damien Marmion. “The amount will vary by hospital group but in some cases we will be aiming for a reduction of 15 per cent or more. This, coupled with the ban on incentives and increased competition that result from greater transparency will enable us to offer customers better value from private healthcare.”
Many of the measures will also help to increase confidence in private healthcare. In turn this will help to attract more people to medical insurance, with a larger population helping to spread the risk and control costs.
But, while the figures being quoted suggest that premiums could be significantly reduced, there is some scepticism about the scale of savings from the CMA’s package of remedies. “A conservative estimate of the value of the lack of competition in the private healthcare market is between £170m and £190m,” says Laws. “But as medical insurance claims in 2012 were £3.466bn according to Laing & Buisson, even if this saving was passed on in its entirety it would only account for a reduction of less than 5 per cent. I can’t see that we’ll see any significant changes to premiums as a result of this.”
Where there may be more activity is on product design. With costs out in the open, it will become easier to focus on price. This could lead to some employers looking to remove cover for some of the more expensive hospitals or to direct their employees to a small group of providers.
For example Laws says a large centrally sited employer could use its size to secure a better deal. “An employer with 5,000 or more employees may be able to negotiate a better value care package if it pushes all its treatment through a local hospital,” he says.
As well as leading to more products that restrict the choice around where treatment can be carried out, there’s also likely to be growth in top end products.
Buck Consultants managing director, health and productivity Martyn Anwyl says: “Some clients, especially legal firms and banks, want an enhanced platinum service that lets them be treated in the most expensive hospitals. The report has raised awareness of the variation in price charged by providers but there will always be demand for a real top end product.”
While the CMA’s recommendations have been welcomed, the medical insurance industry isn’t expecting to see wholesale changes as a result of it. “Not much will change,” says WPA corporate communications director Charlie MacEwan. “There are some positives and it’s fantastic that the transparency puts consumers in the driving seat but I don’t expect to see massive savings on insurance.”
Likewise Dr Wright doesn’t expect to see any immediate changes. “It will be a very slow burn but over time I do expect the CMA’s measures will lead to a reduction in the rate of medical inflation,” he explains.
Advisers are also reserved about the extent of change. “Some good things will happen as a result of the report but the remedies have been scaled down significantly over the course of the investigation,” says Anwy. “The market has moved on since the investigation was first announced: it’s already reacted to many of the issues identified by the CMA.”
As an example he points to open referral style schemes. These have enabled insurers to have greater control over specialist fees, with Bupa even temporarily taking some BMI hospitals out of its network when it failed to reach a mutually agreeable arrangement on pricing. Anwyl says this tough stance has worked well. “Open referral isn’t right for everyone but it has resulted in a reduction in the cost per episode, which has meant a slight decline in medical inflation on open referral style products,” he says. “I don’t expect much change but the CMA’s recommendations will support the work the insurers have already instigated.”
In its final report, the Competition and Markets Authority (CMA) published a package of remedies to increase competition in the private healthcare market. These are as follows:
- a restriction or ban on incentive schemes and benefits provided by private hospital operators to clinicians.
- the publication of information on the performance of consultants and private hospitals, including details of consultant fees
- the divestiture by HCA International of either the London Bridge and the Princess Grace hospitals or the Wellington hospital including the Platinum Medical Centre
- measures to enable the CMA to review any arrangements between NHS trusts and private hospital operators to run a private patient unit. The CMA will also have powers to prohibit arrangements that substantially lessen competition in the area.
Appeals can be submitted and HCA International has already stated that it will challenge the sale of part of its London portfolio. Aviva UK Health medical director Dr Doug Wright, says this could cause a significant delay. “Depending on the appeals the CMA receives and whether they affect all the measures, we could be looking at a delay of between 18 and 24 months while it undertakes further investigation and analysis,” he says.