Sean Egan, Chief Executive Officer, Aviva Group Ireland 'Reforming Healthcare, the role of the Health Insurer'

1. Under embargo until 15.00 pm:
Reforming health care, the role of health insurers
Speech by Sean Egan, Chief Executive, Aviva Ireland
Good afternoon ladies and gentlemen.
My name is Sean Egan. I am Chief Executive of Aviva Ireland, which is,
comprised of three separate entities – life and pensions, general insurance,
and of course, health insurance.
Let me start by saying that I am delighted to be afforded the opportunity to
speak with you, to meet you and to listen to you today.
As I came to putting my notes together for my speech today, I was very
conscious of the heavyweight group of very bright and informed minds on
healthcare gathered together in this room.
With this daunting prospect in my mind, I considered what I could bring to
today’s debate.
As CEO of Aviva Ireland, I am tasked with having a broader, longer-term,
development vision for our business, including planning for the future
growth of our healthcare business.
Without this oversight function, it is all too easy to get bogged down in the
intricacies of our complex health care system and health insurance
provision, without ever addressing the wider, macro challenges which are
prevalent in that system.
So in terms of my contribution today, I hope that I can give you a brief,
summary of Aviva’s vision for the future of private health insurance in
Ireland.
Health insurers are in an unusual position in the overall health system.
We are not health care service providers; we are not the end users; nor, are
we health policy decision-makers.

2. Yet we are at front and centre in the lives of those for whom the whole
health system exists in the first instance – patients.
We facilitate patients, our customers, in gaining access to the treatments
and services which they require. We do this by acting effectively as the
middle man between the health service and the patient.
Every decision which is taken in the provision of healthcare affects our
customers and by extension our business model in a significant way.
Talking about our healthcare system and business in the same sentence has
the potential to make many people uncomfortable. However, given the
structure of our healthcare system, it is vital that the two are fully synched.
Of course there are increased sensitivities around healthcare. It is so
personal and of vital importance to each of us, our families and our
communities.
Healthcare cannot and should never be treated like any other business.
Yet healthcare can learn much from business.
The challenge, for the private and public sectors alike, is to get the balance
right between providing customers with the highest levels of service and
customer care, while keeping a constant eye on your costs and the wider
operating environment.
The health insurance sector, like all sectors, is experiencing real challenges.
47% of the Irish population now have private insurance. This figure has
been in decline since 2008. In 2011, 66,000 people dropped out of private
health insurance market. Others have been forced to trade down or reduce
their level of cover.
This is happening against the backdrop of a severe economic downturn;
high unemployment levels; and, rising premium prices.
The declining numbers is a major cause of concern for the health insurance
sector and also, I imagine, for the Minister and the HSE because of its
knock-on impact on public health services.

3. Despite this bleak backdrop, we can be positive about the private health
insurance sector and its long-term future.
Almost half of our population continue to be covered by private health
insurance.
Equally, people remain reluctant to abandon private health insurance. This
gives me confidence that once economic recovery takes hold, the numbers
participating in health insurance will bounce back again.
My expectation of a renewed uptake in private health insurance in an
improved economy comes with one major caveat.
It will not happen unless we have a fundamental reform of the health
insurance market.
We particularly need to address:
 How can private health insurance help the Government deliver on its
vision for healthcare in Ireland?
 How private health insurance delivers for its customers?
 How private health insurance operates in terms of the market
structure and regulation.
Without reform, we will not have the well-functioning and competitive
health insurance market necessary to fund our health service.
The introduction of Universal Health Insurance (UHI) will mark a
significant shift in our current system of healthcare provision, particularly
how the system is funded.
Aviva Health Insurance is fully supportive of UHI.
Indeed, Aviva globally has had a positive experience of UHI in other
countries including the Netherlands. Given Aviva’s global experience of
working in different healthcare systems, we hope to use this experience to
contribute to UHI’s introduction.
UHI will lead to a fairer allocation of health resources in the health system
and enable patients to gain access to treatment based on need, rather than
ability to pay.

4. UHI, while a worthy initiative, is just one part of the reform package.
UHI will bring a new funding model, but it will not address the structural
and institutional defects in the health service.
Indeed, if UHI is to succeed, it is vital that these defects are removed.
That includes addressing issues like waiting lists which Dr. Martin Connor
from the special delivery unit is tackling, increased primary care and of
course, an issue close to Aviva’s heart, reform of the health insurance
market.
The introduction of UHI will be a huge challenge for all within our health
system.
I cannot claim to be an expert on UHI, but I can speak about my personal
experience of managing significant organisation transformation projects.
This gives me some understanding of the complexities which lie ahead for
Minister Reilly. I do not envy his task.
I sense too that it is starting to crystallise in the minds of decision makers
that for UHI to work, the role of health insurers will be key.
If anything under UHI, private health insurance’s importance will grow.
The contribution of private sector health insurance will be vital to support
the State subsidised element of UHI.
Central to UHI’s success will be:
 A long-term sustainable health insurance market with patients at its
core;
 Underpinned by robust competition between insurers and between
health care providers;
 Providing affordable health insurance for all regardless of their
income, risk profile or other criteria.

5. The key issue for our customers and for health insurers remains
affordability. It is the single most important issue facing customers and the
industry and will remain so, even with UHI.
The affordability of private health insurance, most evident from the rising
cost of insurance premiums, has been undermined in recent years.
Medical inflation; a failure to contain costs; failure to reform both
healthcare provision and health insurance; lack of competition in the health
insurance market and the introduction of Government levies, have all
undermined affordability.
Two matters in particular are critical issues when it comes to affordability
and the long-term sustainability of the private health insurance market.
The first of these is the recent proposal to re-designate existing private
beds in public hospitals.
This proposal will see charges levied against private patients in public
hospitals. Private patients will now be paying for a bed in a public hospital
on the double – through their taxes and through their private health
insurance.
It is a retrograde step which will further undermine the affordability of
private health insurance, increase costs to private patients and push up
premiums.
We talk much about fair and equitable access to health care, yet if this
proposal proceeds we are abandoning both.
Private patients will migrate to private hospitals and public hospitals will
lose out on the millions of euro in funding they currently collect from
privately insured patients.
No one wins.
As things stand, this proposal is exactly that – a proposal. It requires
further thought. The Health Insurance Consultative Forum, recently
established by Minister Reilly, is an ideal environment to give this proposal
deeper evaluation.

6. The proposal on bed re-designation comes against a wider backdrop of
rising bed charges over the past number of years.
One way to contain bed charge increases is to allow insurers negotiate bed
charges with individual hospitals. Currently, the Minister applies a one-
size-fits-all charge.
The Minister has publicly called on insurers to control premium increases
by negotiating prices with the service providers, whether hospitals or
consultants. Allowing insurers negotiate with hospitals empowers us to do
this. It is something which Aviva fully supports.
The second factor hindering affordability is health insurance competition.
We need to do more to make our health insurance market more
competitive. To do that, we need radical reform.
The Minister for Health and the Minister for Finance – who also has a key
role in this area – have given positive indications around reform.
Aviva welcomed the decision by the Minister for Health to establish a
Health Insurance Consultative Forum to drive this programme.
But no Forums are necessary to highlight the one glaring inequity which
exists in health insurance today – regulation, or the lack of regulation.
Currently, the dominant player in the market, Vhi, with almost 60% of the
total market, remains unregulated by the Central Bank of Ireland.
The failure to regulate the Vhi perpetuates a situation where Vhi is treated
in a different and more favourable manner from its competitors.
The result of this lack of regulation is two-fold:
 It leaves Vhi in a protected position and impedes the development of
a truly competitive health insurance market; and
 The Vhi continues to be exempt from the Consumer Protection Code
(CPC), imposed by the Central Bank of Ireland and designed to
protect consumers. This may leave consumers vulnerable in their
dealings with Vhi.

7. I mentioned the Code because as many of you may know, Aviva, itself, was
recently fined by the Central Bank for breaches of this Code.
We regret that this breach happened in the first instance. Once aware of it,
we took immediate steps to rectify these breaches, a fact which was
acknowledged by the CBI in reaching a settlement.
I make no bones about it.
Aviva Health implemented the Code in full but failed to abide to the letter of
the Code.
Fortunately, no customers were disadvantaged by the breach, nonetheless,
we recognise that the Code requires complete adherence.
Given Ireland’s financial recent history, it is understandable that the CBI
takes the need for regulation seriously.
The result of our breach was that we were slapped on the wrist to the tune
of almost €250,000.
Believe me it is a painful slap for any company.
We accept the Central Bank’s rationale. But if that rationale is being applied
to some and not all, then the whole system is undermined.
All players in the market must be subject to a level playing field and a
regulatory regime which treats all equally.
With the Vhi outside of regulation, this is not currently the case. It is
hindering a truly competitive market.
To be fair, Vhi is working to streamline its operations and its annual results
published yesterday reflect this.
However, in terms of its regulation the power to act lies with Ministers for
Finance and Health.
In the short term, the need for the Government to increase the Vhi’s capital
solvency margins and the costs to the Exchequer of doing so, impede
regulation. However, Ireland’s current budgetary constraints cannot be
used as an excuse.

8. Aviva believes that the Government and Central Bank can decouple the
solvency issue from CPC regulation by seeking to resolve the solvency issue
in the medium term and applying the Consumer Protection Code to Vhi in
the immediate term.
In conclusion, let me leave you with some positive comments.
In my experience, properly run private health insurers are extremely adept
at managing costs. This feeds directly into the wider healthcare system.
Effective cost control with a focus on primary care will help make
healthcare more accessible and affordable for all.
Private health insurers are also often first adopters of new technology and
medical innovations.
For example, drawing from Aviva’s own experiences, we were the first, and
only, health insurer to cover our customers with breast cancer, for
Oncotype DX testing, on all health insurance plans.
This breakthrough test is now also being provided by the State. It has the
potential to transform clinical cancer care and could help women
diagnosed with breast cancer avoid unnecessary chemotherapy, saving
patients from unnecessary treatment and the government unnecessary
costs.
Similarly, Aviva Health was also the first to offer discounted cervical cancer
vaccinations under our health plans. This initiative was followed by a
universal vaccination programme.
I am convinced that private health insurers have the capacity to continue to
be first responders to healthcare innovations which deliver cost savings
and benefits for patients.
I am convinced that private health insurers have a vital role to play in the
reform agenda.
And I am convinced more than ever that our input will result in better
policy decisions, better outcomes for patients and a better, more viable
healthcare system.
Thank you.