David Brindle of The Guardian's well-spotted report of the latest private medical insurance figures from Laing and Buisson inspires me to get on with Part Two of the 'Competing For Business' bit. Part One appeared here.
In many senses, the figures revealed by the Laing and Buisson report belong to the august category of Things That Are Not Surprising - as does the revelation via a leaked email to HSJ that the BMA intend to get GPs to sideline private providers of data and management support to the new GP commissioning consortia (GPCC, inevitably).
It is possible to argue that in the teeth of a long-lasting recession, from which the present tentative recovery inspires scant confidence, a 5.2% drop in private medical insurance renewals by individuals and a 4.7% fall in employer-paid policies is not actually that bad.
It is possible, but unwise. Insurers will be pressed to put downward pressure on their providers' costs, just as NHS order books get the right to become less generous with the abolition-that-isn't of process waiting time targets.
The NHS tariff itself faces downward pressure, moving to the basis of best quartile performance from the previous average and with the added CQUIN bonus / malus element.
Assuming the Laing and Buisson figures are correct, and that private medical insurance (PMI) covers just 7.2 million (11.7%) of the UK population, and that just over a million of the 7.2 still pay out of pocket for their insurance, the walls of a cottage industry just shrank. A niche boutique just became even more exclusive.
An insurer in the PMI market can now do one of the following things:
1. it can ration its offerings to save money, with more policy exclusions and hope people will not notice (which they will)
2. it can trim its profit margins, cut dividends or management bonuses and hope to ride out the recession
3. it can cut its prices, hoping to attract new clients and so to ride out the recession
4. it can raise its prices to sustain its margins, shedding the older and less well-off customers who make higher demands
5. it can pass cost pressures on to its suppliers
Bad news for private hospital firms
While none of these options are without the whiff of the kamikaze for insurers, most of them also spell out appalling news for private sector hospital providers, for the following reasons.
Any hospital estate built before the 1980s is now probably nearing the end of its life without having significant and expensive upgrades.
The White Paper promises to abolish the private patient income cap on foundation trusts, which in just a few years' time is going to be every NHS provider.
And it looks as if, at very long last, the NHS is starting to develop some seriousness about outcome measurement, which should provide precisely comparable data for managers in both sectors.
The recession is technically over, but growth is very sluggish and consumer confidence appears low. Austerity was always a given.
Now competition is coming, and it is going to be painful for the NHS - and also for both insurers and private sector providers.